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TMI Blog1999 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ce has been given to the seller in his account' or that--- (ii) 'in fact the seller has shown this as her income and has been assessed on this' including the 'other amount of Rs. 81,760' ?" 3. Whether, on the facts and in the circumstances of the case, is the Tribunal right,--- (i) 'in relying on the second return as a revised return' ? and (ii) in casting the burden of proof on the Revenue ? 4. Whether, on the facts and in the circumstances of the case, and also in view of the Explanation to section 271(1)(c), did the assessee admitting a concealment of income by Rs. 5,81,760, discharge the burden that lay on him? 5. Whether, on the facts and in the circumstances of the case, is the Tribunal justified in considering and also in relying on the additional ground of an alleged 'understanding/misunderstanding' ? 6. Did the Tribunal have any materials to hold that the purchases were made at rates higher than the market rates (as stated in paragraph 33) and is not the above finding wrong and inconsistent with the finding in para. 37 ?" As suggested by learned counsel for parties, we consolidate and reframe the questions to read as follows : "Whether, on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed a minimum penalty of Rs. 4,00,652, which was confirmed in appeal by the Commissioner of Income-tax (Appeals) (in short, "the CIT(A)"). The matter was carried by the assessee in appeal before the Tribunal. Its stand before the Tribunal was to the effect that the seller is a proprietary concern belonging to the assessee's wife. For the purpose of availing of benefit relating to sales tax exemption in respect of purchases for the purpose of export, the arrangement was made. The assessee and his wife found that while the business of the assessee had shown substantially higher profits, the seller had shown substantial loss. It was also found that the purchases from the seller in many instances were for prices below the market fate. Therefore, it was considered necessary to correct the lopsided picture of profits and, accordingly, the decision was taken to increase the price relating to the total purchases made from the seller. An accountant was directed to do so. But he did not do so by passing journal entries in respect of the prices. He made the adjustment by correcting and inflating bill No. 653 referred to earlier. It was stated that the only intention of the assessee was to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at some stage, the assessee had agreed to surrender any income for inclusion in its total income, that does not per se amount to concealment. By way of reply, it is submitted by, learned counsel or the Revenue that when there is a conscious surrender, it prima facie establishes concealment. Penalty proceedings are apart and separate from assessment proceedings. An assessee is entitled to adduce evidence, even if he had not adduced it earlier at the assessment stage, when penal proceedings are taken up. Even if an amount had been surrendered for inclusion in the assessee's income as undisclosed income that per se cannot be held to be concealment. It is open to the assessee to explain the nature of the income in the penalty proceeding. The explanation has to be considered by the Assessing Officer. It Cannot be laid down as a general rule that no penalty can be levied for concealment in respect of surrendered income. If no explanation is offered or the explanation offered is found to be not plausible and/or acceptable, penalty can be levied. At this juncture, it is necessary to refer to the legislative history so far as section 271(1)(c) is concerned. There are three stages of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. Explanation 1.---Where in respect of any facts material to the computation of the total income of any person under this Act,--- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner to be false, or (B) such. person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed : Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or withdraw from observation ; to cover or keep from sight ; to prevent discovery of ; to withhold knowledge of". There may be cases where the facts may attract both the offences, and in some cases there may be overlapping of the two offences. If, in the facts and circumstances of a particular case and on the materials before it, the Tribunal reaches a conclusion that concealment was not proved, it is a question of fact and no question of law arises from such order. Similarly, whether the burden in a given case has been discharged on a set of facts or not, is a question of fact. Where a finding of fact arrived at by the Tribunal is based on no material or is perverse or arrived at by application of wrong principles of law, a question of law arises. Where the Tribunal fails to arrive at its own conclusion of fact after due and proper consideration of the entire materials for and against the assessee and cancels the penalty, a question of law arises. Similar is the case where the conclusions of the Tribunal suffer from any infirmity on account of relevant materials and evidence being ignored. A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact, and no question of law arises. As observed earlier, the initial burden is on the assessee. Once the initial burden is discharged, the assessee would be out of the mischief unless further evidence is adduced. It is plain on the principles that it is not the law that the moment any fantastic or unacceptable explanation is offered, the burden placed would be discharged and presumption rebutted. As pointed out by the apex court in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14, the burden placed upon the assessee is not discharged by any fantastic explanation. It must be an explanation acceptable to the fact-finding body. The position on and after April 1, 1976, is clear that where, in respect of any item of credit, the assessee has offered an explanation which the taxing officer has considered to be false or the assessee has offered an explanation but no material or evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78, from Spot Spices Co., Jew Town, Cochin-2. As against the rate of Rs. 1,975 per quintal the purchase rate was shown as Rs. 2,975 per quintal and it is this purchase at the rate of Rs. 2,975 per quintal which has been debited in my books of account. This inflation in purchase has resulted tin reducing my actual profit by Rs. 5,00,000. 5. In view of the above, I filed the revised return of income dated August 3, 1979, showing in Part III of the said return of income, the sum of Rs. 5,00,000 (rupees five lakhs) being the profits earned by inflation of the purchase as per bill No. 653, dated January 25, 1978. 6. In pursuance of your present notice, I am enclosing herewith the return of income dated October 26, 1979, together with a vakalath executed in favour of my advocates, Kamath and Kamath, Cochin-2. In the said return of income, I submit that the total income from business has been shown by me at Rs. 5,90,387.51 as against the sum of Rs. 90,387.51 shown by me in the original return dated July 31, 1978. 7. 1 submit that the sum of Rs. 5,00,000 (rupees five lakhs only) was kept as cash and this amount has been introduced today into the books of account of my proprietary con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases of the year and not for the particular purchase. But the accountant, by mistake, corrected the bill though he was not directed to do otherwise. Paragraphs 4, 5 and 7 of the letter extracted above clearly indicate a different position. In fact, that was an admission in clear terms, that there was inflation of purchase, that the amount was kept in cash and had been introduced into the books of account of his proprietary concern. That being the position, the finding of the Tribunal that the amount had in reality been paid to the seller is clearly contrary to materials on record. So far as the alleged promise by the Revenue authorities not to impose penalty is concerned, the Tribunal itself has referred to the letter of the Commissioner of Income-tax, who had stated that if the assessee extends co-operation in reassessment proceedings, that would be taken into account while determining the quantum of penalty and in deciding the question of initiating prosecution or in fixing compounding fee for prosecution. True to the indication, the minimum penalty has been imposed. The Tribunal was clearly in error in making out a case contrary to the accepted stand of the assessee and in ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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