1988-VIL-407-CAL-DT

Equivalent Citation: [1990] 185 ITR 481, 80 CTR 233, 46 TAXMANN 196

CALCUTTA HIGH COURT

Date: 16.12.1988

COMMISSIONER OF INCOME-TAX

Vs

NURUDDIN AND BROTHERS

BENCH

Judge(s)  : AJIT KUMAR SENGUPTA., J. N. HORE 

JUDGMENT

AJIT K. SENGUPTA J. -At the instance of Commissioner of Income-tax, West Bengal-X, the following question of law has been referred to this court under section 256(2) of the Income-tax Act, 1961, for the assessment year 1960-61 :

"Whether, on the facts and in the circumstances of the case and having regard to the unequivocal admission made by the assessee in its petition under section 271(4A) of the Income-tax Act, 1961, to the effect that income had been concealed by it, the Tribunal misdirected itself in law in holding that no penalty was exigible under section 271 (1) (c) of the said Act ?"

The facts, shortly stated, are that the Income-tax Officer originally completed the assessment for this year on a total income of Rs. 86,814. Thereafter, the assessee is stated to have made a disclosure petition under section 271(4A) of the Income-tax Act, 1961, before the Commissioner of Income-tax on February 28, 1967. In the said disclosure petition, the assessee admitted that cash credits introduced in the books in various names in different years including the assessment year 1960-61 represented its own income which had not been earlier disclosed in its returns of income. However, the Commissioner of Income-tax declined to accept the petition filed by the assessee. Thereupon, the Income-tax Officer initiated reassessment proceedings under section 147(a) of the Act on the basis of the admission made by the assessee in the disclosure petition filed before the Commissioner of Income-tax and assessed the peak of the cash credits including the interest paid thereon as income of the assessee. He also initiated penalty proceedings for concealment of income under section 271(1)(c) and as the minimum penalty exceeded Rs. 1,000, he referred the case to the Inspecting Assistant Commissioner of Income-tax under section 274(2).

The Inspecting Assistant Commissioner, after duly considering the objections raised on behalf of the assessee, imposed a minimum penalty of Rs. 54,667 under section 271 (1) (c) of the Income-tax Act, 1961.

On appeal by the assessee before the Tribunal, it held that the facts of the case clearly show that the assessee had disclosed the income to the Department on its own volition and such being the case, the assessee did not conceal income. Consequently, the penalty levied by the Inspecting Assistant Commissioner was cancelled. The facts are that the assessee made a disclosure petition under section 271(4A) of the Act and it was not accepted by the Commissioner. From the disclosure petition, the Tribunal could not find out any admission on the part of the assessee that income has been concealed or incorrect particulars had been furnished.

Mr. Naha, appearing for the Revenue, has fairly submitted that similar question came up for consideration before this court in CIT v. Sarda Rice and Oil Mills [1979] 117 ITR 917, where a similar question was answered against the Revenue. We are of the view that the principles laid down in the said decision are applicable to the facts and circumstances of this case.

The question referred to us, however, proceeds on the assumption that the assessee had made an unequivocal admission in the disclosure petition that income had been concealed by it. No such contention was raised before the Tribunal. The Tribunal held on the facts that the assessee disclosed the income to the Department of its own volition and in such a case it cannot be said that the assessee had concealed its income.

If there is an unequivocal admission that the amount added to the assessment is the concealed income of the assessee for the relevant year, penalty may be levied on the basis of such admission depending on the facts and circumstances of the case. But we do not find any such material in this case. If the conditions of section 271(4A) are satisfied, the Commissioner cannot deny relief to the assessee. Where the disclosure is eventually rejected but in making the assessment the Income-tax Officer does not bring to tax any amount in excess of what had been disclosed by the assessee penalty should not be imposed merely because it is lawful to do so. discretion has been vested on the competent authorities by providing in section 271 (1) that if the conditions laid down in that section are satisfied, the competent authority may impose penalty. It is not mandatory that in every case penalty should be imposed as soon as a declaration is made of concealed income leading to its assessment. The entire facts and circumstance must be taken into account to find out whether the case warranted imposition of penalty.

We may add that a similar view has been taken by this court in CIT v. Bengal Iron Galvanising Works [1987] 165 ITR 249.

We, therefore, reframe the question as follows :

"Whether, on the facts and in the circumstances of the case and having regard to the disclosure petition filed under section 271(4A) of the Income-tax Act, 1961, the Tribunal misdirected itself in law in holding that no penalty was exigible under section 271(1)(c) of the said Act ?"

For the reasons aforesaid, the reframed question is answered in the affirmative and against the Revenue.

There will be no order as to costs.

J. N. HORE J. -I agree.

 

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