9911796707
TMI Blog1990 (5) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... and his four daughters. The case of the assessee was that on 31st day of March, 1968, he had thrown the said property into the hotch pot of the HUF, for which purpose a declaration had been filed to this effect, attested by a Notary Public one Shri R.P. Tayal. The affidavit purported to have been written on 31st day of March, 1968, was typed on two stamp papers of Rs. 2 25 ps denominations respectively. On the first page of the affidavit two notorial stamps of Rs. 3 and ps 50 were affixed. The affidavit was purported to have been verified by Sh. R.P. Tayal Distt. Notary on 31st day of March, 1968 itself. However, the genuineness of the execution and the attestation of this affidavit on 31st day of March, 1968 was doubted by the ITO. The statement of Sh. Tayal was recorded before the ITO and the ITO obtained the report dated26th March, 1980of the Senior Scientific Officer (documents) cum Asst. Chemical Examiner to the Government of India (Central Forensic Science Laboratory). The Notary while verifying the document had fixed two seals on the first page and two seals on the second page of the affidavit. Out of them, one seal was quite bright while the other was a faint one. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pure and simple intention of diverting the income from individual status to HUF status and as such, throwing of the individual property by the assessee into common hotch pot was held not proved. Since the assessee had filed HUF returns on29th Jan, 1979, the assessments were completed on a substantive basis in the hands of the individual whereas the assessments in the case of the HUF were completed on a protective basis. 3. The incomes declared by the assessee in the individual and HUF returns were the following: Asst. yr. Individual Rs. HUF Rs. 1970-71 9,880 3,170 1971-72 8,970 3,190 1972-73 9,270 1,420 1973-74 9,570 1,390 1974-75 11,480 10,850 1975-76 9,570 415,700 1976-77 11,000 14,930 1977-78 14,240 16,850 1978-79 15,760 16,000 1979-80 18,770 16,220 1981-82 16,650 .......... 4. Against the said assessment orders, the assessee came up in appeal to the learned AAC who, vide his consolidated order dated 31st March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lending of property or its having been thrown into the common stock of the HUF by the assessee individual. The lease agreement dated 15th Sept., 1973, according to the Tribunal was only indicative of the assessee's intention to throw the property into the common hotch pot and not to show that the document dated 31st March, 1968 was a genuine one. In any case, the Tribunal held that even if it was to be accepted that as on 15th Sept., 1973, the assessee was the Karta of his HUF as far as the ownership of the property in question was concerned, this date fell after the outside date of 31st Dec., 1969 as mentioned in s. 64(ii) and, therefore, the income from the said property was assessable only in the hands of the individual. One more fact which occurred was that for the asst. yrs. 1970-71 and 1975-76, the Appellate Tribunal vide its order dt.18th Dec., 1982in wealth-tax appeal Nos. 1642 to 1644/Del/81, had deleted the inclusion of the value of the property in question in the net wealth of the assessee individual. However, in the order dated29th Jan., 1985, the Tribunal took the view that the earlier decision dated18th Dec., 1982in wealth-tax side had been given by the Tribunal witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot justified with regard to the enhancement in the income from furniture business. He noticed that with regard to the furniture business, the accounts were rejected and the additions to the declared income were made only on account of the application of a certain rate of profit rather that due to the discovery of any specific detection of concealed income. He also noticed that the estimate of sales were considerably reduced by the AAC in appeal which was confirmed by the Tribunal. He, therefore, held that the additions in the furniture business be kept outside the purview of the imposition of the penalty. So far as quantum of penalty is concerned, he held that it required to be reduced to 150 per cent of tax on concealed income. Therefore, he found that after excluding the additions in the furniture business, the tax on the concealed income and the penalty had to be computed as follows: Asst. yr. Tax on concealed income Penalties @ 150 per cent . Rs. Rs. 1970-71 6,426 9,639 1971-72 6,643 9,965 1972-73 5,727 8,590 1973-74 5,421 8,130 1974-75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cularly when the Notary had confirmed the execution of declaration on 31st March, 1968 and the Tribunal had in the wealth-tax cases of the applicant also held that the property and the business were the ownership of applicant's HUF?" 3. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the estimates of sales made by the AAC and applications of net rate of 16 per cent thereon to arrive at the net income from applicant's business in the business of furniture carried on under the name of M/s Jagat Furniture House in the assessment years? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in rejecting the misc. application dt. 27th May., 1985 by refusing to recall its consolidated order dated29th Jan., 1985particularly when the assessee had proved reasonable cause for not appearing before the Hon'ble Tribunal on16th Jan., 1985?" Shri Sapra referred to the following decisions in order to show that a finding given in and assessment proceeding, though relevant, was not conclusive and that the finding in the assessment proceedings would only be a piece of evidence in penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habda vs. CIT 1976 CTR (SC) 140 : (1975) 101 ITR 776 (SC) for the proposition that the joint Hindu Family with all its incidents is a creature of law and cannot be created by Act of parties except to the extent to which a stranger can be affiliated to the family by adoption. He also referred to the decision of the Supreme Court in the case of CIT vs. Musaddilal Ram Bharosey (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 for the preposition that the burden placed upon the assessee under s. 271(1)(c) is not discharged by any fantastic explanation nor is it the law that any and every explanation by the assessee must be accepted. He pointed out hat the explanation had to be acceptable to the fact finding body. Lastly he referred to the decision of Andhra Pradesh High Court in CIT vs. Sait Khubcahnd Perumal (1987) 65 CTR (AP) 225 : (1988) 169 ITR 278 (AP) for the proposition that if there was no fresh evidence in the penalty proceedings, the onus could be discharged by the assessee with the help of the material already on record. 10. We have carefully considered the rival submissions as also the decisions referred to above. The learned CIT(A) has held in the impugned order that the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that against that order of the learned AAC, the Department had filed ITA No. 6743 and 6744/Del/88 on 8th Dec., 1988 and which are still pending decision before SMC Bench 'A' of the Tribunal. Therefore, this point also would not assist the assessee. 14. The first question which has to be seen is as to what is the relevance of the order passed in the assessment proceedings, so far as penalty proceedings are concerned. So far as this point is concerned, it is a settled proposition by now that no doubt the assessment proceedings may be good items of evidence in penalty proceedings, i.e., they may be admissible as well as relevant but they are not conclusive and penalty cannot be levied solely on the basis of the reasons given in the assessment proceedings. However, that is not to say that some additional material should always be forthcoming in addition to the material on which the assessment was based. 15. Next comes the question of plea or explanation. Even if a plea was not raised in the assessment proceedings, it can be raised in the penalty proceedings. Mere omission does not amount to concealment or deliberate furnishing of inaccurate particulars unless the omission is att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of which the assessee resides alongwith his wife and four daughters. The assessee's case is that he made a declaration dated 31st March, 1968 (sworn on a stamp paper before the Notary Sh. R.P. Tayal) throwing his self-acquired house property No. 87-B, Civil Lines, Bareily in the common hotchpot of his HUF. We need not concern ourselves with the point whether the hotchpot of the assessee's HUF is empty, at that time or it had any other property because it is settled law that even if the hotchpot of the HUF is empty, there is no bar to the throwing of a self-acquired property into such an empty hotchpot of the HUF. The statement of the assessee is that the stamp paper (containing 2 pages and being of the denominations of Rs. 2 and ps. 25 respectively was purchased by him on 28th April, 1965 from the stamp vendor one Sh. Ram Avtar. He stated that though he did not know this stamp vendor, he could produce him after finding out his address. In spite of these replies, the ITO did not pursue this lead any further. Therefore, we have to take it as established that the assessee had purchased the stamp paper for the declaration on28th April, 1965in his name from the stamp vendor. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of 50 ps. Notarial stamp. This assumes importance. Therefore, the possibility of 50 ps stamp having been secured from any Treasury other than Bareily Treasury either by the assessee or by the Notary could not be excluded. So far as the second point is concerned prima facie it does appear the if the attestation took place on 31st March, 1968 there could not be Notary's seal thereon containing a telephone number which the assessee (Notary) got only w.e.f. 23rd Nov., 1974. In this connection, it may be mentioned that the first seal (which was fainter) had telephone No. 5108 mentioned thereon and thereon another seal appears to have been superimposed (which was brighter and in which the older telephone No. 3082 was written). During his examination, Shri Tayal continued to insist that to him what appeared to the ITO to be telephone No. 5108 was really telephone No. 3082. Therefore, the ITO had sent the declaration for the report of the Central Forensic Science Laboratory,New Delhi. Their report dated 27th March, 1980 was to the effect that there were two distinct seals one containing the telephone number 3082 and the other containing the telephone number 5108, though it could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into HUF property was not a false one, it was desired to be established by means of evidence about the genuineness of which there was a prima facie doubt. These two things would be entirely distinct and separate and in the latter case, it would not be feasible to impose penalty with reference thereto. Blending is a unilateral act and all that is required is the declaration or expression of a clear and unequivocal intention to abandon all claims upon the property and to voluntarily throw it in the common hotchpot of the HUF. No formalities are necessary nor a declaration, if made in writing, requires any attestation before the Notary or Registrar. It could also be by a course of conduct. On behalf of the Department, much stress was laid on the point that for the asst. yrs. 1968-69 and 1969-70, no such claim was made by the assessee and that this was also a circumstance which went against the assessee if the assessee had really executed a declaration on31st March, 1968as alleged. This question was put to the assessee in his statement and he stated that he did not claim it. The explanation given by Shri O.P. Sapra at the time of hearing was that the property income being only Rs. 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the Tribunal in para 9 of its order dated29th Jan., 1985referred to above was in the following terms: "The cumulative impression that one gets from all the above mentioned facts and the fact that the verification of the document was not signed by the Notary is that the document was neither valid nor genuine." This finding, in our view would not come in the way of the assessee in the penalty proceedings, particularly in the light of the fact that the Hon'ble High Court has directed the Tribunal to refer the question and to draw up a statement of the case with reference to its finding regarding the execution of the declaration dated 31st March, 1968. Having regard to the entirety of all the facts and circumstances of the case, the evidence on the record and the probabilities, we are of the view that the explanation offered by the assessee in the penalty proceedings could be said to be bona fide in terms of Explanation 1(b) to s. 271(1)(c) as operative for the assessment years in question since the claim regarding the throwing of the property in question to the hotchpot of his HUF was a contestable one and which could not be said to be false. Since the claim had been raised o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
