Commissioner of Income Tax vs Nankchand Jain

Venkataswami, J.—The Income Tax Appellate Tribunal, Madras, has referred to this court u/s 256(2) of the Income Tax Act, 1961, the

following question for its opinion :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the assessee did not conceal

the particulars of his income and accordingly in canceling the penalty of Rs. 23,000 imposed u/s 21(1)(c) for the assessment year 1970-71 ?

The assessment year is 1970-71. Initially, the respondent, hereinafter referred to as assessee, returned a loss of Rs 4,860 for the assessment

year 1970-71. Subsequently, a revised return was filed accounting for in come in a sum of Rs. 34,790. While finalising the assessment, the

assessment, the Income Tax Officer noticed that there were no drawings for domestic expenses. It was also found that the assessee had

contributed to a chit fund a sum amounting to Rs. 46,000 up to October 16, 1969, and as the assessee was not able to account for the resources

out of which the contributions to chit funds were made, the said was treated as undisclosed income of the assessee. Likewise towards domestic

expenses, a sum of Rs. 5,000 was fixed and that sum was also treated as the undisclosed income of the assessee. On that basis, the assessment

was finalised.

On appeal by the assessee, the Appellate Assistant Commissioner found that, estimate of domestic expenses at Rs. 5,000 was on the

conservative side and needs no interference. Regarding the contributions made to the chit fund, the appellate authority found that the payments to

the chit fund were spread over a period of three years and, therefore, for the year ending March 31, 1970, the entire amount cannot be treated as

undisclosed income of that year. It was further found that contributions and dividend received during the assessment year in question amounted to

Rs 18,000 and, accordingly, the appellate authority sustained the addition of Rs. 18,000 and Rs. 5,000 towards domestic expenses.

On the basis of the order of the appellate authority, a note was issued u/s 27(1)(c), calling upon the assessee to show cause why a penalty

should not be imposed in respect of the income that he had failed to account for, viz., Rs 23,000 (Rs. 18,000 + Rs. 5,000). The explanation

submitted by the assessee was not accepted by the Inspecting Assistant Commissioner. Consequently, he levied a penalty of Rs. 23,000.

Aggrieved by the order of the Inspecting Assistant Commissioner levying penalty, the assessee preferred an appeal to the Income Tax Appellate

Tribunal.

Before the Tribunal, it was argued on behalf of the assessee that the assessee used to make at the races and such sums were utilised for the

domestic expenses. In any event, it was argued before the Tribunal that the estimated sum of Rs. 5,000 itself will not be sufficient for invoking

section 271(1)(c) of the Act. As regard contributions to chit funds, the argument on behalf of the assessee was that the assessee did not make any

contribution and the payments were made by one Parasuraman. Therefore, there was no question of concealment of income so as to attract

section 27(1)(c) of the Act. It was further argued on behalf of the assessee that the levy of penalty on the basis of estimate without a further finding

of mens rea on the part of the assessee cannot be sustained.

On behalf of the Department, it was argued before the Tribunal that the explanation given for meeting domestic expenses was not acceptable

and the estimate towards that at a sum of Rs. 5,000 was reasonable Regarding contribution to the chit fund, it was urged before the Tribunal that

the Inspecting Assistant Commissioner obtained full particulars from the concerned chit fund at Bangalore and only on the basis of those particulars

furnished by the chit fund, it was found that the assessee alone had made the contributions. Therefore, the case of the assessee that he did not

make the contributions but one Parasuraman made them should not be accepted.

The Tribunal, on consideration of the rival arguments advanced before it, found that the Inspecting Assistant Commissioner, having not invoked

the Explanation to section 271(1)(c) of the Act, cannot levy penalty on the basis of the estimate so far as the domestic expenses are concerned.

Regarding contributions to the chit fund, the Tribunal accepted the explanation of the assessee that he did not make the contributions, but such

contributions were made by one Parasuraman in the assessee''s name. Therefore, there cannot be any case of concealment and, consequently, the

levy of penalty cannot be sustained. In the result, the Tribunal set aside the levy of penalty of Rs. 23,000.

Mr. Balasubramanian, learned counsel appearing for the Revenue, after citing Commissioner of Income Tax Vs. P. Sarada, , submitted that the

finding on facts given by the Tribunal in respect of the contributions made to the chit funds requires reconsideration. No doubt, in Commissioner of

Income Tax Vs. P. Sarada, , Ramanujam J., speaking for the Bench, has held as follows :

It is no doubt true that a finding of fact arrived at by the Tribunal cannot normally be interfered with by this court. But if the Tribunal failed to take

into account the relevant material, or has acted on inadmissible material, or has based its conclusion on conjectures and surmises, this court can

ignore such finding of the Tribunal and re-examine the issue arising for decision on the basis of materials on record.

Contending contra, Mr. Janarthana Raja, learned counsel appearing for the assessee, placing reliance on a judgment of the Supreme Court

reported in Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, submitted that mere misappreciation

of evidence will not give room for this court to re-examine the findings rendered on fact by the Tribunal and only in case of non-appreciation of

evidence this court may re-examine a finding rendered by the Tribunal on a fact. In that case, the Supreme Court has observed as follows (at p.

714) :

Non-appreciation may give rise to a question of law but not mere misappreciation, even if there be any from a certain angle. Change of

perspective in viewing a thing does not transform a question of fact into a question of law.

In the instant case, we are of the opinion that in preferring one view to another view of factual appreciation, the High Court transgressed the limits

of its jurisdiction under the Income Tax reference in answering the question of law.

Bearing the above principles in mind, let us consider the finding given by the Tribunal. We may at once state that no exception can be taken

regarding the finding given by the Tribunal in respect of domestic expenses about which we have already stated above. As regards the

contributions made to chit fund, the Tribunal has discussed the issue as follows :

So far as the Contributions alleged to be made by the assessee to the chit fund at Bangalore is concerned, the case of the assessee throughout is

that he did not make the contributions and such contribution were made by one Parasuraman in the assessee''s name. The Inspecting Assistant

Commissioner wrote to the Sangam Chit Fund at Bangalore and after getting the particulars he inferred that the assessee had filed to account for

the income of Rs. 18,000. The assessee was not given an opportunity to cross-examine the representatives of the Sangam Chit Fund at Banglore.

Though the chit may be in the name of the assessee, there is no proof that it is the assessee who made the payments. Even the Inspecting Assistant

Commissioner does not state that the Sangam Chit Fund authorities had pointed out that the amount due in respect of the chit were paid by the

assessee himself. That seems to be only the inference of the Inspecting Assistant Commissioner. Even though the explanation of the assessee may

not be accepted in the quantum appeal, for the purpose of penalty, there should be proof that the assessee had really concealed an income of Rs.

18,000 but there is no positive proof. The mere fact that the chit is in the name of the assessee does not conclude the matter. It is possible that the

contributions to the chit were made by a third party. Moreover the Appellate Assistant Commissioner points out that the contributions and

dividends received together amounted to Rs. 10,000. In that case, there cannot be any concealments of Rs. 18,000. There is nothing on record to

indicate that it is the assessee who had remitted the payments for the chit fund out of his undisclosed income. under such circumstances, the levy of

penalty of Rs. 18,000 as the concealed income of the assessee cannot also be sustained.

On a careful perusal of the above discussions of the Tribunal, we are of the view that we cannot invoke the principle laid down by this court in

Commissioner of Income Tax Vs. P. Sarada, extracted above. Likewise, we cannot even say that the Tribunal has misappreciated the facts, leave

alone non-appreciation. If that be the position, there is no scope for re-examining the findings rendered by the Tribunal. If the findings rendered by

the Tribunal are accepted, there is no case for interference.

In the result, we answer the question in the affirmative and against the Revenue. The assessee is entitled to costs. Counsel''s fee is fixed at Rs.

500.