BADRI PRASAD OM PRAKASH v. COMMISSIONER OF INCOME TAX
[Citation -1985-LL-1004-3]

Citation 1985-LL-1004-3
Appellant Name BADRI PRASAD OM PRAKASH
Respondent Name COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 04/10/1985
Assessment Year 1966-67
Judgment View Judgment
Keyword Tags initiation of penalty proceedings • time-limit for completion of • presumption of concealment • concealment of income • imposition of penalty • voluntary disclosure • assessable income • show-cause notice • speculation loss • bona fide belief • concealed income • original return • burden of proof • income returned • issue of notice
Bot Summary: As far as question No. 3 is concerned, learned counsel for the petitioner has submitted that question No. 3 is squarely covered by questions Nos. The Tribunal while rejecting the reference of these questions in its order has stated as under: The question whether there is concealment of income or not, is purely a question of fact. The questions framed by the assessee seeking to refer these two aspects of the case are in our opinion, pure questions of fact, in whatever manner they might have been worded, and we would not be in a position to refer them for the opinion of the Hon'ble Court,. The Tribunal below has already held on the basis of the material on record that the Inspecting Assistant Commissioner was justified in holding that it is a case of wilful neglect and the Tribunal has taken a view that it is a question of fact and no question of law is involved and it cannot be said that the view taken by the Tribunal is bad in law. The Tribunal, taking into consideration question No. 4, has held that no question of law is involved in it and it is a pure and simple matter of fact. No question of law is involved in question No. 5. As far as question No. 15 is concerned, it is also a question of fact and it is for the Tribunal to see how things are appreciated and apprised in the facts and circumstances of the case and no question of law is involved in it also.


JUDGMENT JUDGMENT Application under section 256(2) of Income-tax Act, 1961, against order dated January 31, 1976, passed in R.A. No. 36/JP/1975-76, has been filed before this court by assessee. Learned Tribunal refused to refer some of questions prayed for arising out of appellate order dated May 25, 1975, in Income-tax Appeal No. 122/JP/ 1974-75. brief facts of case are that in assessment year 1966-67, assessee firm filed its return of income on August 29, 1969, showing total taxable income of Rs. 50,720.59. During assessment proceedings, Income-tax Officer made some queries and directed petitioner-assessee to disclose details and also to show reasons on which he claims deduction of loss incurred out of income of firm. Placed in this situation, assessee filed revised return for assessment year 1966-67 on August 25, 1970, showing total income of Rs. 1,63,370.59. difference between original and revised return arose on account of exclusion of two debit entries of Rs. 82,393 loss on account of speculation in alsi, and (ii) Rs. 5,000 on account of loss in gram, palwal and also on account of right adjustment of provision for bonus payable of relevant year. On January 20, 1971, Income-tax Officer made reference under section 274 of Income-tax Act, 1961, to Inspecting Assistant Commissioner. grounds on which reference was made and recorded by Income-tax Officer which were as follows: "In this case, return was originally filed on August 29, 1969, declaring income of Rs. 50,720. During course of examination of accounts, it was noticed that assessee has claimed full deduction in respect of bonus whereas bonus admissible as per rules ought to have been claimed. It was further noticed that speculation losses were also added back in return. assessee has, therefore, filed revised return declaring income of Rs. 1,63,370. As assessee did not disclose truly and materially all facts in original return, there are reasons to believe that he has concealed particulars of income which he subsequently disclosed in revised return." notice under section 274/271 dated January 20, 1971, was issued by Income-tax Officer to assessee and also, vide its despatch No. 3887-3888, dated January 21, 1971. letter dated February 15, 1971, was also addressed by Income-tax Officer to Inspecting Assistant Commissioner, Jaipur Range-II, Jaipur, whereby he drew attention of Inspecting Assistant Commissioner to his earlier communication dated January 20, 1971. On receipt of this letter from Income-tax Officer, Inspecting Assistant Commissioner took cognizance of matter and issued to assessee showcause notice under section 274(2) read with section 271 of Income-tax Act, 1961, on February 19, 1971. assessment was completed finally on March 25, 1971, on total income of Rs. 1,72,800. In body of assessment order, Income-tax Officer made following observations: " assessee was requested, vide this office letter dated 23/25-3-1970, to furnish certain information relating to bonus shown as well as loss claimed in alsi account, etc. assessee immediately on receipt of this letter filed revised return on 24-9-1970 declaring income of Rs. 1,63,370. It is, therefore, abundantly clear that assessee filed revised return after adding back amounts in respect of bonus which was wrongly allocated by him as well as losses in gram, palwal and alsi account, which he formerly indicated as losses of ready business. assessee, therefore, definitely concealed particulars of income and penalty proceedings with prior approval of Inspecting Assistant Commissioner had been duly initiated by issue of notice dated February 19, 1971, by Inspecting Assistant Commissioner and on February 15, 1971, by Income-tax Officer." Penalty proceedings were initiated for concealing particulars of income on January 17, 1983 (sic). Reply to show-cause notice was submitted by assessee to Inspecting Assistant Commissioner. It was explained in said letter that at time of filing original return, certain clerical mistakes had crept in while calculating total income and, therefore, assessee had filed revised return of income on September 24, 1970, declaring income of Rs. 1,63,370. It was also submitted that four partners, ladies and males, are working outside. Tribunal held that assessee is guilty of concealment of particulars of income with regard to loss in speculation only and not with regard to excess debit in bonus account, quantum of penalty will stand reduced to Rs. 87,293 which is minimum under provisions of Act as it stood on April 1, 1968. application for making reference to High Court for opinion was submitted by assessee before Tribunal. Tribunal partly accepted application and referred question to this court for opinion. questions referred by Tribunal are as under: "(1) Whether, on facts and in circumstances of case, Tribunal was justified in holding that order of Inspecting Assistant Commissioner, imposing penalty on January 18, 1974, had not become timebarred, as limitation for passing order by Inspecting Assistant Commissioner in this present case, on basis of penalty proceedings, initiated by Income-tax Officer, vide his notice dated January 20, 1971, would be governed by provisions of section 274(2) of Income-tax Act, 1961, as amended with effect from April 1, 1971?" (2) Whether, on facts and in circumstances of case, Tribunal was justified in holding that penalty proceedings in present case would not be governed by law in force in assessment year 1966-67, but by law as obtained with effect from April 1, 1968?" applicant being aggrieved by order relating to other questions submitted this application before this court and submitted that Tribunal may be directed to refer following questions for opinion of this court: " 1. Whether Tribunal was right in law in holding that not adding back amount of loss arising to assessee in speculative transaction to commercial profits disclosed in his books for purpose of assessment was tantamount to concealment of income or furnishing of inaccurate particulars of income within meaning of section 271(1)(c) of Act? 2. Whether Tribunal was right in law in holding that not adding back amount of loss arising to assessee in speculative transaction to commercial profits disclosed in his books for purpose of assessment was act by which assessee could be deemed to have concealed income within meaning of Explanation to that section? 3. Whether finding of Tribunal that assessee has concealed income or furnished inaccurate particulars of its income and also simultaneously finding that he is deemed to have concealed income within meaning of Explanation to that section are legally consistent and not contradictory by themselves vitiating entire order? 4. Whether assessee, on facts and in circumstances of case, had failed to raise probabilities in his favour so as to repeal charge that he did not discharge onus which lay upon him to establish that difference between total income assessed and income returned did not arise from any fraud or any gross or wilful neglect on his part within meaning of Explanation to section 271(1)(c)? 5. Whether initiation of penalty proceedings was valid in view of fact that Income-tax Officer did not initiate penalty proceedings on his own accord but did so only after consulting Inspecting Assistant Commissioner of Income-tax? 6. Whether learned Inspecting Assistant Commissioner could hold assessee guilty of charge of not discharging onus cast under Explanation to section 271(1)(c) when Income-tax Officer has categorically stated that charge against assessee was of concealment of income? 7. Whether assessee's failure to add back speculation loss amounted to concealment of particulars of income or of submission of inaccurate particulars thereof? 8. Whether, on facts and in circumstances of case, learned Inspecting Assistant Commissioner could have imposed penalty on assessee by holding that latter has failed to discharge onus cast under Explanation to section 271(1)(c)? 9. Whether learned Income-tax Appellate Tribunal was justified in holding in law that charge of concealment of income covers also charge of furnishing of inaccurate particulars of income? 10. Whether Income-tax Appellate Tribunal could, after categorically holding that error is one which borders on verge of wilful negligence or inadvertence, hold assessee guilty of offence under section 271 (1)(c)? 11. Whether learned Inspecting Assistant Commissioner had jurisdiction to pass penalty order on January 13, 1974, when penalty proceedings were started by issue of notice dated February 15, 1971? 12. Whether there was any material before Hon'ble Tribunal to hold that assessee was guilty of charge of concealment of income in view of particulars given in original return as supplemented by revised return? 13. Whether penalty proceedings should be governed by law in force in assessment year 1966-67 or law at time of filing of return and whether any amendment to that law after filing of return could be made applicable to penalty proceedings? 14. Whether amendment of law with effect from April 1, 1971, which dealt with jurisdiction as well as time-limit for completion of assessment had effect of extending time limit in cases of proceedings pending on date of amendment? 15. Whether facts that computation of assessable income and preparation of return which was entirely duty of accountant of firm which had four lady partners and only one male partner residing in Calcutta was not enough to establish that there was no contumacy in conduct of assessee?" It was submitted at Bar that questions Nos. 11, 13 and 14 fall within purview of questions referred by Tribunal and, as such, learned counsel for petitioner assessee does not press for these questions. As far as question No. 1 is concerned, Allahabad High Court took view that adding back amount of loss arising to assessee in speculative transactions to commercial profits disclosed in his books for purpose of assessment is liable to tax. However, Supreme Court, vide its judgment in CIT v. Jagannath Mahadeo Prasad [1969] 71 ITR 296, reversed judgment of Allahabad High Court and held that amount of loss arising to assessee in speculative transaction to commercial profits disclosed in his books, is not liable to tax. Counsel for petitioner submited that there was bona fide belief and petitioner acted bona fide. It was further submitted that ordinarily, every assessee cannot refer to law laid down by Supreme Court and, as such, under bona fide belief, such mistakes can be committed by assessees. He further submits that it does not fall within purview of gross negligence or wilful default and, as such, penalty, cannot be imposed, adding back amount of loss arising in speculative transaction to commercial profits on basis of bona fide belief cannot be said to be concealment of income or furnishing of inaccurate particulars of income within meaning of section 271(1)(c) of Act. Learned counsel for petitioner has also cited before us some cases to show that in matter of imposition of penalty, considerations are altogether different and in every case of non-disclosure or no proper disclosure of details of income, expenditure or any other items in return, penalty cannot be imposed as rule. Tribunal, while disposing of application, has discussed in detail submissions made by assessee- petitioner. Tribunal held that in instant case, farts on record clearly go to show that Income-tax Officer had initiated penalty proceedings and assessee did not disclose truly and fully all facts in his original return. This was reason recorded by him in his order dated January 20, 1971. It was also held by assessing authority that assessee had concealed particulars of his income and in notice served, grounds of concealment of income and furnishing of inaccurate particulars of income have been mentioned. Tribunal, after examining rival contentions of parties and submissions made in application, held that contention that Income- submissions made in application, held that contention that Income- tax Officer has not made up his mind at time of issuing notice is not correct Tribunal also held that note which it had sent to Inspecting Assistant Commissioner communicating matter of which he was making reference clearly go to show that Income-tax Officer was clear in his mind on facts of case and that on that basis, he had said that he had reasons to believe that assessee had concealed particulars of its income. initiation of penalty proceedings under section 271(1)(c) by Income-tax Officer was, therefore, in our opinion, valid. It will not be out of place here to mention that Income-tax Officer has referred case to Inspecting Assistant Commissioner on January 20, 1971. He made up his mind and when he found that he was not in position to impose penalty as jurisdiction lay with Inspecting Assistant Commissioner, he referred matter. Learned counsel for petitioner has invited our attention to order passed by Incometax Officer. Income-tax Officer in order has said that assessee, therefore, definitely concealed particulars of income and penalty proceedings with prior approval of Inspecting Assistant Commissioner had been duly initiated by notice dated February 19, 1971, by Inspecting Assistant Commissioner and February 15, 1971, by Income-tax Officer. This order is dated March 25, 1971. reference about word "approval" is not inconsistency though word has not been properly used. In fact, there was reference on January 20, 1971, and no further proceedings have been taken by Income-tax Officer, only he reminded, vide his letter dated February 15, 1971, to Inspecting Assistant Commissioner about his earlier letter dated January 20, 1971, by which he had requested Inspecting Assistant Commissioner to take matter on hand. As far as question No. 1 submitted by petitioner assessee is concerned, we are of view that Tribunal has rightly rejected prayer of petitioner for referring this question. Tribunal has given detailed order and we need not repeat same here. We are in conformity with view taken by Tribunal in this matter. As far as question No. 2 is concerned, it was submitted by assessee that Tribunal has raised presumption of concealment under Explanation to section 271(1)(c) and no notice under section 271(1)(c) read with Explanation was given to assessee. notice was only given under section 271(1)(c) of Income-tax Act. It was also submitted that provision of Explanation to section 271(1)(c) is not attracted. Explanation is part of main section and Explanation clears ambiguity, if any, in main section. Explanation cannot be read in isolation. intention of adding Explanation is that if anything is not clear in main section, then it should be made clear by adding Explanation. For purpose of taking any action or for purpose of interpreting any law, foundation is main section and Explanation is subordinate part for purpose of arriving at particular conclusion in matter of interpretation of statute. It will not be out of place here to mention that aid of Explanation can be taken and it is not necessary to refer Explanation in notice issued. Tribunal while rejecting application of present petition has discussed also this question in detail in its order; We would not like to repeat same. We are in full conformity with view taken by Tribunal as far as this question is concerned. As far as question No. 3 is concerned, learned counsel for petitioner has submitted that question No. 3 is squarely covered by questions Nos. 1 and 2 and he has not pressed this question. As far as questions Nos. 4, 7 and 8 are concerned, learned counsel for petitioner has taken them together and Tribunal has also taken them in similar way. One of important grounds for refusal to refer questions Nos. 4, 7 and 8, referred by petitioner, is that question involved in said questions is question of fact and same cannot be referred. No substantial question of law is involved in these questions. Tribunal while rejecting reference of these questions in its order has stated as under: "The question whether there is concealment of income or not, is purely question of fact. Similarly whether or not burden which in terms of Explanation was on assessee has been discharged or not is also question of fact. questions framed by assessee seeking to refer these two aspects of case are, therefore, in our opinion, pure questions of fact, in whatever manner they might have been worded, and, therefore, we would not be in position to refer them for opinion of Hon'ble Court,." Question No. 4 relates to fact that petitioner-assessee did not discharge onus which lay upon him. It is duty of assessee to show that any particular fact mentioned in return inadvertently is not because of wilful neglect or fraud. burden of proof lies on assessee to disprove fact of wilful neglect. In instant case, assessee has come with case that there were five partners out of whom four are ladies and accountant prepared return and partner signed them without knowing details and consequences of statements made therein. In every case, such plea can be raised. It is for assessee to prove that it is not case of wilful neglect, but it is because of inadvertence. finding that whether it is case of wilful neglect or fraud is finding of fact and no question of law is involved in it. It may be said that in some cases where there is no evidence to contrary, but any perverse view is taken by Tribunal, then this court has jurisdiction to take matter on hand as it may amount to question of law on ground that it is case of no evidence. Appreciating and apprising material facts which are on record, however, it can be said that drawing inference on basis of admitted facts may be question of law. Tribunal below has already held on basis of material on record that Inspecting Assistant Commissioner was justified in holding that it is case of wilful neglect and Tribunal has taken view that it is question of fact and no question of law is involved and it cannot be said that view taken by Tribunal is bad in law. We are in conformity with view taken by Tribunal. As far as questions Nos. 7 and 8 are concerned, Tribunal has given similar finding in both these questions. Tribunal, taking into consideration question No. 4, has held that no question of law is involved in it and it is pure and simple matter of fact. We are in conformity with view expressed by Tribunal in its detailed and reasoned order and it is not necessary to repeat same again. We do not find any force in submissions made by learned counsel for petitioner in matter of questions Nos. 4, 7 and 8 and prayer for issuance of direction is rejected. As far as question No. 5 is concerned, we have already given history earlier stating that Income-tax Officer on January 20, 1971, made up his mind that it was case of concealment and wilful neglect and also of giving inaccurate particulars in return. He made reference to Tribunal on same day and also issued notice to Inspecting Assistant Commissioner. There is no question of getting approval only inadvertently. words " approved by Inspecting Assistant Commissioner" finds place in order passed in month of March, 1971. Inspecting Assistant Commissioner issued notice to assessee on February 19, 1971, heard assessee and decided case of penalty. No question of law is involved in question No. 5. Tribunal has also discussed this point in detailed order while rejecting application for reference on this question. We are in full conformity with view expressed by Tribunal. We would not like to repeat them again in this order. Question No. 6 also does not find favour with us. Section 271(1)(c) of Income-tax Act can be divided into two parts-(i) concealment of income and (ii) inaccurate particulars of such income given in return. These parts have to be read as one section and any one of ingredients may be cause for imposition of penalty. One may treat concealment to be one part and same part can also be considered in some respects as matter of furnishing inaccurate particulars. Both parts may be overlapping in some cases. Both parts have been used distinctly but, at same time, intention of Legislature should be considered and one case may fall within purview of both parts also. We agree with view taken by Tribunal in this matter and we need not repeat reasons given by Tribunal for this view. As far as question No. 9 is concerned, it was not pressed. As far as question No. 10 is concerned, words "borders on verge of wilful negligence" have been used in order in different context. Even if it is said that it is border case, it becomes question of fact also and it cannot be said that being border case, view taken by Tribunal is perverse. Learned counsel for petitioner has submitted that Tribunal has itself taken it as case bordering on negligence and, as such, Tribunal was not justified in imposing penalty and was not also competent to do so. As far as question of competence and jurisdiction is concerned, Tribunal was competent to do so and Tribunal had jurisdiction in matter. Even if it is assumed that it is borderline case, it cannot be said that it was not case for imposing penalty, especially when minimum penalty has been imposed which is imposable under law. We are in conformity with view taken by Tribunal in this matter and, as such, we need not express our opinion in detail. revised return and original return have to be considered for purpose of penalty in different way. If there is voluntary disclosure by filing revised return, it may be case in which party may submit that question of wilful neglect does not arise at all. But, in case where there are queries and queries by Tribunal or authority concerned and party discloses same facts on directions of assessing authority and subsequently files revised return, party cannot escape liability for penalty by filing revised return because it cannot be said that it is wilful act of filing revised return but it can be said that it is act under compulsion as matter has come out and party is filing revised return for taking defence in anticipated proceedings of penalty. matter has been discussed at length by Tribunal and we need not repeat same. It was submitted that questions Nos. 11, 13 and 14 are covered by reference made by Tribunal and, as such, these questions have not been pressed in this application. There are some materials before Tribunal and it cannot be said to be case of no evidence and it is not necessary to direct Tribunal to refer question No. 12 as suggested by learned counsel for petitioner. As far as question No. 15 is concerned, it is also question of fact and it is for Tribunal to see how things are appreciated and apprised in facts and circumstances of case and no question of law is involved in it also. For reasons mentioned above, we are of view that it is not necessary to direct Tribunal to refer questions referred by petitioner in his application under section 256(2) of Income-tax Act. application is disposed of accordingly. There is no order as to costs. *** BADRI PRASAD OM PRAKASH v. COMMISSIONER OF INCOME TAX
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