COMMISSIONER OF INCOME TAX Vs. NAVNITLAL POCHALAL

JUDGEMENT

(1.) THE Income tax Appellate Tribunal, Ahmedabad Bench 'B' (hereinafter referred to as the Tribunal) has referred the following questions, for the opinion of the High Court in compliance with the directions of this Court.

(2.) UPON perusal of the materials on record we find that the assessee was assessed in the status of individual. During the relevant previous year the assessee installed the machinery in his own business at a cost of Rs. 2,32,500. The machinery according to the assessee was purchased from a concern namely Simplex Industrial Corporation and the bill dt. 1st May, 1969 was said to have been issued by one Mr. D.H. Gajjar, proprietor of the said Simplex Industrial Corporation. The contention of the assessee was that the assessee had obtained a loan of Rs. 2,30,000 from Gujarat State Financial Corporation in order to purchase this machinery. The ITO summoned Mr. Gajjar and certain statements were recorded. The assessee, however, did not avail of the opportunity of cross examining the persons whose statements were recorded. However, the matter was settled before the AAC and a sum of Rs. 40,000 was taken as amount from the undisclosed sources. The ITO thereafter made the assessment afresh on the basis of the settlement and included therein a sum of Rs. 40,000 on account of "income from undisclosed sources" and the proceedings for levy of penalty were initiated. The matter went upto the Tribunal and the Tribunal accepted the submissions made on behalf of the assessee that it was not open to the IAC to rely on the facts stated in the original assessment order because that assessment order was set aside. The Tribunal also accepted the submission made on behalf of the assessee that merely because the assessee did not choose to summon those who had given evidence against the assessee before the ITO for cross examination before the assessment order was made, the IAC should not have relied on the evidence without giving an opportunity to the assessee to cross examine the witnesses in penalty proceedings. The Tribunal specifically found that in the present case simply because the assessee agreed that he should be taxed on the amount of Rs. 40,000 which was spent by him from outside the books and source of which he could not explain, it did not follow that the amount of Rs. 40,000 was the undisclosed income of the assessee in the asst. year 1970 71. Relying on the judgment in the case of CIT vs. Vinaychand Harilal (1979) 8 CTR (Guj) 247 : (1979) 120 ITR 752 (Guj), the Tribunal decided that no penalty under S. 271(1)(c) or Explanation thereto is justified.

(3.) IN the instant case the facts are completely otherwise. In the present case there is a clear finding by the Tribunal that no materials are on record to prove that the amount of Rs. 40,000 was the income of the assessee for the year 1970 71 and/or there was any fraud or negligence on his part to invoke the penalty proceedings. The onus lies upon the authority concerned to prove the fact is clearly absent. The Tribunal on the facts and circumstances has rightly relied upon the decision rendered in CIT vs. Vinaychand Harilal (supra), wherein it has been held that on admission of the assessee to the extent that the amount is not property as lying in his hands of other sources does not ipso facto absolve the onus of proving the same as the income of the same year in a penalty proceedings. Considering all the aspects of the case, we accordingly answer question No. 1 in the affirmative against the Revenue and in favour of the assessee and consequently questions Nos. 2 and 3 are to be construed as having been answered in favour of the assessee. This reference is accordingly disposed of with no order as to costs.