Bhag Mal Charanji Lal vs Commissioner of Income Tax and Others

S.P. Goyal, J.—The assessee, M/s. Bhag Mal Charanji Lal, is a Hindu undivided family concern. Darshan Kumar, one of the coparceners, entered into a partnership agreement on May 1, 1967, with one Pashupati Nath to carry on the business of sale of petroleum products under the firm name "Darshan Kumar & Co." The amounts of Rs. 995 and Rs. 10,413 received by way of profits from the said concern for the assessment years 1968-69 and 1971-72 were claimed by Darshan Kumar as his personal income but was included by the assessing authority in the income of the Hindu undivided family holding that Darshan Kumar entered into the agreement not in his individual capacity but as a coparcener representing the Hindu undivided family.

As the share of profits received from M/s. Darshan Kumar & Co. was not reflected in the income of the Hindu undivided family, the assessing authority issued a show-cause notice to the Hindu undivided family as to why penalty be not imposed u/s 271(1)(c) of the Income Tax Act (for short, called "the Act") for concealment of the said income, and after hearing the assessee, imposed 100 per cent. penalty which was the minimum under the said provision. The order of the assessing authority having been upheld up to the Tribunal stage and the assessee''s application u/s 256(1) of the Act also having been rejected, he moved the present petition u/s 256(2) of the Act for issuing a mandamus to get the following questions referred :

"(i) Whether, on the facts and circumstances of the case, the order of the Tribunal in imposing the penalty violates the provision of Section 271(1)(c) and is legally exigible in view of Anwar Ali''s case of the Supreme Court ?

(ii) Is not the procedure adopted by the Tribunal and the Income Tax Officer inquisitorial and not accusatorial as is required in the quasi-criminal proceeding, which penalty proceeding undoubtedly is ?

(iii) Whether the moneys in the hands of a coparcener for his use and utilisation necessarily represent the Hindu undivided family''s funds and that his activities vis-a-vis other parties are necessarily in a representative capacity on behalf of the Hindu undivided family and leave no room for any other inference as held by the Tribunal ?

(iv) Whether, on the facts and circumstances of the case, is it not a clear case of difference of opinion whether a particular income is assessable in the hands of an individual or a Hindu undivided family and whatever may be the outcome, no penalty was exigible as there was no concealment within the meaning of Section 271(1)(c) ?"

The learned counsel for the assessee contended that it was not a case of concealment of income because the assessee honestly believed that the income derived from M/s. Darshan Kumar & Co. was the personal income of Darshan Kumar even though the Hindu undivided family had provided the funds to him to enter into that venture. The learned counsel for the Revenue, on the contrary, urged that once it was held that Darshan Kumar had entered into the partnership as a representative of the Hindu undivided family and not in his personal capacity, the conclusion that there was concealment of income was only a finding of fact and gave rise to no question of law. We are unable to subscribe to this view. On the facts found, whether penalty would be exigible or not, would be, at least, a mixed question of law and fact if not a pure question of law. So far as the remaining three questions framed in the petition are concerned, we fail to appreciate if they have any independent existence apart from question No. 1. The learned counsel for the applicant also did not advance any serious argument in this regard. This petition is, consequently, allowed to the extent stated above and the Tribunal is directed to refer the following question to this court together with the statement of the case :

"Whether, on the facts and circumstances of the case, penalty would be exigible under the provisions of Section 271(1)(c) of the Income Tax Act ?"

No costs.