1979-VIL-637-GUJ-DT

Equivalent Citation: [1983] 139 ITR 1028

GUJARAT HIGH COURT

Date: 15.10.1979

COMMISSIONER OF INCOME-TAX

Vs

LALLUBHAI JOGIBHAI PATEL

BENCH

Judge(s)  : P. D. DESAI., S. B. MAJMUDAR

JUDGMENT

The judgment of the court was delivered by

DESAI J.-This is an application under s. 256(2) of the I.T. Act, 1961, and the Commissioner of Income-tax, Gujarat Central, Ahmedabad prays that the Income-tax Appellate Tribunal, Ahmedabad Bench, should be asked to raise and refer the following questions of law for the opinion of this court:

" 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in setting aside the order of the Inspecting Assistant Commissioner levying the penalty of Rs. 20,000 under section 271(1)(c) of the Income-tax Act, 1961 ?

2. Whether, the Income-tax Appellate Tribunal was right in law in holding that the Income-tax Officer had no jurisdiction to refer the case to the Inspecting Assistant Commissioner and, therefore, the penalty cannot be sustained ?

3. Whether, the finding of the Tribunal that the income of Rs. 20,000 was only chargeable to tax as income from undisclosed source in the assessment year 1971-72, is correct in law and sustainable from the material on record ? "

In our opinion, if no reference could be granted on questions Nos. 1 and 3, question No. 2 would be rendered academic and we would, therefore, consider first whether this is a fit and proper case, in which questions Nos. 1 and 3 of the Revenue's application under s. 256(2) can be entertained.

The material facts as found by the taxing authorities are as follows:

(1) The assessee filed the return of income for the assessment year 1971-72, declaring his total income at rupees nil.

(2) In Part IV of the return, the assessee showed income of Rs. 59,856 as income from agriculture and claimed exemption.

(3) In the course of investigation, the assessee was found to be the owner of a building valued at Rs. 3,25,000.

(4) Addition in respect of unexplained investment was under contemplation under s. 69 when the assessee approached the Department for assessment on an agreed basis in that regard.

(5) The assessee's contention that the building belonged to the HUF consisting of the assessee and his brother was accepted.

(6) It was also accepted that the assessee's contribution towards the cost of construction of the building over a number of years was Rs. 1,75,000.

(7) It was further accepted after discussion with the assessee that the said amount of Rs. 1,75,000 would be assessable in the assessee's hands over a number of years, of which a sum of Rs. 20,000 was assessable during the assessment year 1971-72.

(8) Assessment for the assessment year 1971-72, was completed by adding the aforesaid amount of Rs. 20,000 on agreed basis as aforesaid.

The ITO started penalty proceedings for a levy of penalty under s. 271(1)(c) in the course of assessment proceedings for the assessment year 1971-72. The proceedings came to be referred to the IAC as the ITO was of the view that the minimum penalty leviable exceeded Rs. 25,000. The IAC came to the conclusion that the investment in question was made out of some undisclosed income of the assessee and that, therefore, there was a concealment of particulars of income to the extent of Rs. 25,000 in the assessment year in question. In view of the said finding, the IAC levied a penalty of Rs. 20,000 under s. 271(1)(c) and directed the ITO to issue demand notice and challan accordingly.

In appeal, the I.T. Appellate Tribunal held, on merits, that it was not clear that the investment of Rs. 20,000 in the construction of the property in question had been made out of the undisclosed income of the assessee assessable to tax for the assessment year 1971-72. The entire proceeding proceeded on the basis of the letter addressed by the assessee to the Commissioner, Gujarat-II, wherein he admitted that the sum of Rs. 1,75,000 be treated as his non-returnable contribution to the HUF towards the cost of construction of the property, and that the same be treated as his income from undisclosed source for the assessment years 1968-69 to 1972-73. The assessee requested the Commissioner to tax the sum of Rs. 20,000 out of the aforesaid income from undisclosed source as income for the assessment year 1971-72. The Tribunal observed that the object of the assessee in requiring the sum of Rs. 1,75,000 to be treated as non-returnable contribution for five different assessment years was obviously to avoid taxation at the higher rate in any one particular year. According to the Tribunal, the conclusion was not inescapable from the letter of the assessee to the Commissioner that the assessee had actually earned an income of Rs. 20,000 from undisclosed sources for the assessment year 1971-72, and no penalty was, therefore, leviable. In view, inter alia, of this finding, the Tribunal allowed the appeal and vacated the order levying the penalty.

In our opinion, whether or not there was concealment of income to the extent of Rs. 20,000 in the assessment year in question is a question which was required to be decided on the facts of the case. In the instant case, as earlier pointed out, in the assessment proceedings the addition of Rs. 1,75,000 as the assessee's income from undisclosed sources had been made and such income has been spread over a number of years, so to say, because the assessee did not question such inclusion and agreed to the spread over of such income in order to avoid taxation at the higher rate in any one particular year. There has been no dispute indeed it cannot possibly be disputed having regard to the findings recorded by the taxing authorities that apart, from the assessment proceedings there was nothing which would justify the conclusion that, in fact, the assessee had derived income to the extent of Rs. 20,000 in the corresponding account year and that he was guilty of concealment. The mere fact that in the assessment proceedings the assessee acquiesced in the treatment of the whole amount as his income presumably on account of his inability to prove the source or, may be, to avoid protracted litigation and that with the end in view of mitigating taxation, he conceded that a portion of the amount be treated as his income of a particular year, the levy of penalty for concealment might not be justified. The decision of the Supreme Court in CIT V. Ashoka Marketing Ltd. [1976] 103 ITR 543, is a clear authority for the proposition that under such or similar circumstances if the Tribunal has decided on facts that there is no concealment, no question of law arises from the order of the Tribunal requiring a reference to be made to this court.

It was urged on behalf of the Revenue that Ashoka Marketing Ltd.'s case [1976] 103 ITR 543 (SC) was clearly distinguishable because in that case, the explanation offered by the assessee, namely, that the agreement in question was entered into between the assessee-company and another party to avoid protracted appeal proceedings, was accepted by the Tribunal and that there was no such circumstance present as in the instant case. We are afraid, the basis on which the decision in Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC), is sought to be distinguished is not available in the instant case. It is significant to note that even in Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC), an argument was advanced on behalf of the Revenue before the Supreme Court that the alleged understanding or agreement between the assessee and another party therein appeared only from what the assessee's counsel stated before the Tribunal and that there was no material on record in support of that statement and that, therefore the penalty was justified. The Supreme Court rejected that contention in the following words (p. 547):

"Assuming that the fact of agreement with D.J.C. appeared only in counsel's statement, there is nothing on record to suggest that the Department challenged the truth of the statement or questioned the propriety of acting on it. The agreement with D.J.C. is a fact appearing from the order of the Tribunal, and that is sufficient for the present purpose. Whether or not an assessee has concealed its income is a question to be decide 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."

Herein, beside the addition of Rs. 20,000 under the circumstances mentioned above, there was no other material in the penalty proceedings to justify a levy of penalty on the ground of concealment. Under the circumstances, once the Tribunal found that there was in fact no concealment because it was not conclusively established that the assessee had actually earned the income of Rs. 20,000 in the relevant year, no question of law arises which required to be referred to this court.

For the foregoing reasons, we discharge the rule. The Commissioner will pay the costs of the application to the assessee.

 

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