S. PURAN SINGH SETHI v. INSPECTING ASSISTANT COMMISSIONER
[Citation -1986-LL-0709-2]

Citation 1986-LL-0709-2
Appellant Name S. PURAN SINGH SETHI
Respondent Name INSPECTING ASSISTANT COMMISSIONER
Court ITAT
Relevant Act Income-tax
Date of Order 09/07/1986
Assessment Year 1967-68
Judgment View Judgment
Keyword Tags commencement of production • income from house property • promissory estoppel • concessional rate • unregistered firm • bona fide belief • ignorance of law • notional income • income returned • deemed income • sales tax • vanaspati
Bot Summary: The assessee declared an income of Rs. 80,556 in his return for this year. According to him the assessee was guilty of furnishing inaccurate particulars of income in his return. Apart from the above, income from the said property was so small in the context of the assessee's total income returned that there could be no charge of concealment in this regard. Income from self-occupied property was only notional income and not real income. Nor did the Commissioner find any merit in the argument that the income from the said property being a notional or deemed income, a penalty was not to be levied for omission of such an item of income from the return. One of the arguments taken before us was that the assessee was ignorant of the fact that even the notional income form self-occupied property had to be returned for assessment. The assessee's explanation is that he had no intention of concealing such small items of income as Rs. 2,500 and Rs. 1,500 in the context of the total income of Rs. 80,556 disclosed by him in the return thus raising probabilities in his favour, i.e. the claim that the notional income as well as the annuity refund were omitted to be shown under an erroneous but bona fide belief has to be accepted on probabilities.


assessee is individual. His sources of income are from Gulab Singh Sethi & Sons, unregistered firm, income from house property at 47, Hanuman Road, New Delhi and from other sources. 2. This appeal by assessee is against levy of penalty of Rs. 4,000 under section 271(1) (c) of Income-tax Act, 1961 ('the Act'). assessee declared income of Rs. 80,556 in his return for this year. Admittedly this did not include income from (self-occupied) property at Hanuman Road, assessed at Rs. 2,500 this year and Rs. 1,500 being annuity refund receivable for this year. It was finally assessed at Rs. 1,36,131. On completion of assessment notice under section and Rs. 1,500 noted supra. In response to above notice, assessee filed reply dated 28-3-1979. This reply dealt with only Rs. 1,500 and not other omission of Rs. 2,500. It was explained by assessee here that though he had not disclosed any income on annuity refund (Rs. 1,500) that came to be assessed for this year, no penalty was leviable with regard to same as assessee had not received said refund during relevant previous year and had been under impression that it was assessable on receipt basis. IAC (Assessment), apparently had in mind actually both items, viz., Rs. 2,500 on account of notional income from self-occupied property brought to assessment this year though not returned and Rs. 1,500 on account of above unity refund. IAC (Assessment) found assessee's explanation to be unsatisfactory. According to him assessee was guilty of furnishing inaccurate particulars of income in his return. In this view, he levied impugned penalty. assessee appealed. 3. Before Commissioner (Appeals) following submissions were raised: (i) assessee was not in law owner of self-occupied property. His name came to be registered as owner of property in municipal records only in 1970. (ii) Apart from above, income from said property was so small (Rs. 2,500) in context of assessee's total income returned (Rs. 80,556) that there could be no charge of concealment in this regard. (iii) Income from self-occupied property was only notional income and not real income. Hence, no penalty could be levied with regard to such income. (iv) annuity refund was not disclosed as assessee was under bona fide impression that it was taxable on receipt basis. (v) That IAC (Assessment) had presumably accepted that burden on assessee under Explanation to section 271(1) (c) stood dis-charged; and h d proceeded to levy penalty on ground that assessee had concealed said items of income. IAc was not justified in doing so. 4. Commissioner (Appeals) found no merit in above submissions. According to him explanation for non-disclosure given out in first appeal was afterthought. He noted that assessee had inherited property in question on death of his father, sometime in 1964 and that assessee had applied to municipal records as far back as 1966; that municipality made necessary entry in its records only in 1970 showing assessee as owner of said property. In such factual context Commissioner (Appeals) was of view that assessee could not take pleas that he was not owner of property until 1970. He was in fact residing in said property, enjoying said property as rightful owner. In this view Commissioner (Appeals) rejected submissions raised for assessee on this aspect. 5. Commissioner (Appeals) found no substance in other submissions also. According to him there was no particular quantitative relation between total income returned and income sought to be concealed. Even when income returned was very high taxpayer might try to conceal small item of income. Hence, according to Commissioner (Appeals), assessee could not derive any benefit from such stand. Nor did Commissioner (Appeals) find any merit in argument that income from said property being notional or deemed income, penalty was not to be levied for omission of such item of income from return. Commissioner (Appeals) was of view that assessee had no acceptable explanation for omission of annuity refund also. He observed that assessee was assisted by chartered accountant in tax matters and hence it was all more clear that assessee had come within ambit of section 271(1) (c) following his omission to return these two items of income. In these circumstances, he confirmed penalty. We have heard both Shri. considered position. One of arguments taken before us was that assessee was ignorant of fact that even notional income form self-occupied property had to be returned for assessment. learned counsel's argument was that concept, ignorance of law could not be excuse for statutory default, was outmoded one; that on contrary no man is presumed to know entire law of country. counsel supported this argument by relying on decision in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (1979) 118 ITR 326 (SC). We have seen decision. That decision is certainly no authority for proposition argued by learned counsel. It must be remembered that ratio of decision cannot be torn out of its factual context. In Motilal Padampat Sugar Mills Co. Ltd.'s case (supra) issue for decision was on when doctrine of promissory estoppel could be invoked. Supreme Court held that facts necessary for invoking said doctrine were clearly present in case before it; and that U.P. Government was bound to carry out its representation and exempt appellant- company there from sales tax in respect of sales of vanaspati effected by it in U.P. for period of three years from date of commencement of production; and that U.P. Government was not entitled to recover such sales tax from appellant. Court did note fact that appellant had written at one stage letter (dated 25-6-1970) to Government accepting levy of concessional rate of sales tax but held that this did not amount to waiver of its claim for exemption from levy. According to Court, waiver is question of fact. It has to be properly pleaded and proved. factual foundation for claim of waiver has to be laid in plattings. There could be no waiver unless person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. 8. On facts before it Supreme Court found it difficult to speculate on reasons for which assessee wrote in its letter dated 25-6-1970 to U.P. Government that it would avail of concessional rate of sales sustained U.P. Government that it would avail of concessional rate of sales sustained only on doctrine of promissory estoppel and this doctrine was not so well defined in its scope and ambit that Court must necessarily held that appellant had knowledge of its right to exemption on basis of promissory estoppel at time when it sent letter of 25-6-1970. It was in context of discussion on this aspect fore-knowledge of doctrine of promissory estoppel that Court pointed out that there was no presumption that 'every person knows law' It quoted with approval Maula, J. in Martindale v. Falkner (1846) 2 CB 706 to effect that it would be contrary to commonsense and reason to presume that every person knows law. It also noted observation of Lord Atkin in Evans v. Bartlam (1937) AC 473 (HL). Who put point in its proper context when he said "... fact is that there is not and never has been presumption that every one knows law. There is rule that ignorance of law does not excuse, maxim of very different scope and application." Court went on to record its finding that on facts before it, it could not be presumed that appellant before it had had full knowledge of its right to exemption so as to warrant inference that it had waived such right in its letter of dated 25-6-1970. In this view it rejected plea of waiver raised on behalf of State Government. 9. From above, it would be at once evident that what learned counsel has attempted to do here is to offer ignorance of law as excuse. This is certainly not permissible. True, there is no presumption that every man knows law. But from this it cannot be argued that ignorance of law is excuse for any statutory default. As observed by Lord Atkin in Evan's case (supra) maxim, ignorance of law does not excuse, has 'very different scope and application. To accept such plea as raised before us by assessee's learned counsel is to render, at one stroke, all sections in statute against tax delinquencies, totally ineffective. We do not propose to interpret law in such radical manner. This plea of assessee, based on 'ignorance' of law, stand rejected. 10. We, however, find some merit in argument of assessee's counsel that this is case covered by Explanation to section 271(1) (c) . Under Explanation burden on assessee is to show preponderance of probabilities. assessee's explanation is that he had no intention of concealing such small items of income as Rs. 2,500 and Rs. 1,500 in context of total income of Rs. 80,556 disclosed by him in return thus raising probabilities in his favour, i.e. claim that notional income (self-occupied property) as well as annuity refund were omitted to be shown under erroneous but bona fide belief has to be accepted on probabilities. Hence, our finding is that burden on assessee stood discharged. It was then for IAC (Assessment) to bring on record cogent material to show mean area in matter. We find that there is no such material available on record. In other words, IAC (Assessment) failed to discharge burden that came to be shifted on to him in matter when he levied penalty holding assessee to be guilty of furnishing inaccurate particulars of his income. In this view of matter, penalty requires to be canceled. We direct accordingly. in view we have taken it is not necessary to consider further question whether item of notional income such as income from self-occupied property could be subject of penalty under section 271(1) (c). 11. appeal is allowed. *** S. PURAN SINGH SETHI v. INSPECTING ASSISTANT COMMISSIONER
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