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TMI Blog1986 (3) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... d the contentions of the assessee that he had not concealed any particulars of his income nor furnished any inaccurate particulars of the same, to justify the imposition of a penalty under section 271(1)(c) for any of these years. He further rejected the assessee's plea that the income added in his hands in the assessments made as an individual, really represented the income of his HUF of which he was the karta. He further did not accept the plea of the assessee that the additions made were purely on an estimated basis as against the income declared by the assessee, no doubt on an estimated basis, made in the absence of the materials which were seized by the department on 18-2-1978 and kept by the department, in their custody. He also did not agree with the assessee that no penalty would be leviable for the estimated additions made to the assessee's income in all these years. 3. The IAC pointed out that a search under section 132 of the Act was conducted in the premises of the assessee on 18-2-1978 and that in the course of the said search certain investments and income derived therefrom which were not disclosed by the assessee in his returns of income came to light. He pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee failed to rebut the said presumption. The IAC pointed out that the assessee was unable to discharge the onus cast on him and that all that he could state in his defence was that no concealment had been proved and that the additional income brought to tax was on account of partial non-acceptance of his explanation and that the income returned as well as the income assessed were based on estimate. The IAC held that the additional income brought to tax in all these years was with reference to the investments admittedly made by the assessee during each of the years and after a consideration of all known sources of income for such investment. He pointed out that the only point on which an estimate was necessitated was with reference to the apportionment of investments between the joint family and the assessee and that even here, the estimate was occasioned by the assessee's failure to maintain any accounts and the assessee's inability to establish that these investments were made by the joint family. He also relied on the fact that such estimates were made only after a due consideration of all the issues raised by the assessee and the additional income brought to tax base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... element of guesswork. The fact that the assets, viz. motor vehicles, promissory notes, hire-purchase documents, and investments, all stood in the appellant's name was obviously inconclusive, for a joint family more often than not acquire property in the name of one of its members, usually the karta and rarely if ever in the name of the family itself. (iii) Looking to the smallness of the appellant's personal income as disclosed by his tax records for the years 1956-57 to 1972-73, relative to the probable income of the family from its agricultural lands during the same period, the ownership of the assets in question, viz., the money-lending and hire-purchase businesses, buses and lorries and other investments, could more easily have been attributed to the family than to him and in this connection the family's omission to file tax returns, does not in my mind, as the IAC has tried to make out, lead to an inference adverse or otherwise to the appellant. Indeed it seems to me on a broad appraisal of the pertinent facts, that there could well have been a case for hiding that the entire income assessed in the appellant's hands, whether admitted to be his, or treated as such by the IAC b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anakammal [1979] 118 ITR 94 and that if the same principle was to be applied here, there could be no scope for doubt that the Explanation could have been, on the relevant facts and circumstances of the case, no assistance to the IAC, for the purpose of supporting the penal imposts in question. According to the Commissioner, the additions on account of (i) the unexplained investments, (ii) the income from money-lending business, and (iii) the income from transport business were made merely because there was no proof acceptable to the department, in regard to the ownership of the aforesaid investments and business. He, therefore, cancelled the penalties and allowed the assessee's appeals. The revenue feels aggrieved by these orders of the Commissioner (Appeals), and, hence, the present appeals to the Tribunal. 8. Shri Martin David, the learned departmental representative took us through the orders levying penalties passed by the IAC, and the appellate order of the Commissioner (Appeals) and pointed out that in the present case the old Explanation to section 271(1)(c) as inserted by the Finance Act, 1964 with effect from 1-4-1964 would be applicable for the first two assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramagopal, the learned counsel for the assessee, relied on the findings of the Commissioner (Appeals) in his order under appeal and contended that the decision cancelling the penalties on the facts of the present case was correct and that the same should be upheld. He pointed out that in the present case we are concerned with the individual assessments of Shri Palaniswamy and not with the case of the HUF of Shri Palaniswamy consisting of Shri Palaniswamy as karta and his two sons. The learned counsel referred us to the facts of the assessee's case starting from the assessment year 1965-66 to the assessment year 1973-74 and the subsequent history set out in the first four paragraphs of the appellate order of the Commissioner (Appeals) and pointed out that it was clear from these facts that the assessee as an individual did not have any substantial source of income and that on the contrary it was the HUF which had a real source of income, namely, agricultural lands yielding substantial income. In this connection Shri Ramagopal relied on the statement of the assessee recorded by the ITO on 1-6-1972 at pages 44 to 46 of the paper book. He particularly relied on the answer to question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CIT v. Charan Dass Khanna & Sons [1980] 123 ITR 194 wherein it was held that the investment of money by the coparceners after obtaining loans from the family in a new business was a significant factor though not the only determining criterion to decide whether the business belonged to the family and its income was liable to be clubbed in its hands and that it had also to be ascertained whether that new business and the earning of such income therefrom would be overwhelmingly attributed to the specialised skill and enterprise of the coparceners and that in case the investment part of the family funds was the main factor resulting in the set up of the new business and its profitability then the income might have to be ascribed to the family. Relying on these two decisions, Shri Ramagopal argued that the facts of the present case clearly established that the entire income that has been added in the hands of the assessee in his individual capacity really belonged to his HUF and that therefore there was no question of any concealment of income by the assessee in his individual capacity. Shri Ramagopal argued that it was always open to the assessee in the course of the penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te his explanation to the satisfaction of the departmental authorities and that it was a case of rejection of the assessee's explanation in part and that, therefore, the assessee would be entitled to the benefit of the proviso to Explanation 1 to section 271(1)(c). Shri Ramagopal, therefore, argued that no penalty was leviable in the present case for any of these five years and that they have been rightly cancelled by the Commissioner (Appeals). 12. Alternatively, Shri Ramagopal submitted that, if we are to hold that penalty is leviable in the present case, it would be necessary to determine the concealed income with reference to which the penalty is leviable. He pointed out that the assessee had filed his returns of income for all these years on an estimate basis since all the materials were seized and carried away by the departmental authorities who would not allow any inspection of the seized materials to the assessee to enable him to file his returns of income correctly. For this, Shri Ramagopal relied on the assessee's letter dated 28-8-1978 at page 43 of the paper book and the letter dated 18-2-1980 filed by the assessee with his returns of income for the assessment years 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e second case of Krishna & Co., the learned counsel submitted that it was a case of an admission on the part of the assessee regarding a certain amount of income. It was in the context of those facts it was held that no further evidence could be necessary to show that this amount represented the concealed income of the assessee. The learned counsel pointed out that in the present case before us, the assessee has been contending throughout that the income in question represented the income of his HUF and not his individual income and that it was a case of rejection of the explanation by the departmental authorities for want of satisfactory proof. He, therefore, submitted that this decision also would be inapplicable to the facts of the present case. He, therefore, submitted that the order of the Commissioner (Appeals) cancelling the penalties was correct and that the same should be confirmed. 14. Shri Martin David, the learned departmental representative in his reply invited our attention to the decision of the Gauhati High Court in Jatindra Nath Sarmah v. ITO [1978] 113 ITR 898 to contend that there was no burden on the revenue to prove while applying section 69 that unexplained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther acquisitions of agricultural lands out of the income from agriculture and also from money-lending carried on short-term basis, out of such agricultural income. It is for these reasons apparent that the department could not reject outright the explanation offered by the assessee that all the investments either in his money-lending business or in his hire-purchase or lorry or bus business, came out of his HUF funds. We have already referred to the findings of the IAC accepting the assessee's claim that the investments made by the HUF amounted to Rs. 1,17,000 as on 1-4-1973, Rs. 1,54,700 as on 31-3-1975 and Rs. 1,92,000 as on 31-3-1978 with reference to the various assessment orders, copies of which have been filed before us in the assessee's paper book. These facts clearly establish that there was substantial ancestral HUF nucleus out of which the assessee could have made and acquired all these investments in various businesses, as his own individual resources were negligible. This is established by the assessments made on him for the assessment years 1965-66 to 1972-73. We are not referring to 1973-74 figures as it is stated that the addition of Rs. 1,44,769 made in that year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged concealment of income or furnishing of inaccurate particulars of income. 19. Regarding the other three assessment years, we are satisfied that the assessee's case is saved by the proviso to Explanation 1 to section 271(1)(c) as it is a case of rejection of the assessee's explanation in part and acceptance of the same in part. We, therefore, agree with the reasoning and conclusion of the Commissioner (Appeals) cancelling the penalties in all the three years. 20. In the present case, we are called upon to decide whether Shri Palaniswamy, the individual is guilty of concealment of his income or furnishing of inaccurate particulars of such income, and, hence, liable to penalties under section 271(1)(c) for these years. We are not concerned in the present appeals with the question whether the HUF of the assessee would be liable to any penalty under section 271(1)(c). On the facts discussed above, we are satisfied that the Commissioner (Appeals) has reached at the correct conclusion that the assessee, the individual, is not liable to any penalty under section 271(1)(c) and that he has discharged his burden of proof under the Explanation to section 271(1)(c) in the first two yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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