Commissioner of Income Tax vs Shankar Ghosh

K.C. Agarwal, C.J.—At the instance of the Commissioner of Income Tax, the following two questions have been referred u/s 256(2) of the Income Tax Act, 1961 :

" 1. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the explanation of the assessee in respect of the cash credit of Rs. 50,000 was bona fide and all facts relating to the same were disclosed by the assessee so as to be covered by the proviso to Clause (B) of Explanation 1 to Section 271(1)(c) of the Income Tax Act, 1961, is based on any material or perverse ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 ?"

We have heard counsel for the parties and are of the opinion that the argument by the, Department that the finding recorded by the Tribunal was perverse is not sustainable. We are, therefore, unable to accept the same. A finding is said to be perverse when no reasonable man can arrive at the same. In the instant case, the Tribunal examined the facts and arrived at a finding which is just and proper in the circumstances of the case. The Tribunal while doing so, was not convinced that there was a concealment of the particulars of the income of the assessee, or the assessee furnished inaccurate particulars of such income. This is a finding of fact. The reference is answered in favour of the assessee and against the Department. The decision in Commissioner of Income Tax, Madras Vs. K.R. Sadayappan, has no manner of application to the facts of the present case.

From a perusal of the aforesaid findings of the Tribunal, it would be noticed that the findings are based on an appreciation of materials that are already on record and they do not involve any point of law. A question before the Tribunal in the appeal was whether there was any- concealment of income by the assessee or furnishing of inaccurate particulars of such income to justify the imposition of penalty u/s 271(1)(c) of the Act. This question was examined by the Tribunal in the light of the explanation offered by the assessee in the course of the assessment proceedings and the penalty proceedings and also in the light of the provisions contained in the proviso to Clause (B) of Explanation 1 to Section 271(1)(c) of the Act. In the light of this proviso, the Appellate Tribunal came to the conclusion that the presumption of concealment under Explanation 1 of the Act could not be readily drawn against the assessee. Since the assessee had placed all the facts relating to the deposit, his explanation is not found to be false. In other words, the Tribunal came to the conclusion that it was a case of inability on the part of the assessee to substantiate its explanation before the Departmental authorities. The question whether there was any concealment of income, is purely a question of fact and this position is filially settled by various decisions of the courts. The decision of the Supreme Court in Commissioner of Income Tax, Madras Vs. K.R. Sadayappan, relied on by the Tribunal had no application to the facts of the present case as it was a case which was governed by the old Explanation to Section 271(1)(c) of the Act, whereas the present case of the assessee was one governed by Explanation 1 to Section 271(1)(c) of the Act. The Appellate Tribunal had not placed any burden of proof on the Department, on the contrary, they had examined the materials that are already on record to come to the conclusion that there was no concealment of income by the assessee, which is a pure finding of fact.

Question No. 1 is thus answered in the negative and in favour of the assessee. Question No. 2 is answered in the affirmative and against the Department.

There will be no order as to costs.

Mukul Gopal Mukherji, J.

I agree.