9911796707
TMI Blog1979 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... irsa, is a " registered firm " consisting of four partners and a minor admitted to the benefits. The firm was constituted on October 4, 1967, and it derived its income from the sale of tubewell material, saria, Patti, etc. The assessment is for 1968-69 ending on March 31, 1968. The return, furnished on November 1, 1968, declared an income of Rs. 13,589. The ITO completed the assessment at a total income of Rs. 33,600 after making an addition of Rs. 20,000. He found that payments of at least that amount had been made to M/s. Bharat Steel Tubes Ltd. (partly on 17th October, 1967, and partly on 28th October, 1967), by the assessee out of cash lying outside the assessee's books of account. Entries regarding these payments were made in the assessee's books only on November 11, 1967. The assessee's explanation was that one Om Parkash (a brother of two of the partners of the assessee-firm used to advance to the assessee-firm loans without any interest, without any security and without any instrument or even without an entry in the assessee's books, either regarding the receipt of the loan or regarding the repayment thereof. Entries pertaining to the payment and receipt of the two amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charge of concealment and the absence of an explanation or the falsity of an explanation cannot be construed as establishment of concealment. The totality of circumstances do not establish that this is the concealed income of assessee. This is what their Lordships of the Supreme Court in Anwar Ali's case [1970] 76 ITR 696 have observed and we are of the view that the penalty is not exigible because the concealment has not been established by the department and for this we rely on Anwar Ali's case [1970] 76 ITR 696 and Khoday Eswarsa's case [1972] 83 ITR 369 (SC), both decided by their Lordships of the Supreme Court. The learned counsel for the assessee also relied on two judgments of the Supreme Court, namely, Mohamed Haneef 's case [1972] 83 ITR 215 and Hindustan Steel Ltd. [1972] 83 ITR 26. But we need not go into these citations because we are of the view that the revenue have not been able to establish the concealment on the part of the assessee. Mere assessment of an amount for assessment purposes is not by itself enough to establish the concealment. We, therefore, hold that no penalty is exigible in the instant case which is deleted, and the appeal allowed." Mr. Awasthy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Ram Nath [1977] 106 ITR 172, of the Patna High Court in CIT v. Patna Timber Works [1977] 106 ITR 452, of the Orissa High Court in CIT v. Laxmi Auto Stores [1977] 106 ITR 626, of the Calcutta High Court in CIT v. Walker and Company [1979] 117 ITR 690 and of the Madras High Court in CIT v. Smt. Kanakammal [1979] 118 ITR 94. On the other hand, Shri B. S. Gupta, learned counsel for the assessee, has placed reliance on a judgment of this court in Addl. CIT v. Karnail Singh V. Kaleran [1974] 94 ITR 505, which, according to him, fully covers the present case. It has been held therein that the purpose of the Explanation to s. 271(1)(c) is to differentiate between two types of assessees : those who have reported correct income up to eighty per cent. of the assessed income and those who have not. In the case of the first type the onus lies on the department to prove fraud or gross or wilful neglect in not returning the correct income and in the case of the second type the onus is on the assessee to establish that the failure to return the correct income was not on account of any fraud or gross or wilful neglect on his part. It has been further held therein that the principles enunciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Laxmi Auto Store's case [1977] 106 ITR 626, no reasons have been stated as to how the decision of the Supreme Court in Anwar Ali's case [1970] 76 ITR 696 could not provide any guidance after the Explanation to s. 271(1)(c). The Patna High Court in Patna Timber Works' case [1977] 106 ITR 452 has noticed the Punjab High Court judgment in Karnail Singh's case [1974] 94 ITR 505 but has failed to give any cogent reasons to differ from the same. The judgment of the Calcutta High Court in W.J. Walker's case [1979] 117 ITR 690 is rather based upon the Supreme Court decision in Anwar Ali's case [1970] 76 ITR 696 and it has been held therein that in view of the clear provisions of the Explanation, it must be held that it is only after the assessee has proved positively that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part, that the principles laid down by the Supreme Court in Anwar Ali's case [1970] 76 ITR 696 would come into play, i.e., the department will have to prove that the assessee was guilty of concealment of income or had furnished inaccurate particulars of income. The only difference of opinion in Karnail Singh's case [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent against recurrence of default on the part of the assessee and that section 28 is penal in the sense that its consequences are intended to be an effective deterrent which would put a stop to the practices which the legislature considers to be against the public interest. It has been further held that the department must establish that the receipt of the amount in dispute constitutes the income of the assessee and if there is no evidence on record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes its taxable income. It has been further held that, as the proceedings under section 28 are of a penal nature and the burden is on the department to show that a particular amount is revenue receipt, it is legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents the income. It has been pointed out in the said decision that the finding given in the assessment proceeding for determining or computing the tax is not conclusive though it may be good evidence. It has been further held by this cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that it does. Therefore, we are in respectful agreement with the decision of this court in Karnail Singh's case [1974] 94 ITR 505. Since in that case it was the clear finding of the Tribunal on a question of fact that the assessee was not the owner of the money in his pocket and there was no proof thereof, this court held that no fault could be found with the conclusion of the Tribunal that the provisions of s. 271(1)(c) of the Act were not applicable, and decided the matter in favour of the assessee. Thus, we find that the Explanation to s. 271(1)(c) was duly considered by the Tribunal while giving that finding in that case. However, in the present case, from the observations made by the Tribunal in the order reproduced earlier, it appears that the Tribunal did not consider the effect of the Explanation added to s. 271(1)(c). The observations made by the Tribunal that, " For imposition of penalty and the sustenance thereof, the revenue has to establish not by mere falsity of the explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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