COMMISSIONER OF INCOME TAX Vs. TARACHAND GHANASHYAMDAS

JUDGEMENT

(1.) For the assessment years 1952-53 and 1953-54, the Tribunal referred the following question of law under Section 66(1) of the Indian Income-tax Act, 1922, for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed under Section 28(1)(c) of the Indian Income-tax Act, 1922 ? " The assessee, a partnership firm, carried on business as selling agents of Burmah-Shell products, It has numerous branches in India with its head office at Calcutta. In both the years under reference, the original assessments were reopened on the grounds that income to the tune of Rs. 2,50,336 in the assessment year 1952-53 and Rs. 16,500 in the assessment year 1953-54 had escaped assessment. In the returns submitted after the reopening of the assessments, the assessee disclosed amounts of Rs. 2,50,336 and Rs. 24,039 for the respective assessment years 1952-53 and 1953-54 in Part D of the return claiming that those amounts were not liable to be included in the assessments. The assessee's plea with respect to these amounts was that the assessee's branches collected amounts for charity in the bills and that these amounts remained with the branches, that in some of the cases the amounts of charity were not disclosed in the accounts while in others these amounts were entered in the account books. The assessee's further explanation was that these collections for charity were not spent by the branches and were later on transferred to the head office and that as these amounts were in the nature of a trust with the assessee, these did not form part of the assessee's income and could not be included in its income. The assessee-firm was dissolved in 1957 and the assets and liabilities of the assessee were distributed amongst the partners by an award. The Income-tax Officer found that a sum of Rs. 2,07,380 was distributed amongst the partners according to their shares. The assessee failed to produce evidence to show that the branches had collected these amounts on the bills as charity. The Income-tax Officer also found that an amount of Rs. 16,500 received from the branches did not appear in the account books of the assessee and the amount on account of chanty for the assessment year 1953-54 was Rs. 40,539. The Income-tax Officer was also of the opinion that the assessee failed to explain why these amounts were not spent for charity and why the amounts standing on account of charity was distributed amongst the partners according to their shares. The Income-tax Officer did not accept the explanation of the assessee that the amounts of Rs. 2,50,336 and Rs. 40,539 were for charity realised by the assessee and he treated the same as the income of the assessee from undisclosed sources for the respective assessment years. The Income-tax Officer initiated penalty proceedings under Section 28(1)(c) of the Indian Income-tax Act, 1922, for both the years and by issue of notices called upon the assessee to show cause why penalty be not imposed for these years. These notices were served on the assessee on November 24, 1962. The Income-tax Officer for the reasons given by him in the assessment orders treated the additions of Rs. 2,30,236 and Rs. 40,539 as the concealed income of the assessee and imposed the penalties for the two years by his order passed on August 12, 1970.

(2.) The assessee preferred appeals against the assessments to the Appellate Assistant Commissioner but the additions were sustained in the quantum appeals by the Appellate Assistant Commissioner. The assessee also preferred appeals against the orders of imposition of penalties by the Income-tax Officer. The Appellate Assistant Commissioner in both the years agreed with the Income-tax Officer and sustained the penalties imposed by the Income-tax Officer in the penalty orders. The assessee went in appeal before the Tribunal, The Tribunal, after considering the respective submissions, held as follows:

(3.) In the result, the question must be answered in the affirmative in favour of the assessee. There will be no order as to costs.