TaxTMI 
TaxTMI 
1962 (3) TMI 87
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.... 5,000 8,000 8,000 The Income-tax Officer added a sum of Rs. 5,000 as income from undisclosed sources in the assessment for 1946-47. In so doing, he observed as under: "The Amanat Khata shows a deposit of Rs. 3,000 on Pus S. 7 which was withdrawn on Magh B. 1. Then again a sum of Rs. 5,000 was deposited on Chait S. 7 and was withdrawn on Baisakh S. 9. The cash book shows that the cash was received from byopari but the name of byopari is not given. It has been contended by the assessee that Rs. 3,000 was deposited and then withdrawn and thereafter Rs. 5,000 was deposited. The sum of Rs. 3,000 is thus covered by the deposit of Rs. 3,000. However, considering the particular circumstances of the case, I add Rs. 5,000 for profit undisclosed." The assessment order for 1946-47 dated 28th October, 1949, is annexed as annexure "A" and forms part of the case. 3. On appeal before the Appellate Assistant Commissioner this addition was confirmed. He observed that: "For the profit of Rs. 5,000....
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.... were received. He further held that, in the circumstances: 'the only inference would be that these deposits were in fact not deposits from outsiders but the appellant's own money of the nature of business profits introduced into the books described as receipts from byoparies which were subsequently withdrawn after some time'." He rejected the contention of the assessee that the addition had been made on inference and that there was no positive evidence to show that the sum of Rs. 5,000 represented in fact an item of secreted profit and as such it was not a case for penalty under section 28. In the result he confirmed the penalty order of the Income-tax Officer. The order of the Appellate Assistant Commissioner dated February 8, 1952, is annexure "C" and forms part of the case. 5. There was a further appeal to the Tribunal. It concurred with the department that the assessee was deliberately concealing the source of this income and that the penalty was clearly attracted. The order of the Tribunal dated July 28, 1952, is annexure "D" and forms part of the case. 6. The question of law is: &....
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....p; "The Amanat Khata shows a deposit of Rs. 3,000 on Pus S. 7 which was withdrawn on Magh B. 1. Then again a sum of Rs. 5,000 was deposited on Chait S. 7 and was withdrawn on Baisakh S. 9. The cash book shows that the cash was received from byopari but the name of byopari is not given. It has been contended by the assessee that Rs. 3,000 was deposited and then withdrawn and thereafter Rs. 5,000 was deposited. The sum of Rs. 3,000 is thus covered by the deposit of Rs. 5,000. However, considering the particular circumstances of the case, I add Rs. 5,000 for profit undisclosed." On appeal before the Appellate Assistant Commissioner, this addition was confirmed. He observed: "For the profit of Rs. 5,000 the name of the depositor is not available in the account books nor any evidence has been given. I am, therefore, not prepared to interfere with the finding of the Income-tax Officer that the sum of Rs. 5,000 represents profits from some undisclosed sources." No further appeal....
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....from business. In due course a notice under section 28(3) of the Income-tax Act was issued to the assessee by the Income-tax Officer to show cause why a penalty should not be imposed upon him under section 28(1)(c). In response to this notice the assessee furnished an explanation. The explanation was that due to lapse of four years time since the date of the deposit he could not remember the names of the byoparies from whom the temporary deposits were received. This explanation was rejected by the Income-tax Officer as "fallacious". He observed: "If the assessee wanted to disclose the source from which the money was received it could have been very easy for him to have noted down the names in his account books and the information could have been traced out after the lapse of any amount of time. The name, it appears, was not noted in the account books deliberately. The assessee is certainly not entitled to suppress full facts in his accounts and then try to take advantage of his own fault. In the circumstances he levy of penalty is not only fully justified but absolutely necessary." Thereafter the Income-tax Officer went on to consider the past record of the assessee and ob....
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....ected the assessee's argument that the addition of Rs. 5,000 was made on "inference" and not on positive evidence in the following words: "The fact that no names of the parties who made the deposit are mentioned in the cash book, is the most unusual feature in the account books. No such information was furnished before the Income-tax Officer or even at the appeal stage. It must therefore be said that these cash credits were not deposits from some outsiders, but were the appellant's own money, the nature and source of which was purposely not revealed before the department. In the circumstances it cannot be said that these additions were based on surmises or inference." From this it will appear that the Appellate Assistant Commissioner was impressed by the following facts: "(1) The names of the depositors not having been given was a most unusual feature of the account books. (2) If the deposits were from genuine parties the names would have been given as it would not be possible to locate the depositors to whom the deposits were to be returned. (3) The names of the deposi....
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....above it is quite clear that learned counsel is not right in saying that the basis of the findings in the penalty proceedings is the same as the basis of subjecting the amount of Rs. 5,000 to income-tax in the assessment proceedings. There was further material before the authorities in the penalty proceedings and the material was relevant and admissible. In this view the question which has been referred to us must be answered in the affirmative and no other question would arise for consideration. We shall now deal with the various submissions of learned counsel which he has urged before us at considerable length. The starting point of learned counsel's argument is that proceedings under section 28 of the Income-tax Act are penal proceedings. He has taken his stand on the decision of the Bombay High Court in Commissioner of Income-tax v. Gokuldas Harivallabhdas [1958] 34 I.T.R. 98. In this case it seems to have been assumed that proceedings under section 28 are penal proceedings. This assumption now seems to be doubtful. In C.A. Abraham v. Income-tax Officer, Kottayam [1961] 41 I.T.R. 425; [1961] 2 S.C.R. 765, the Supreme Court has observed at page 430 that section 28 occu....
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....mal rules as to the pleadings in civil actions applied and that the taxpayer must furnish the particulars. It is settled in England and the United States that actions for penalties are civil actions, both in form and in substance. In Henner v. United States** it was stated by Harlan J., at page 108: "It must be taken as settled law that a certain sum,...prescribed in a statute as a penalty for the violation of law, may be recovered by civil action, even if it may also be recovered in a proceeding which is technically criminal, unless the statute contemplates recovery only by a criminal proceeding." He also pointed out that proceedings to recover a penalty remains civil, even though it may partake of a criminal proceeding to an expressed limited extent. It is a civil proceeding, even though the defendant cannot be compelled to be a witness against himself. In Hanby v. Commissioner of Internal Revenue it was held that an assessee, who has been convicted for making a false return once under a statute, may be assessed to a penalty for making a false return of income under a d....
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.... Income-tax [1953] 24 I.T.R. 410 it was held by this court that the materials in the assessment proceedings are materials in the penalty proceedings also. The income-tax authorities in the instant case have not refused to receive further materials in the penalty proceedings and have not treated the finding in the assessment proceedings as conclusive or res judicata. We also think that there were some additional materials before them in the penalty proceedings such as that the assessee even then did not explain to their satisfaction the real nature of the receipt. Not only did it fail to produce additional materials to prove that the amount was received from a trader by way of a deposit but also it failed to show that it was a receipt of another nature not assessable to income-tax. Under the Income-tax Act only income is assessable and not a mere receipt. Every receipt is not assessable, only certain receipts are. The income-tax authorities cannot assess all receipts; they can assess only those receipts that amount to income. It follows that before they assess a receipt they must find it to be income and they cannot find so unless they have some material to justify their....
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.... a particular kind is false, they can argue in their minds that it is not a non-assessable receipt of the particular kind alleged, that there was no reason for the assessee to claim that it was a non-assessable receipt of that kind if it was of another kind, that he did not disclose the real nature even subsequently and that it must necessarily be an assessable receipt. If the claim of the assessee, though not accepted, is also not found to be false, this line of reasoning will not be open to them and they will not be justified in treating the receipt as assessable. So long as it can be said that it might be a non-assessable receipt of another kind they cannot treat it as an assessable receipt. In the absence of direct evidence, they cannot treat it as assessable receipt without having materials, such as a false claim, to justify the finding that it is not a non-assessable receipt of any kind. The position is not any different in the penalty proceedings. No penalty can be imposed unless the income-tax authorities find that there has been a concealment of the particulars of the assessee's income or that he has deliberately furnished inaccurate particulars of it and no such findi....