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TMI Blog1987 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... Bibi Mazidan, mother of the assessee, and the third was a sum of Rs. 1,010 received by the assessee as annuity deposit refund. The Tribunal set aside the penalty on all counts. The Revenue being aggrieved, claimed reference before the Tribunal, but without any success. The High Court, thereafter, being moved by the Revenue, prayed for calling for a reference. This High Court directed the Tribunal to state a case before this court for answering the question mentioned above. Hence, the reference before us. I would prefer first to take up the cash credit item of Rs. 16,000 said to have been received by the assessee from her mother, Bibi Mazidan. The assessee was called upon to show cause whether his mother was possessed of sufficient assets to advance the sum to him. It was stated on behalf of the assessee that his mother had income from rent of house property at the rate of Rs. 2,440 per year for 1968-69 and between the period 1967-70 at the rate of Rs. 2,608 per year. The Income-tax, Officer had found that the documents produced to support the assessee's claim were forged ones and prepared to booster up his claim for cash credit from his mother, Bibi Mazidan. The finding of fraudu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out whether the land was sold actually for Rs. 49,500 or for more. This was a matter within the special knowledge of the assessee. The Tribunal could not be expected to produce the sale deed. Learned counsel for the assessee submitted that even if the assessee did not produce the original sale deed, the Revenue could have obtained a certified copy of the sale deed from the registration office and disproved the stand of the assessee that the land had been sold really for a sum higher than Rs. 49,500. This does not lie in the mouth of the assessee. No court or Tribunal should countenance in an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decribed by Chinnappa Reddy J. in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC). The command of Parliament is to penalise the tax-dodgers. Such stand of the assessee is nothing but trickery and should not be countenanced by courts. Further, the Revenue could have produced a certified copy of the sale deed only if the details of the land sold were known. There is nothing on record to show that the details had been provided by the assessee. Merely stating that income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord Reid, dealing with endeavours by the assessee to cheat the exchequer, observed as follows : "We seem to have travelled a long way from the general and salutary rule that the subject is not to be taxed except by plain words. But I must recognize that plain words are seldom adequate to anticipate and forestall the multiplicity of ingenious schemes which are constantly being devised to evade taxation. Parliament is very properly determined to prevent this kind of tax evasion and, if the courts find it impossible to give very wide meanings to general phrases, the only alternative may be for Parliament to do as some other countries have done, and introduce legislation of a more sweeping character which will put the ordinary well-intentioned person at much greater risk than is created by a wide interpretation of such provisions as those which we are now considering ...... Indeed, I sometimes suspect that our normal meticulous methods of statutory construction tend to lead its astray by concentrating too much on verbal niceties and paving too little attention to the provisions read as a whole." Chinnappa Reddy J. observed at page 154 of 154 ITR that " The march of the law against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts is the one laid down by Chinnappa Reddy J. in the following terms : " We think that the time has come for us to depart from the Westminster principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in a welfare State like ours. Next, there is the serious disturbance caused to the economy of the country by the piling tip of mountains of blackmoney directly causing inflation. Then there is 'the large hidden loss' to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on the one side and the tax-gatherer and his perhaps not so skilful advisers on the other side. Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it'. Last, but not the least is the ethics (to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he known processes in the taxation world. Where the assessee conceals relevant material/evidence, the Revenue has no option but to make a best judgment by estimate. An assessment by estimate is as much legal as any other assessment. Once an assessment has been done, whether it is a best judgment assessment or otherwise, the figure assessed must be held to be the income of the assessee. 1 do not see why such an assessment cannot invite penalty in its trial. Learned counsel for the assessee placed reliance upon Dr. (Mrs.) K. D. .Arora v. CIT [1986] 162 ITR 481 (Pat), a decision rendered by me in which I had observed as follows (p. 490): " I am, therefore, definitely of the view that even if an assessment has been done by estimate, penalty cannot be deleted merely on the score of assessment by estimate. But I should make it clear that it is not intended to be conveyed that in every case of estimated assessment specially in the case of investment over construction of buildings, penalty must be imposed. If the difference is marginal between the returned investment and the assessment so that it may be said that there is scope for honest difference of opinion, that will not be a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o penalty has ever been imposed under the Explanation. The Explanation to section 271(1)(c) is only a rule of evidence and not a substantive law (See CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292 (Pat) [FB] at page 302). It is not surprising that the Tribunal had not understood the true implication of the Explanation. Whenever there is concealment or inaccurate particulars furnished by an assessee, it calls for imposition of penalty. The proof of concealment or furnishing of inaccurate particulars is to be tested with the help of the Explanation which raises a presumption of concealment. Once there is a difference of more than 20% between the assessed income and the returned income, a presumption of concealment arises. That presumption is rebuttable. Once the presumption has been rebutted, the Explanation loses its force. Thus, it is not sound proposition to state that penalty has been or has not been imposed under the Explanation. The Explanation being a rule of evidence, it must be made applicable at every relevant stage. A Full Bench of this court to which I also was a party considered the implication of the Explanation. The decision of the Full Bench in CIT v. Nathulal . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concealment. Let us see what the Tribunal found the assessee had shown and in what manner the presumption had been rebutted. perusal of paragraph 5 of the order of the Tribunal does not show that the assessee produced any material to rebut that presumption. In that view of the matter, the conclusion of the Tribunal that there had been no deliberate concealment was erroneous in law. The penalty could not have been set aside on that basis. The presumption not having been rebutted, the penalty had to follow. Learned counsel for the assessee submitted before us that the Tribunal having found true the explanation of the assessee in regard to the cash credit of Rs. 16,000, the Explanation would cease to be applicable. That having become inapplicable, the approach of the Tribunal in regard to concealment of capital gain was invulnerable. I regret, I have some difficulty in accepting this statement. In order to appreciate whether the Explanation would govern the case or not, we have to turn back to the date when the penalty proceeding was initiated. On that day, there was a difference of 20%. The initiation of the penalty proceeding being valid, the facts have to be tested in the backd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng been received from the client, the inference is inescapable that there has been concealment. That would fall squarely in the category of section 271(1)(c). It will fulfil the requirement not only of furnishing an inaccurate amount but also of concealment. Learned counsel for the assessee submitted that the Tribunal had held that the assessee had returned an income of Rs. 466 only under some misunderstanding. That, according to learned counsel for the assessee, was a finding of fact which could not be interfered with or tinkered by this court.. It was submitted that the Revenue had not challenged that finding of fact as being without any material and, therefore, the cancellation of penalty on that score must be upheld. I regret, with great respect, cannot accede to this submission. Whether there was any scope for misunderstanding or not and whether the penalty could be set aside on that score fell within the larger question whether the cancellation of penalty was justified. The question referred took in its sweep a challenge to the entire gamut of finding of fact of the Tribunal. The conclusion of the Tribunal that Rs. 466 only was returned by a misunderstanding was, to say the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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