1975 (12) TMI 171 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in disregarding the order of the Income Tax Officer dated 27th November 1959.
2. Whether the Tribunal was right in holding that the profit of Rs. 48,024/- credited in the accounts of eleven other persons was not of the assessee.
3. Whether the Tribunal was right in holding that there was no concealment of income on the part of the assessee in respect of the amount of Rs. 48,024/- and in setting aside the penalty of Rs. 20,000/-.

Detailed Analysis:

1. Disregarding the Order of the Income Tax Officer:
The Tribunal disregarded the Income Tax Officer's (ITO) order dated 27th November 1959, which had included Rs. 48,024/- as the assessee's income. The Tribunal's decision was challenged on the grounds that the assessee did not appeal against the initial assessment order and no new material was presented when the penalty was imposed. The Tribunal's jurisdiction to disregard the ITO's findings was questioned, arguing that the ITO's order was "a good piece of evidence" and should not have been overlooked. However, the Tribunal re-evaluated the evidence and found the ITO's conclusion unsupported, thus justifying its decision to disregard the order.

2. Profit Credited in Accounts of Eleven Other Persons:
The Tribunal held that the profit of Rs. 48,024/- credited in the accounts of eleven other persons did not belong to the assessee. The ITO had initially included this amount in the assessee's income, suspecting it was a diversion of profits. The Tribunal, however, found no substantial evidence to support this claim. The Tribunal's findings were based on a thorough re-assessment of the evidence, which led to the conclusion that the amount did not constitute the assessee's income. This decision was challenged, but the Tribunal's evaluation was upheld as it was within its jurisdiction to reassess the facts and evidence.

3. No Concealment of Income and Setting Aside the Penalty:
The Tribunal concluded that there was no concealment of income by the assessee concerning the Rs. 48,024/-. The ITO had imposed a penalty of Rs. 20,000/- under Section 28(1)(c) of the Income Tax Act, 1922, for alleged concealment. The Tribunal found that the Department failed to establish that the assessee had consciously concealed income or deliberately furnished inaccurate particulars. The Tribunal's decision to set aside the penalty was based on the principle that penalty proceedings are quasi-criminal in nature, requiring the Department to prove the assessee's intent to conceal income. The Tribunal's findings were based on the re-evaluation of the evidence, leading to the conclusion that the penalty was unjustified.

Relevant Case Laws Cited:
- CIT v. Indian Molasses Co. P. Ltd (78 ITR 474): The High Court can consider aspects of a question of law not expressly argued before the Tribunal.
- CIT v. Anwar Ali (76 ITR 696): Penalty proceedings are penal in nature, and the burden is on the Department to prove concealment.
- Jethabhai Hirji & Co. v. CIT (27 ITR 533): The High Court can reframe questions for clarity.
- Lal Chand Gopal Das v. CIT (48 ITR 324): No essential difference between tax and penalty; both are part of the assessment machinery.
- C.A Abraham v. ITO (41 ITR 224): The Income Tax Act provides a complete machinery for assessment and penalty, and taxpayers must use this machinery.
- Bai Velbai v. CIT (49 ITR 130): Findings of fact can be questioned if there is no evidence to support them.
- CIT v. Scindia Steam Navigation (42 ITR 589): The High Court can entertain new contentions if they fall within the scope of the question referred.
- Lakshminarayan Cotton Mills Co. Ltd. v. CIT (73 ITR 634): The High Court can decline to answer questions that do not arise out of the Tribunal's order.
- CIT v. Kaoday & Sons (83 ITR 369): Penalty cannot be levied solely on the basis of the assessment order.
- Rameshwar Prasad Bagla v. CIT (87 ITR 421): The High Court can question the Tribunal's findings if based on irrelevant evidence.
- CIT v. Gokuldas Harivallabhdas (34 ITR 98): Assessment and penalty proceedings are distinct; findings in assessment are not binding in penalty proceedings.
- D.M Manaswi v. CIT (86 ITR 557): The Tribunal's findings must be based on relevant material.
- CIT v. Mrs. Doris S. Luiz (sic) ITR 646: Penalty proceedings are quasi-criminal, and the burden of proof lies on the Department.
- CIT v. Kotrika Venkataswamy & Sons (79 ITR 499): The Tribunal's conclusion on facts cannot be referred to the High Court.
- CIT v. Anwar Ali (65 ITR 95): Assessment and penalty proceedings are separate, and the burden of proof in penalty proceedings lies on the Department.

Conclusion:
The Tribunal had jurisdiction to disregard the ITO's findings and re-evaluate the evidence. The Tribunal's conclusion that the profit of Rs. 48,024/- did not belong to the assessee and that there was no concealment of income was based on a thorough reassessment of the evidence. The penalty imposed by the ITO was unjustified, and the Tribunal's decision to set it aside was upheld. The High Court answered the question of law in the negative, supporting the Tribunal's findings.