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TMI Blog1978 (8) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to law, in the earlier assessment year 1947-48. Accordingly, the assessment for the assessment year 1947-48 was reopened under s. 34 of the Indian I.T. Act, 1922. The assessee's explanation was that the said amounts were in fact advanced by M/s. Surajmal Nagarmal, although the same were entered in its books in the names of the said employees and in support thereof the assessee relied on a confirmation furnished by M/s. Surajmal Nagarmal to the effect that out of a fund of about Rs. 16,000 lying idle with them in cash as admitted before the Income-tax Investigation Commission, the said sum of Rs. 1,40,000 had been advanced to the assessee. The ITO did not accept the said explanation of the assessee and added back the same to the income, of the assessee as income from undisclosed sources. Such addition was confirmed both by the AAC and the Tribunal on successive appeals by the assessee. The ITO being of the opinion that the assessee had concealed the particulars of its income or had deliberately furnished inaccurate particulars thereof, initiated proceedings against the assessee under s. 28(1)(c) of the Indian I.T. Act, 1922, and issued notice to the assessee under s. 28(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees in whose names the credit entries were made could not advance such a huge amount to the assessee, it sought to explain the sums as amounts received from M/s. Surajmal Nagarmal, although initially no such case was made out and documents had been executed by the assessee recording that the alleged loans were taken by the assessee from the said employees. The Tribunal held that the entries made by the assessee in its account books clearly established that the assessee had knowingly furnished inaccurate particulars of its income, and confirmed the order of the AAC. At the instance of the assessee, this court directed the Tribunal to submit a statement of the case and to refer the following question as question of law arising out of the order of the Tribunal : " Whether, on the facts and in the circumstances of the case, the imposition of penalty under section 28(1)(c) was lawful or justified ? " Mr. Ranjit Murarka, learned counsel for the assessee, contended before us that the authorities below and the Tribunal proceeded solely on the basis of the facts and materials found in the assessment proceedings in levying and sustaining the penalty. No further facts were found or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee from undisclosed sources stood confirmed. CIT v. Khoday Eswarsa Sons [1972] 83 ITR 369 (SC). This was an appeal by the revenue against an order of the High Court of Mysore rejecting its application under s. 66(2) of the Act for directing the Tribunal to refer the following question of law to the High Court: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty of Rs. 35,000 levied under section 28(1)(c) of the Indian Income-tax Act, 1922 ?" The Supreme Court relied on its decision in CIT v. Anwar Ali [1970] 76 ITR 696 and laid down as under (p. 376 of 83 ITR): "Apart from the falsity of the explanation given by the assessee, the department must have before it before levying penalty cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is revenue receipt. No doubt the original assessment proceeding for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essions had been made in the proceedings where the assessee was not a party and where the assessee had no opportunity to cross-examine those parties ...... In these circumstances, it cannot be said that it has been proved that there was any concealment by the assessee." CIT v. Bhowanipur Motor Accessories Agency Pvt. Ltd. [1978] 113 ITR 703 (Cal). Here, the assessee had filed a return showing an income of Rs. 1,490. In the assessment proceedings, the ITO found diverse Cash credit entries in the accounts of the assessee and a total sum of Rs. 40,000 was shown as outstanding from five persons, which were stated to be loans taken against hundis. The ITO called upon the assessee to prove the said cash credits and also served notices under s. 131 of the I.T. Act, 1961, on the alleged creditors. Only two of them appeared and gave evidence. The ITO did not accept that they were money-lenders and held that they were merely name-lenders. The said sum of Rs. 40,000 was added as the income of the assessee from undisclosed sources. Penalty proceedings under s. 271(1)(c) of the I.T. Act, 1961, were initiated by the ITO which was concluded by the IAC on the basis that there was notorious hundi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said amount was advanced to the assessee by Surajmal Nagarmal. There was no evidence that the said entries were made in the names of the employees of the assessee at the instance or direction of Surajmal Nagarmal. Even assuming that the case of the assessee was true there was no escape from the fact that the assessee deliberately furnished inaccurate particulars of the said cash credits by making false entries in its books of account, in the names of its employees. The said amount has been added in the assessment as income of the assessee from undisclosed sources. Thus, the net result was that the assessee deliberately furnished inaccurate particulars of its income by showing the same as loans from its employees. Thus, there was concealment of income by the assessee. In support of his contentions, Mr. Sen cited the following decisions: CIT v. Kotrika Venkataswamy Sons [1971] 79 ITR 499 (SC). Here, the Tribunal having refused to refer to the High Court the question asked for by the revenue under s. 66(1) of the Indian I.T. Act, 1922, the revenue made an application before the High Court under s. 66(2) of the said Act for referring the same which was also refused. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee has concealed its income is a question to be decided on the facts of a case, and in the present case the decision is based on the respondent's agreement with D. J. C., which the Tribunal accepted as true. That being, so, no question of law really arises from the order of the Tribunal and the order dismissing the application under section 66(2) cannot be said to be wrong." In our opinion, the contention of Mr. Sen that the question referred is a question of fact and not a question of law is not without substance. In Khoday Eswarsa Sons case [1972] 83 ITR 369 (SC) the Supreme Court found that the order of the ITO levying the penalty categorically stated that the reasons for adding the disputed amounts in the total income of the assessee had been already discussed in the original order of assessment and that they need not be repeated again. That was the only basis for the levy of penalty in that case. The Supreme Court also found that the AAC made a further guess that there were very many dry areas bordering Mysore and the assessee could have surreptitiously sold the alcohol, supplied to it without using it for the purpose of making tincture. Bat the Appellate Tribunal ..... 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