ADDITIONAL COMMISSIONER OF INCOME TAX Vs. BHARTIYA BHANDAR

JUDGEMENT

(1.) THIS is a reference under section 256 of the I.T. Act, 1961, made by the Income-tax Appellate Tribunal, referring for our answer the following question of law :

(2.) THE facts are that the assessee is a registered firm dealing in cloth, hosiery and umbrellas. For the assessment year 1958-59, the assessee filed its return declaring a total income of Rs. 15,182. THE assessment was completed on 31st March, 1961, on a total income of Rs. 34,475. Subsequent to the completion of the assessment, the ITO noticed that there were entries of cash credits of the aggregate amount of Rs. 7,500 in the names of different persons in the books of account of the assessee which were not properly explained. In order to bring the aforesaid amount of Rs. 7,500 to tax as the assessee's income from undisclosed sources, the assessment was reopened by the ITO under section 147 of the Act and a notice under section 148 was issued to the assessee calling upon it to file a return. On 28th January, 1969, the assessee filed a return in response to the notice showing a total income of Rs. 41,972, This figure was made up of the income of Rs. 34,475 as computed in the original assessment and the above cash credits of Rs. 7,500. THE assessment was completed on 29th January, 1969, on a total income of Rs. 42,031 which included the unexplained cash credits of Rs. 7,500 and an amount of Rs. 56 shown by the assessee as interest payment on the above three cash credits. THE ITO also initiated penalty proceedings under section 271(1)(c) of the Act and referred them to the LAC of Income-tax under section 274(2) as the minimum penalty imposable exceeded Rs. 1,000, THE IAC continued the proceedings under section 271(1)(c) against the assessee and called upon it to show cause why a penalty should not be imposed for the concealment of particulars of income to the extent of Rs. 7,556 (cash credits of Rs. 7,500 and interest payment thereon of Rs, 56). THE assessee submitted before the IAC that it had not concealed the particulars of its income ; that the cash credits of Rs. 7,500 were surrendered for assessment as constituting the income of the assessee as the assessee was not in a position to produce the creditors and to prove the genuineness of the credits owing to the time lag between the dates of the credits and the date of the assessment and that from this circumstance alone the assessee should not be held to be guilty of concealment of income. THE IAC held that by including the cash credits of Rs. 7,500 in the return of income filed by the assessee under section 148, there was a clear admission on the part of the assessee that though the amount of Rs. 7,500 was recorded in the books of account as cash credits, it really represented the income of the assessee and as this income was not disclosed in the return of income filed at the time of the original assessment, the assessee had clearly concealed the particulars of its income. THE IAC was also of the view that as the assessee had itself admitted in the revised return filed under section 148 that the amount of Rs. 7,500 constituted its income, no further evidence was required to establish that it was the concealed income of the assessee. THE IAC, on this view, imposed a penalty of Rs. 7,600 under section 271(1)(c) of the Act. THE assessee appealed to the Tribunal. THE Tribunal allowed the appeal of the assessee on the view that no case for imposing penalty under section 271(1)(c) was made out by the department. In holding so, the Tribunal relied upon the cases of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) and Gumani Ram Siri Ram v. CIT [1972] 85 'ITR 67 (Punj) and observed as follows:

(3.) IN the instant case, the position on facts is materially different. IN the return filed, in answer to the notice under section 148, the assessee showed the amount of Rs. 7,500 as its income without any qualification. This return filed by the assessee constituted an unequivocal admission on its part that the amount in question was its income. It was on this evidence of admission that the department relied in penalty proceedings to prove that the disputed amount was the assessee's income. It was not a case where the department relied merely on the finding reached in assessment proceedings rejecting a explanation offered by the assessee in support of the plea that the disputed item was not the assessee's income. It is true that the burden is on the department to establish in penalty proceedings that the disputed amount was the income of the assessee, the particulars of which were concealed. But the unqualified admission made by the assessee in the instant case in the return filed in pursuance of the notice under section 148, that the disputed amount was its income, was a very important evidence to discharge that burden. IN view of the admission on which the department relied, it was for the assessee to explain as to why the unequivocal admission was made by it that the disputed amount was its income. It was open to the assessee to show that the admission was untrue or that it was made in such circumstances that it cannot be acted upon. The assessee, however, merely stated that it surrendered the above amount for the reason that it was not able to prove the genuineness of credit entries after a lapse of about ten or twelve years. Apart from this explanation, the assessee offered no material in support of its case. It did not even disclose the addresses of the persons in whose name the cash credit items stood. The assessee did not even examine any of its partners in support of this explanation. IN these circumstances, in our opinion, it cannot be said that the weight and effect of the admission made by the assessee was rebutted. The IAC was, therefore, right in acting upon the admission and in holding that the disputed amount was the assessee's income; and as it was not disclosed in the original return and was shown in the books of account as cash credit items pertaining to different persons, the charge of concealment of particulars of income was fully established. The mistake made by the Tribunal was in overlooking the admission made by the assessee in the return that it filed in answer to the notice under section 148 that the disputed amount was its income. The Tribunal also failed to notice the distinction between the facts of the instant case and the facts in Anwar Ali's case [1970] 76 ITR 696 (SC), where there was no admission at all made by the assessee and the department had solely relied on the rejection of the explanation offered by the assessee in the assessment proceedings.