COMMISSIONER OF INCOME TAX Vs. SANTHOSH FAMILY TRUST

JUDGEMENT

(1.) These references are at the instances of the Revenue and are against a common order passed by the Income Tax Appellate Tribunal. The questions of law referred for our consideration are as follows:

(2.) The assessees are different persons. They are engaged in the business of money lending. A search was conducted in the business and residential premises of the assessees and certain documents and valuables were found. In the course of the search, it was found that the assessees were charging interest on loans and advances at 30% against 18% accounted for in the books. The seized materials also indicated the practice of charging 30% interest as against 18% accounted for in the books. On that basis, proceedings under S.132(5) of the Act were completed. Thereafter, notice was issued S.148 of the Act and the assessees filed returns of income for the impugned assessment years admitting only 18% interest on the loans and advances given by them and 12% interest on the borrowings made by them. However, a note was appended to the returns filed in response to the notice under S.148 of the Act that the extra interest collected by them would not constitute their income in view of the provisions of S.18D of the Kerala Money Lenders Act. It was pleaded before the Assessing Officer that the assessees were paying interest at 18% on their borrowings even though only 12% was recorded in the books of accounts on such borrowings. The Assessing Officer accepted the plea regarding the payment of interest at 18% but regarding the plea that the extra interest collected did not constitute the income of the assessees was not accepted. But the assessees agreed for fixing the interest at 30% instead of 18% recorded in the books of accounts. Thus, the assessments were completed taking the interest collections at 30% as against 18% recorded in the books of accounts and taking the interest on borrowings at 18% as against 12% recorded in the books. The Assessing Officer initiated penalty proceedings under S.271(1)(c) of the Act and levied minimum amount of penalty in all these cases.

(3.) The matter was taken in appeal before the Commissioner of Income Tax (Appeals). The first Appellate Authority concurred with the Assessing Officer and held that the extra interest collected was the income. Therefore, the Appellate Authority held that the Assessing Officer was justified in making the addition to the income admitted by the assessees. Against that appeals were preferred before the Income Tax Appellate Tribunal. The Tribunal held that there was no concealment of income attracted under S.271(1)(c) of the Act and cancelled the penalty. It is against the above order that these References are made.