9911796707
TMI Blog1988 (2) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... in the source of investment of that amount by the deceased assessee the appellant relied upon the documents produced by him as mentioned above and contended that the deceased assessee along with his sons, wife, two daughters-in-law and one daughter had stayed at Kampala in Uganda (East Africa) for a very long time and there in Uganda the ladies of the family, viz. Smt. Surajben, wife of the deceased assessee, Smt. shardaben, wife of the appellant, Smt. Sushilaben, wife of Kantilal M. Patel, another son of the deceased assessee and Smt. Meenaben, daughter of the deceased had by working on sewing machines produced their own incomes which they had invested in purchasing gold ornaments. On their return from East Africa the ladies had brought their gold ornaments with them and had kept them with the deceased assessee. The deceased assessee along with his sons was a partner in M/s. Mahendra Metal Industries but sometimes in December, 1974 differences between the father and sons had arisen. It was under these circumstances that the deceased had sold the gold ornaments belonging to the aforementioned four ladies and had invested the sale proceeds thereof amounting to Rs. 2,70,000 in three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l deed with his signatures on the deceased on the said documents. On making a comparison of the signature of the documents filed in City Civil Suit No. 3084 of 1974 the ITO felt satisfied that the signature on the Will were those of the deceased assessee. The learned CIT(A), on the basis of the report of the ITO, treated the Will of the deceased as a genuine document and allowed both the appeals. 6. The matter however came up before the Tribunal in the appeals preferred by the three ladies mentioned above against the order of the AAC and the appeals preferred by the Department against the order passed by the CIT(A) in the cases of the deceased assessee through the present appellant and of Smt. Surajben, the widow of the deceased. The Tribunal held that the assessee had signally failed to prove the source of the deposits. It therefore reversed the order of the CIT(A) as passed in the cases of the deceased assessee and his widow and restored that of the ITO. That is how the assessment stood finalised at positive income of Rs. 2,71,740 in the case of the deceased assessee for asst. yr. 1975-76. 7. In the course of assessment proceedings in the case of the deceased assessee the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On legal aspects of the penalty order as passed by the ITO and as confirmed by the CIT(A) in appeal in the present case Mr. Shah submitted that by the use of both the conjunctions 'and/or' it is abundantly clear that the ITO had failed to come to a definite conclusion with regard to the act of the assessee attracting penal provisions in the present case. Mr. Shah explained that the ITO has failed to point out as to whether it was a case of of concealment of particulars of income or whether it was a case of furnishing inaccurate particulars of such income. Mr. Shah further submitted that in a case where the ITO could not arrive at a definite conclusion on the point as to whether penalty was imposable for concealment of the particulars of the income or for furnishing inaccurate particulars of such income penalty under s. 271(1)(c) of the Act cannot be levied. In this respect Mr. Shah invited our attention to the part of ITO's order as has been mentioned above and supported his view point from the decision of the Gujarat High Court in the case of CIT vs. Manu Engg. Works (1979) 8 CTR (Guj) 141 : (1979) 122 ITR 306 (Guj). In reply Mr. P.D. Khandelwal, the learned Departmental Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y issuing a notice under s. 274 of the Act the ITO may require the assessee to explain both the facts situations mentioned above. But in order to impose penalty under cl. (c) of s. 271(1) the ITO shall have to record a definite finding as to whether he had found a case of concealment of particulars of income or a case of furnishing inaccurate particulars of such income. He cannot impose penalty on an assessee for both of the facts situations at one and the same time. 11. In the present case we have extracted the relevant part of ITO's order in extenso. It is clear that at the time of imposition of penalty upon the assessee the ITO could not record a clear finding as to whether he intended to impose penalty for concealment of particulars of income of the assessee or for furnishing inaccurate particulars of such income. That being the position of the penalty order passed in this case there is no escape from the conclusion that the principle laid down by the Gujarat High Court in the case of Manu Engg. Works apply with all force to the case on hand. It was held in the said case that where there was no clear cut finding recorded by assessing officer on the point whether he intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the ladies could have very well brought the gold ornaments with them at the times of their repeated visits to India from East Africa during the period of their stay abroad. Mr. Shah also invited our attention to various papers on the paper book showing the remittance of Rs. 1,82,500 by the members of the family of the deceased to India. It was thus submitted that though the burden of proving the conditions attracting penalty under s. 271(1)(c) of the Act was there on the shoulder of the Revenue yet the appellant had by cogent and convincing evidence positively proved that the concealment of income amounting to Rs. 2,72,000 had not resulted from any fraud or gross or wilful neglect on the part of the appellant and therefore no penalty was imposable upon him. In support of his arguments Mr. Shah heavily relied upon the Gujarat High Court decision in the case of CIT vs. Vinay Chand Hari Lal (1979) 8 CTR (Guj) 247 : (1979) 120 ITR 752 (Guj). 13. In reply Mr. Khandelwal vehemently stressed that the difference between the returned income and the assessed income exceeding 20 per cent in the present case the provisions of the explanation to s. 271(1)(c) were attracted to the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee can successfully prove, by leading some affirmative evidence or by relying on the material on record that there was no fraud or gross or wilful neglect on his part to return the correct income. In that view of the matter the proposition laid down by the Supreme Court in the case of CIT vs. Anwar Ali (1970) 76 ITR 696 (SC) that the burden of proof squarely lies on the Department, will not apply to a case under s. 271(1)(c) after coming into force of the Explanation thereto w.e.f. 1st April, 1976 if Explanation is applicable to such a case. In our approach to the present case, one more factor shall have to be present case, one more factor shall have to be kept in mind. Herein it cannot be lost sight of that it was not that assessee himself whose income was to be assessed, who had filed the return. It was one of his legal heirs and representative who was obliged to file the return of income of the deceased assessee due to his death. It is in the light of these principles that we intend to approach the facts of the present case and to see whether the appellant had succeeded in proving that there was no fraud or gross or wilful neglect on his part in not returning correct income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red from the documents placed before us that perhaps the deceased had felt much interested in his younger son with whom he was staying in a bungalow in Ranjan Society and whom he wanted to establish in another business to be started under the name of Patel Metal Industries. Anyway the facts relevant to the investment of Rs. 2,70,000 by the deceased in three fixed deposits with Central Bank of India, Mithakali branch on 28th Dec., 1976 are that the females had allegedly left their jewellaries with the deceased on safety considerations. It is alleged that it was sometimes in Dec., 1974 that the deceased had sold such jewellaries and had deposited the proceeds thereof in three bank deposits in the joint names of himself and his wife Smt. Surajben. The ITO rejected this version on the ground that neither the acquisition of gold ornaments by the ladies was successfully proved nor the sale thereof. He found certain discrepancies in the statements of the ladies and doubted whether they could have brought gold in huge quantity from abroad without undergoing the rigours of Customs Act. He further disbelieved that the ladies would have given their ornaments to the deceased even in the wake o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if taken, that had been found unfounded baseless or even false. Findings recorded in quantum proceedings are not to operate as res judicta in penalty proceedings. The plea advanced by the assessee and material relied upon by him in penalty proceedings shall have to be examined with a view to see whether such a plea and material can reasonably be declared as sufficient to discharge the burden of the assessee under the Explanation. We need not stress that findings on that point shall have to be recorded on the basis of preponderance of probabilities as in civil matters and not on the standard of proof beyond doubt as in criminal proceedings. In the present case we find that the appellant had throughout been asserting two vital facts, viz., (1) that the moneys invested in the fixed deposits did in fact belong to certain females of the family and (2) that it all had come to his knowledge after the death of the deceased. This conduct of the appellant was strengthened by the fact that at the very first hearing he had not only disclosed all the relevant facts by his letter dt. 15th Feb., 1978 but had also placed all the relevant material in his possession in that behalf before the ITO. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s again indicates that assertion being advanced by the appellant was not without any basis. 17. Then again it cannot also be lost sight of that at one stage of the proceedings the tax authorities themselves had upheld the contention of the appellant that the distribution of the moneys in the fixed deposits in question had resulted in bringing capital gain to the ladies of the family for which they had been taxed accordingly. No doubt this position was unsettled by the Tribunal in appeal yet it leaves much for consideration whether such circumstances would necessarily go to prove mala fides on the part of the appellant. 18. Thus having considered the material on record, the conduct of the appellant exhibited in the course of assessment proceedings as also in the course of penalty proceedings, the treatment given to the amount in question by the Department at several stages of proceedings in the case of several persons we are clearly of the opinion that the appellant in the present case had fully proved that there had been no fraud or gross or wilful neglect on his part in not disclosing the correct income of the deceased in the return filed by him. We need not stress again tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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