1972 (9) TMI 5 - SC - Income Tax

Whether the proceedings for the imposition of penalty were properly commenced in the course of any proceedings under the Act as required by section 271 - Whether there was any material or evidence before the Tribunal to hold that the assessee had deliberately concealed particulars of his income or deliberately furnished inaccurate particulars of such income as required by section 271(1) (c) - appeal of assessee is dismissed

Summary

Issues Involved:
1. Whether the penalty proceedings were properly commenced in the course of any proceedings under the Income-tax Act, 1961.
2. Whether there was material or evidence to hold that the assessee had deliberately concealed particulars of income or furnished inaccurate particulars of such income.

Issue-wise Detailed Analysis:

1. Commencement of Penalty Proceedings:
The primary issue was whether the penalty proceedings were properly initiated during the course of proceedings under the Income-tax Act, 1961, as required by section 271. The High Court answered this in the affirmative, noting that the Income-tax Officer (ITO) had directed the issuance of a notice under section 271(1)(c) in the assessment order itself, thus commencing the penalty proceedings during the assessment process. The Supreme Court upheld this view, stating that the satisfaction of the ITO during the assessment proceedings regarding the concealment of income is sufficient for initiating penalty proceedings. The Court emphasized that the actual issuance of the notice can occur after the assessment proceedings, provided the ITO's satisfaction was reached during those proceedings. This interpretation is consistent with the precedent set in Commissioner of Income-tax v. S. V. Angidi Chettiar, which clarified that the satisfaction for penalty must occur before the conclusion of assessment proceedings, but the notice can be issued subsequently.

2. Evidence of Deliberate Concealment or Inaccurate Particulars:
The second issue was whether there was sufficient material or evidence to conclude that the assessee had deliberately concealed income or furnished inaccurate particulars. The Tribunal had found that the business of Kohinoor Mills was under the control of the assessee, and the alleged partnership was a facade to disguise the assessee's income. This conclusion was based on detailed examination of statements and evidence showing that the purported partners were merely name-lenders and had no real involvement in the business. The Supreme Court agreed with the Tribunal's findings, rejecting the argument that there was no material evidence. The Court noted that the Tribunal's decision was not merely based on the falsity of the assessee's explanation but on substantive evidence indicating deliberate concealment.

The Court also addressed the argument based on Commissioner of Income-tax v. Anwar Ali, which held that false explanation alone does not constitute evidence of income concealment. The Supreme Court distinguished the present case, noting that there was positive material indicating that the business belonged to the assessee and the partnership was a deliberate device to conceal income.

Conclusion:
The appeals were dismissed with costs, affirming that the penalty proceedings were validly initiated during the assessment process and that there was sufficient evidence of deliberate concealment of income by the assessee. The High Court's answers to both questions were upheld, confirming the validity of the penalty imposed for the assessment years in question.