Motilal vs Commissioner of Income Tax

The Tribunal has referred the following question of law arising out of its order dated 11-12-1985 in respect of the assessment year 1970-71:

"Whether, on the facts and in the circumstances of the case, it could be held in law that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income within the meaning of section 271(1)(c) of the income tax Act, 1961, in respect of which a penalty of Rs. 12,000 levied was upheld by the Tribunal?"

The brief facts of the case are that the assessee has filed a return declaring income of Rs. 5,100. The ITO added a sum of Rs. 10,727 on account of share income earned by the assessee from the firm Moolchand Bastimal. Penalty proceedings for concealment were initiated and penalty of Rs. 12,000 was levied u/s 271(1)(c) of the income tax Act, 1961 (''the Act'').

The Tribunal considered this matter and has given the finding as under:

"We have heard the representatives of the parties at length. The AAC has proceeded on the reasoning that the assessee had been disclosing the share income from the firm during the years 1966-67 to 1968-69. It was for the first time that he failed to do so in the years 1969-70 to 1970-71. This was because the share income of the assessee was not being credited to his account due to some disputes between the partners. According to the assessee, he was not aware about the filing of the return of income of the firm and completion of its assessments. Perhaps the AAC did not appreciate the fact that when the assessee had signed Form No. 12, he had apparently authorised the firm which was being assessed at Bombay to file the same. Ultimately, the AAC proceeded on the assumption that it was clear that the assessee did not know about the income allotted to him by the firm and it was for this reason that he did not disclose this fact in the return during the relevant accounting year. This did not show any mens rea. This appears to be rather an erroneous conclusion. The facts in this year are totally different. We in this behalf had an occasion to go through the statement of the assessee recorded by the ITO on 11-12-1973 wherein he has clearly stated that for the assessment year 1969-70, he had attached a paper showing the sources of his income as money-lending and share income. But for the year 1970-71, he had forgotten to mention it. These facts in the two years are entirely different. If an assessee does not know the amount of share, he can be exonerated only if he has mentioned the factum of his earning income from a firm. In the absence of any such mention, the assessee cannot be said to have disclosed all the particulars relating to his income correctly.

Apart from this, this is a case where the original Explanation to section 271(1)(c) was applicable. Even if the assessee had omitted to include his share income from the firm through mistake, one would have to see whether the income returned by the assessee as a result of the mistake was less than 80 per cent of the total income and if it is so, then the onus of proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. Otherwise, he shall be deemed to have concealed the particulars of his income and furnished inaccurate particulars for the purpose of clause (c) of this sub-section. Therefore, the onus of proving the fact that the omission to mention about the share income earned by the assessee was a simple mistake, would be squarely upon the assessee. Except for stating in his statement that this year the income had been omitted from being mentioned in the return altogether, due to forgetfulness, there is absolutely no evidence for the assessee. Keeping in view all these facts and circumstances, we are of the opinion that the AAC''s order cannot be sustained. We, accordingly, accept the appeal, quash the order of the AAC and restore that of the ITO."

The finding which has been recorded by the Tribunal is of fact and the burden was cast on the assessee on the basis of the Explanation u/s 271(1)(c). The assessee had not given any plausible explanation. The finding of fact which has been recorded by the Tribunal, therefore, is in accordance with law. In these circumstances, we are of the view that the assessee had concealed the particulars of his income/furnished inaccurate particulars and as such, the penalty u/s 271(1)(c) was rightly upheld by the Tribunal. The reference is answered in favour of the revenue and against the assessee.