COMMISSIONER OF INCOME TAX Vs. ARAM SANTOSH KUMAR

JUDGEMENT

(1.) At the instance of the Commissioner of Income-tax, West Bengal, Calcutta, the following question of law has been referred to this court under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1963-64 :

(2.) Shortly stated, the facts are that the assessee is a partnership firm. For the year under reference, initially it returned an income of Rs. 29,901. Later on, in the revised return, the income disclosed was Rs. 32,608. The Income-tax Officer completed the assessment of the assessee on a total income of Rs. 1,13,339. The difference was mainly due to the addition of bogus loans of Rs. 58,000 as "income from undisclosed sources" and disallowance of interest thereon of Rs. 13,850. Those loans stood in the books of the assessee in the names of certain persons. The partners of the assessee-firm filed disclosure petitions with the Commissioner of Income-tax under Section 271(4A) of the Act wherein the said loans were accepted by the partners as their own concealed income. The said disclosure petitions were rejected by the Commissioner.

(3.) The Income-tax Officer, prior to the completion of the assessment proceedings, initiated penalty proceedings against the assessee under Section 271(1)(c) of the Act. Those penalty proceedings came to be completed by the Inspecting Assistant Commissioner of Income-tax. He came to the conclusion that in view of the fact that the partners of the assessee-firm had admitted the said loans of Rs. 58,000 to be bogus and since the admission of the partners was virtually an admission by the assessee-firm, the assessee had concealed its income to the extent of Rs. 58,000. He, accordingly, levied a penalty of Rs. 32,000 under Section 27l(1)(c) of the Act. Aggrieved by the said order of the Inspecting Assistant Commissioner, the assessee brought the matter by way of appeal before the Tribunal. As the assessee failed to appear before the Tribunal at the time of hearing of the appeal, the same was heard ex parte on merits. The Tribunal went through the records and heard the Departmental representative, who submitted that the partners of the firm made disclosure petitions admitting the loans as their own concealed income and so, on facts, the Inspecting Assistant Commissioner was justified in treating the said sum of Rs. 58,000 as the concealed" income of the assessee-firm and in imposing the impugned penalty. The Tribunal also noticed that the assessee's case in the grounds of appeal was that it did not admit the loans as its concealed income. Only the partners of the assessee-firm had admitted that the loans really belonged to them. As far as the assessee was concerned, the case of the assessee was that the loans were genuine as the same belonged to the partners, even if the loans did not belong to the partners in whose names the loans appeared in the books of account of the assessee. On these facts, it was for the Department to prove that the addition made by the Income-tax Officer represented the income of the assessee and that it concealed the same or furnished inaccurate particulars thereof. Reliance was placed, in this connection, on the decision of the Supreme Court in the case of Anwar Ali [1970] 76 ITR 696.