COMMISSIONER OF INCOME TAX Vs. V PONNUSWAMY NAIDU

JUDGEMENT

(1.) THIS is a reference under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Department for answering the following question of law "Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 37, 000 under section 271(1)(c) of the Income-tax Act for the assessment year 1970-71 was not valid ?" It appears that the year 1970-71 was the first assessment year in relation to the respondent-assessee. It appears that he had not filed the return but, since he was a dealer in cement and fertilizer and also a money-lender a notice under section 148 of the Act was issued pursuant to which he filed his return showing an income of Rs. 384 only. During the enquiry, the Income-tax Officer found that the assessee has advanced Rs. 37, 000 on two occasions to one N. Doraisamy Reddiar and interest of Rs. 6, 300 was also shown credited in the account of the said Reddiar. When this was put to the assessee by the Income-tax Officer, he has stated that the money was that of his mother-in-law and he acted only as a name-lender.

(2.) THE Income-tax Officer after making enquiries into the aforesaid explanation held that the mother-in-law of the assessee had no means to advance the money. THE said amount together with interest was, therefore, included in the income of the assessee and it was subjected to tax. On appeal, the Appellate Assistant Commissioner confirmed the addition of Rs. 37, 000 but deleted the sum of Rs. 6, 300 being the interest received. Since there was no second appeal, the said assessment has become final. Since the returned income of the assessee was less than 80 per cent. of the assessed income proceedings under section 271(1)(c) of the Act were initiated against him. In response to the show-cause notice issued by the Inspecting Assistant Commissioner, the assessee appeared and stated that the money belonged to his mother-in-law and, therefore, there was no justification for penalising him. He requested that the penalty proceedings be dropped.

(3.) THAT, in our opinion, is enough as a statement of the assessee by itself can be material sufficient for the Tribunal to base its finding. Reference in this connection may be made to the decision in Gouri Prasad Bagaria v. CIT. Under the circumstances, it will be a finding of fact recorded in accordance with law which this court would not be able to ignore. As long as this finding remains on record, there would be no escape from the conclusion that the burden of proof imposed upon an assessee remains properly discharged and, therefore, there was no justification for imposition of any penalty on himThe submission of learned counsel for the Revenue is that the explanation as it existed at the relevant time gave rise to three presumptions against the assessee and, therefore, the burden of proving to the contrary is on the assessee. There can really be no quarrel with the aforesaid proposition.