COMMISSIONER OF INCOME TAX Vs. VILASBEN HASMUKHLAL SHAH

JUDGEMENT

(1.) AT the outset, it may be stated that this reference arises from a decision of the Tribunal which included one of us, and when this matter was called out, this fact was pointed out by us to learned counsel appearing for both the parties showing our disinclination to hear the matter on that ground. Both learned counsel submitted that the Tribunal had only followed an earlier decision rendered in Jogibhai Mangalbhai vs. ITO, decided on October 18, 1975 (Guj), and further that the substantive points involved in this reference are already covered by the decision of this Court in CIT vs. Suleman Abdul Sattar (1983) 139 ITR 8, and insisted that the matter should be heard and disposed of by this Bench. Since both counsel wanted this Bench to take up the matter for hearing as the matter was covered by an earlier decision of this Court, it has been taken up for hearing.

(2.) THE assessee had filed a return for the asst. year 1970 71 declaring the total income as Rs. 4,577. In Part IV of the said return, the assessee had claimed a total amount of Rs. 1,03,966 as cross word puzzle prize of a casual nature. By order dt. March 27, 1973, the ITO framed the assessment on a total income of Rs. 1,18,940 as against the income of Rs. 4,577 declared in the return as taxable. The ITO held that the amount of Rs. 1,03,966 for which exemption was claimed was income from undisclosed sources. Similarly, the amounts of Rs. 10,397 being the commission paid in connection with the said prize and Rs. 1,532 being the amount allegedly earned on the investment of the said prize were also included in the assessee's total income. The ITO initiated penalty proceedings under S. 271(1)(c) of the IT Act, 1961 (hereinafter referred to as "the said Act"), in respect of these three items and referred the matter to the IAC for penalty proceedings. By his order dt. March 26, 1975, the IAC held that the case attracted the provisions of S. 271(1)(c) of the said Act and levied a penalty of Rs. 1,15,000 on the assessee. From the evidence on record, he held that the assessee had not received any genuine prize and the receipt was in the nature of concealed income not accounted for and that, by claiming it to be a genuine prize, there was an attempt to furnish inaccurate particulars of income as well. He found that there was collusion between the assessee and the organisers of the crossword puzzle competition, Kum Kum Sahitya Harifai, Indore, who organised the fraud and they had colluded in a fraudulent manner with the assessee who, by camouflage, concealed the income as a prize. He held that this was a case covered by the Expln. to S. 271(1)(c) of the Act. The matter was carried to the Tribunal, Ahmedabad Bench, Ahmedabad, against the order of the IAC.

(3.) THE question whether the disclosure made by the assessee in Part IV of the return was good enough to throw a protective armour against the assessee insulating him against any action under s. 271(1)(c) came up for consideration before a Division Bench of this Court in CIT vs. Suleman Abdul Sattar (1982) 26 CTR (Guj) 432 : (1983) 139 ITR 8 (to which my esteemed brother was a party) and the facts on which that reference arose were more or less identical with the facts of the present case. In that case also, from the documents and materials seized during the search and the statements recorded in connection with the crossword competition during the course of investigation, it was discovered that the crossword puzzle was conducted only with a view to lend colour of legitimate source to unaccounted money and convert it into white money. The assessee in that case had disclosed a sum of money in Part IV of the return as prize money won in a crossword competition which disclosure was factually false since the amount was in fact not won in any crossword competition whatsoever. The Tribunal, in that case, had also followed its earlier decision in jogibhai's case and set aside the penalty imposed on the assessee and held that the assessee was not guilty of concealment of income or of furnishing inaccurate and false particulars. The Division Bench of this High Court, on a reference, held that the assessee could not claim immunity from penalty by falsely indicating in Part IV of the return that he had earned income of a casual nature.