1979 (11) TMI 87 - HC - Income Tax

Income From Other Sources, Income Tax Return, Individual Income, Levy Of Penalty, Total Income, Unexplained Investments

Summary

Issues Involved:
1. Whether non-disclosure of income of the wife and minor sons, includible under section 64 of the I.T. Act, 1961, attracts the provisions of section 271(1)(c) of the Income-tax Act, 1961.
2. Whether additions made on estimate under "Income from other sources" due to inadequate withdrawals and unexplained investments in house construction attract the provisions of section 271(1)(c) of the Income-tax Act, 1961.

Issue-Wise Detailed Analysis:

Issue 1: Non-Disclosure of Income of Wife and Minor Sons
The Tribunal had to determine whether the non-disclosure of the wife and minor sons' income, which was includible under section 64 of the Income-tax Act, 1961, attracted the penalty provisions of section 271(1)(c). The assessee argued that there was no concealment of income, as neither section 64 nor section 139 imposed an obligation to include such income in the return. The Tribunal agreed, stating that the penal provisions of section 271(1)(c) were not attracted for such omission.

The department contended that it was obligatory for the assessee to show in his return the income assessable in his hands under section 64, citing the form of the income-tax return which had a column for disclosing such income. However, the Tribunal noted that the relevant form came into effect only from July 1, 1972, and the assessment year in question was 1969-70. The Tribunal held that forms prescribed cannot override statutory provisions.

The Tribunal's decision was supported by several High Court rulings, including Madhya Pradesh High Court in CIT v. Smt. Rani Duleiya, Calcutta High Court in Radheshyam Ladia v. ITO, and Orissa High Court in CIT v. Biju Patnaik, all of which held that section 139 calls for the return of an individual's income and does not impose an obligation to include income assessable under section 64. Consequently, the Tribunal concluded that the failure to include such income did not attract the penal provisions of section 271(1)(c).

The court affirmed the Tribunal's decision, holding that no obligation was cast on the assessee to include in his return the income arising to his wife and minor sons, and thus, the non-disclosure did not attract section 271(1)(c). Question No. 1 was answered in the affirmative and in favor of the assessee.

Issue 2: Additions Made on Estimate Under "Income from Other Sources"
The Tribunal examined whether additions made on estimate under "Income from other sources" due to inadequate withdrawals and unexplained investments attracted section 271(1)(c). The assessee argued that these were mere estimates and did not constitute concealed income. The Tribunal agreed, stating that the mere addition by estimate did not indicate concealed income.

The department argued that the disparity between the returned and assessed income invoked the Explanation to section 271(1)(c), shifting the onus to the assessee to prove no concealment. However, the Tribunal emphasized that even under the Explanation, the department must provide some material evidence to justify the penalty.

The Tribunal found that the IAC had not provided any material evidence to counter the assessee's plausible explanation that the additions were mere estimates. The Tribunal held that the explanation provided by the assessee shifted the onus back to the department, which failed to rebut it.

The court upheld the Tribunal's decision, ruling that estimated additions did not justify the levy of penalty under section 271(1)(c). Question No. 2 was answered in the affirmative and in favor of the assessee.

Conclusion:
Both questions referred to the court were answered in the affirmative and in favor of the assessee. The court concluded that non-disclosure of income of the wife and minor sons, includible under section 64, did not attract section 271(1)(c) and that estimated additions under "Income from other sources" did not justify the penalty. The assessee was entitled to hearing fees and costs of Rs. 250.