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High Court Of Madhya Pradesh
P. V. Dixit, C. J. and R. J. Bhave, J.
COMMISSIONER OF INCOME-TAX - Appellant
Versus
PUNJABHAI SHAH - Respondents
Misc. Civil Case 84 Of 1966
Decided On : 08/11/1967
The question whether the assessee concealed the particulars of his Income or whether he has committed an offence under section 28 (1) (c) of the Income tax Act, 1922 or section 271(1) (e) of the Income tax Act, 1961, is a question of fact to be determined in the circumstances of the case. 10 ITR 186, 34 ITR 98 & 37 ITR 365 relied on. [Para 5]
A reference on question of fact does not lie. The High Court in a reference will not evaluate a question of fact; [Para 8]
(2) Income Tax Act, 1961 - S. 271(1)(c) [Act of 1922 - S. 28 (1)(c)] - proceedings for imposition of penalty-are penal proceedings-penalty when may be imposed.
A penalty under section 28(1)(c) of the 1922 Act or section 27(1)(c) of the 1961 Act can be imposed on an assessee only if the authority mentioned in those provisions is satisfied that the assessee bas concealed the particulars of his income. The penalty proceedings being in their very nature penal proceedings, the degree or quantum of proof for finding an assessee guilty is that of a criminal prosecution. The assessment proceedings and penalty proceedings are different in their nature. The findings given in assessment proceedings are no doubt relevant and admissible in penalty proceedings. But they do not operate as resjudicata So as to preclude the production of other evidence in penalty proceedings to show that the assessee concealed his income or to rebut this charge Again, the bare fact that the explanation offered by the assessee in assessment proceedings was rejected and it was held in those proceedings that he bad concealed his income or that the explanation was unsatisfactory by itself cannot be made the basis of the conclusion that he has been guilty of deliberately concealing the particulars of his income. No doubt, if the assessee's explanation is found to be deliberately false, then it is possible to infer that he concealed his income. But the authority competent to impose penalty must expressly find that the assessee's explanation is false. 1965 JLJ 631 = 1965 RN 313 and other cases relied on. 48 ITC 324, 59 ITR 499, 41 ITR 425 & 42 ITR 123 Explained. [Para 6]
( 1 ) IN this reference by the Income-tax Appellate Tribunal under Section 256 (1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income tax, the question which has been placed for our decision is-
"whether on the facts and in the circumstances of the case, the assessee could be said to have concealed the particulars of his income for the assessment year 1959-60 so as to be penalised Under Section 271 (1) (c) of the Income-tax Act, 1961?"
( 2 ) THE material facts are that for the assessment year 1959-60 the total income of the assessee. Punjabhai Shah, was fixed at Rs. 10,953/ -. During the course of assessment for the next year, namely, 1960-61, it was noticed that the assessee had purchased a motor vehicle and made payments for the purchase of the vehicle as under-
1.
26-08-1958
Rs . 1,00. 00
2.
08-09-1958
Rs . 9,000. 00
3.
23-09-1958
Rs . 3,800. 00
4.
23-09-1958
Rs . 3,450. 00 body building
5.
30-09-1958
Rs . 9,000. 00
6.
07-10-1958
Rs . 8,000. 00
Rs . 31,250. 00
The assessment for the year 1959-60, was therefore, reopened under Section 147 of the Act. The assessee's explanation with regard to these payments was that on 26th August, 1958 he had a cash balance of Rs. 14,168. 0. 0, and out of this cash balance he made a payment of Rs. 1000/- on 26th August 1958 and of Rs. 9,000/on 9th September 1958. This explanation was rejected by the Income-tax Officer, chhindwara. The Income-tax Officer found that in the cash book there were no entries of the withdrawal of Rs. 10,000/-; that in the Rokad there were certain jottings in pencil; and that if the payments had been actually made from the cash balance, then the amounts withdrawn would have appeared merged in the Rokad entries themselves and not in pencil jottings. In regard to the source of payment of the balance of the purchase price, the assessee said that he was allowed depreciation amount on his trucks for assessment years 1957-58 to 1959-60, and that this amount was utilised by him for making the payments. This explanation was also rejected by the Income-tax Officer, who observed-"in the circumstances of the case by no stretch of imagination he (assessee) can be said to possess hard cash of Rs. 21,126/-available for purchase of vehicle on the above-mentioned dates". The Income-tax Officer described the explanation as "obviously phoney and without any substance. " After rejecting the explanation of the assessee, the income-tax Officer held that Rs. 31,250/- was the income of the assessee from undisclosed sources in the assessment year 1959-60.
( 3 ) THEREAFTER penalty proceedings were initiated against the assessee by the inspecting Assistant Commissioner of Income-tax under Section 274 (2) of the act. Before the Inspecting Assistant Commissioner, the assessee repeated the explanation which he gave before the Income-tax Officer in the re-assessment proceedings He placed no material to show that the amount of Rupees 31,250/was not his income or that there was no concealment of income on his part. The inspecting Assistant Commissioner also found himself unable to accept the explanation. He found that the cash balance of Rs. 14,168/-, which existed on 26th August 1958, continued to be carried forward to full extent from day-to-day upto the close of the account year on 11th November 1958 and the assessee did not withdraw from his cash balance the amount of Rupees 10,000/- as alleged by him. The Inspecting Assistant Commissioner reached the conclusion that "cash came from concealed income in possession of the assessee for making these payments". While rejecting the assessee's explanation with regard to the payment of the balance of purchase price out of the depreciation amount allowed to him for some years, the Inspecting Assistant Commissioner said-
"the assessee has not created any depreciation reserve and has not carried forward an equivalent amount in the form of cash or other liquid reserve to be able to claim that the amount of depreci
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