TaxTMI 
TaxTMI 
2008 (8) TMI 158
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....n levied? 3. Whether on the facts and circumstances of the case when the income assessed under section 68 of the Act, penalty under section 271(1)(c) can be levied in law?" 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in confirming the penalty by relying upon the alleged statement made by the depositor in some other proceedings before some other officers? Assessment Years 1967-68 only: Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that Explanation to Section 271(1)(c) of the Act was applicable to the assessment year 1967-68?" 2. The facts giving rise to the assessment order for assessment year 1966-67 are as under: (i) For the Assessment year 1966-67 the assessee had on 25.7.1970 filed a return showing "Nil" income. However, under the assessment order, the income determined as total income of the assessee was Rs.2,90,500/-. The said income of Rs.2,90,500/- was included as undisclosed income of the assessee on the ground that the assessee had shown bogus loans from five different parties. The said assessment (original Assessment) was completed on 23^rd July 1971. (ii) Th....
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....v) Thereafter in mid June 1985 the Assessing Officer initiated penalty proceedings against the assessee under section 271(1)(c) of the Income-tax Act. During the penalty proceedings before the Assessing Officer, the assessee explained that the loan could not be substantiated because of the very long lapse of time. The explanation did not find favour with the Assessing Officer and he invoked the provisions of the Explanation to section 271(1)(c) as it stood between 1^st April, 1964 and 31^st March, 1976 and levied penalty of Rs.50,000/- against the assessee for the assessment year 1966-67. (vi) The assessee challenged the order of the Assessing Officer before Commissioner of Income-tax (Appeals) who, inter alia, held that the assessment was set aside on 4^th September, 1972 and reassessment was taken up only in 1981 and that after such a long gap it was impossible for any person to establish the genuineness of the transaction. The Commissioner of Income-tax (Appeals), therefore, cancelled the penalty levied by the Assessing Officer. The said order of Commissioner of Income-tax (Appeals) was therefore, impugned by the revenue before the Income Tax Appellate Tribunal. (vii) The ....
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....bsp; He, therefore, pleaded his helplessness in complying with the requirement of the summons. However, he stated that he did remember to have had loan transactions with the assessee. (ii) Thereafter the Assessing Officer asked the assessee to produce the three parties before him, but the assessee expressed its helplessness on the same grounds that were stated by the assessee for the Assessment Year 1966-67. The Assessing Officer, therefore, rejected the contention of the assessee and added a sum of Rs.1,25,000/- as income from undisclosed sources to the assessees' negative/loss income of Rs.4,64,301/- and thereafter computed its total income as negative/loss income of Rs.3,39,301/- This order was challenged by the Assessee upto the Appellate Tribunal and the only relief that the assessee could get was that the sum of Rs.1,25,000/- which was treated as his income from undisclosed sources was reduced to Rs.75,000/- The fact remains that the Income Tax Authorities also computed the total income of the Assessee for the Assessment Year 1967-68 as negative/loss income even after the said addition of Rs. 1,25,000/- as income from undisclosed sources. (iii) The facts pertaining to p....
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....nce that the assessee admitted that it was his concealed income. From the aforesaid decision of the Tribunal the following question was referred to the Court:- "Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that the penalty levied on the assessee under section 271(1)(c) of the Act for the assessment year 1968-69 was not sustainable?" 4. The learned Advocate appearing for the revenue while impugning the order of the Appellate Tribunal submitted before the Court that the assessee had in fact admitted concealment of income and hence it was not necessary for the revenue to prove the same. It was submitted by him that in view of this the burden was on the assessee to show that there was no concealment and the conclusion arrived at by the Tribunal was erroneous,. The revenue strongly relied on a decision in the case of Western Automobiles (India) v. CIT reported in (1978) 112 ITR 1048 (Bom). In that case when the ITO discovered from the account books of the assessee, loans to the tune of Rs.90,000/- he came to a prima facie conclusion that the loans reflected the concealed income. The assessee firm agreed to the addition of the....
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.... Haryana High Court. (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding: (a) that the provisions of the Explanation to section 271(1)(c) will not be attracted to the present case? (b) that the word "income" occurring in clauses (c) and (iii) of section 271(1) refers to a positive income only and not to a loss? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in cancelling the penalty order passed by the Inspecting Assistant Commissioner by holding that no penalty could be levied against the assessee?" 6. The Punjab and Haryana High Court answered all the questions set out hereinabove in the negative i.e. in favour of the assessee and against the revenue in the following terms: "Income" has been defined in section 2(24) of the Act which clearly includes profits, gains, dividends or other benefits derived only. Loss cannot possibly be termed as income. Under section 139(1) of the Act, a person is required to furnish a return only if his total income during the previous year exceeded the maximum amount which is not chargeable to income tax. If the same ....
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.... the delay of 14/16 years without any valid reason/explanation is invalid. Mr. Mehta submitted that in the present case penalty is levied on the assessee after about 16 years from the date of filing of the first assessment orders without any valid reason/explanation and the same is therefore not valid. 9. We have considered the facts and circumstances of the case and also the case law cited by Mr. Mehta. In the present case in the reassessment for the assessment year 1966-67 an amount of Rs.50,000/- was added as income of the assessee through undisclosed sources. Similarly, in the reassessment for the assessment year 1967-68 the amount of Rs.1,25,000/- was treated as income of the assessee from undisclosed sources. The assessee at no point of time has admitted that the income treated by the authorities for assessment year 1966-67 and assessment year 1967-68 as income from undisclosed sources is concealed income. The Ratio laid down by the Division Bench of this Court in the case of Commissioner of Income Tax, v. Bhimji Bhanjee and Co. [1984] 146 ITR 145, therefore, squarely applies to the facts of the instant case and we do not find any hesitation in coming to the conclusion tha....
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....ly contended that the alleged statements were made behind the back of the assessee and the assessee was never given any opportunity to confront them and/or cross examine them. No particulars of any such statement/s are on record. In any event, the said original assessment was set aside and the Income Tax Authorities themselves at the time of reassessment of the assessee's income pertaining to assessment year 1967-68 and assessment year 1968-69 once again tried to summon the parties who had given loans to the assessee. The assessing authority surely did not expect all the parties to come forward with records which by that time were about 15/16 years old. Despite that four of the parties who had given loans to the assessee in the assessment year 1966-67 and whose loans were treated as bogus loans in the original assessment came forward with the documents and satisfied the Taxing Authorities about the genuineness of the loans given by them to the assessee. Even for the assessment year 1967-68 only two parties who had given loans to the assessee aggregating to Rs.75,000/- were disbelieved on the ground of them not being produced before the Tax authorities. The penalty proceedings....