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TMI Blog1973 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... and referred the question of law aforesaid for answer by this court. The assessee was a registered-firm and in the accounting year ending on November 6, 1961, it was engaged in the business of sale of sugar on a wholesale basis. The penalty proceeding relates to the said accounting year, the corresponding assessment year of which was 1962-63. During the course of the assessment proceeding for the said year, the Income-tax Officer found that the assessee had pledged on April 18, 1961, 1,491 bags of sugar with the Bank of Bihar for the purpose of obtaining an overdraft. The stock register of the date--April 18, 1961--showed that the actual number of bags in the hands of the assessee was 1,210 and that the Income-tax Officer detected a discrepancy of 281 bags. The assessee was asked to explain this discrepancy and it submitted its explanation in its letter dated June 29, 1963, to the effect that an inflated stock was shown with a view to obtain a larger amount of overdraft. The Income-tax Officer asked the assessee to get confirmation from the bank that the stock lying with them did not represent the actual state of affairs. The assessee refused to comply with this requisition. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal based upon the examination of the stock register and other materials is that, as the stock register was severely checked by the officers of the supply department from time to time, the Income-tax Officer had to establish the guilt of the assessee and mere falsity of an explanation or that the assessee could, not prove its case could not be a ground for levy of penalty. The further finding seems to be that the stand of the assessee that an imaginary, inflated stock was shown to the bank seems to have been accepted by the Income-tax Appellate Tribunal. At the relevant time the provision of law contained in section 271(1)(c) was exactly the same as the one contained in section 28(1)(c) of the Indian Income-tax Act, 1922. The liability attracting the imposition of penalty under the said provision of law is created if the assessee "has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income ". The word "deliberately" has been omitted by Central Act 5 of 1964. Since this case relates to a per iod prior to April 1, 1964, when Act 5 of 1964 came into force, it has to be judged with reference to the provision of law contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts explanation was not found to be correct or found to be false, yet without there being anything further placed on behalf of the department, the assessee could not be found guilty of having either concealed the particulars of its income or deliberately furnished inaccurate particulars thereof. In such a situation, it is difficult to decide this reference in favour of the department and to hold that on the facts and in the circumstances of the case the penalty could be legally imposed under section 271(1)(c) of the Act as it stood at the relevant time. The Tribunal in its appellate order has relied upon a decision of this court to which I was a party in Commissioner of Income-tax v. Mohan Mallah. In this case, the decisions of this court in earlier two cases were followed, namely, Khemraj Chagganlal v. Commissioner of Income-tax and Lakshmi Narain Shambhuram v. Commissioner of Income-tax, the two decisions in Murlidhar Tejpal v. Commissioner of Income-tax and Bhagwandas Shyamsunder v. Commissioner of Income-tax were distinguished. Learned counsel for the department placed strong reliance on the latter two decisions. It would be noticed from the facts of the four cases aforesaid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 28(1)(c) were of a penal nature and it was for the department to establish that the assessee was guilty of concealment of the particulars of income. The mere fact that the assessee had given a false explanation did not prove that the receipt necessarily constituted income of the assessee." It has been further observed by Grover J., in this case, at page 701: "If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. Another point is whether a finding given in the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing, in proceedings under section 28, that the disputed amount was the assessee's income. It must be remembered that the proceedings under section 28 are of a penal nature and the burden is on the department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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