Commissioner of Income Tax vs Lallubhai Jogibhai Patel

R.K. Abichandani, J.—The Income Tax Appellate Tribunal, Ahmedabad Bench ""C"", has referred the following question for the opinion of

this court u/s 256(1) of the Income Tax Act, 1961 :

Whether the Appellate Tribunal is right in law in confirming the penalty only in respect of an amount of Rs. 31,000 and thereby cancelling the

balance penalty levied u/s 271(1)(c) of the Income Tax Act, 1961?

During the course of operation u/s 132 of the Act on November 30, 1974, a Mercedez car was found parked in the premises of the assessee.

The registration book, a servicing bill and a blank transfer form signed by the owner of the vehicle were also recovered from the premises. As the

assessee did not disclose the source of income by which he had acquired the said vehicle, an amount of Rs. 65,000, representing the investment,

was added to the total income of the assessee and a notice u/s 274 read with Section 271 was issued to show cause as to why penalty u/s 271(1)

(c) should not be levied on the assessee. The addition to the total income in respect of the investment in the car was, ultimately, scaled down to Rs.

56,000 by order dated March 19, 1983, passed by the Commissioner of Income Tax (Appeals). The assessee, in response to the notice, kept on

shifting his stand and, in his letters dated January 16, 1980, and February 25, 1980, he stated that the car was purchased only for Rs. 31,000. The

Income Tax Officer, by his order dated September 23, 1983, held that the assessee had deliberately concealed the particulars of income to the

extent of Rs, 56,000 utilised by him for acquiring the car and, therefore, was liable to penalty. The penalty equal to 100 per cent. of the income

concealed was imposed on the assessee.

The Commissioner of Income Tax (Appeals), before whom that order was challenged, decided, by his order dated January 2, 1984, that the

penalty u/s 271(1)(c) could not be imposed on the assessee because the Income Tax Officer had not discharged the onus on him to show that, in

the investment in the car, in the year of account, the assessee''s income of the year, which he had concealed, was involved. It was observed that, in

the wealth-tax records of the assessee, he had returned a cash on hand of Rs. 75,000 and that he was assessed to wealth-tax exceeding Rs.

11,00,000. The Commissioner observed that, whether the investment in the car would reflect any concealed income of the assessee in the year,

being the question itself, it cannot be said that the provisions of the Explanation to Section 271(1)(c) would be applicable to the facts of the case

and that the penalty was to be examined within the framework of the main provisions of Section 271(1)(c). It was held that the onus was on the

Income Tax Officer to establish directly or indirectly that the investment in the car involves an income of the year under review which the assessee

had not disclosed. He, therefore, cancelled the entire penalty of Rs. 56,000.

The Tribunal, on the basis of the material on record, held that the Commissioner (Appeals) was in error in cancelling the penalty. According to

the Tribunal, the Explanation was attracted and it was for the assessee to lead necessary evidence so as to properly rebut the presumption. The

Tribunal found that the income used in purchase of the car was income of the year under consideration and that the asset acquired was, admittedly,

belonging to the assessee. The Tribunal, however, noted that the dispute centred around the determination of the value of the car which was upheld

at Rs. 56,000 and that the amount, admittedly, paid for the purchase thereof was Rs. 31,000. It took into account the contention raised by the

assessee in his letter dated August 29, 1983, that the difference in value could not amount to concealment. It held that, regarding concealment to

the extent of Rs. 31,000, it could be said that there was no dispute in view of the admission by the assessee and that, if at all, there could be said to

be some dispute, it could be in relation to the amount in excess of Rs. 31,000, which involved a factor of estimate on the basis of evidence. The

penalty was, therefore, upheld only in respect of Rs. 31,000 for concealment of income and the order of the Commissioner (Appeals) was

modified accordingly.

Learned counsel appearing for the Revenue argued that the Explanation to Clause (c) of Section 271(1) was attracted in this case and the entire

amount of Rs. 56,000, being the price of the car purchased, should be treated to have been an income deemed to have been concealed under the

Explanation. It was submitted that, once a presumption arose under the Explanation, the minimum penalty of 100 per cent. of the amount

concealed was called for and, therefore, the Tribunal ought to have restored the entire penalty of Rs. 56,000 and not mere Rs. 31,000.

There can be no dispute about the fact that the Explanation to Section 271(1)(c) is a part of Section 271 and, therefore, it applied

notwithstanding that it may not have been separately mentioned. This point is, now, concluded by the decision of the Supreme Court in M/s. K.P.

Madhusudhanan Vs. Commissioner of Income Tax, Cochin, . It is, however, clear that the presumption is not irrebutable and from the material on

record, the assessee can show that there was no concealment. The assessee, by his two letters referred to hereinabove, admitted that he had

purchased the car for Rs. 31,000 and, therefore, that was a valid basis on which the Tribunal held that there, admittedly, was concealment of

income to the tune of Rs. 31,000. As regards the amount which was in excess of Rs. 31,000, the Tribunal has found that it was a mere estimate by

the Income Tax Officer while fixing the amount that went into the purchase of the car. The finding of the Tribunal that the amount which was in

excess of Rs. 31,000 involved a factor of estimate, on the basis of lack of evidence, cannot be said to be a perverse or unreasonable finding. We,

therefore, hold that the Tribunal was right in law in confirming the penalty only in respect of an amount of Rs. 31,000 and cancelling the balance

penalty levied u/s 271(1)(c) of the Income Tax Act, 1961. The question referred to us is, therefore, answered in the affirmative, against the

Revenue and in favour of the assessee. The reference stands disposed of accordingly. There shall be no order as to costs.