COMMISSIONER OF INCOME TAX Vs. MAHABIT PRASAD BAJAJ

JUDGEMENT

(1.) THE Commissioner of Income Tax, Bihar -II, Ranchi filed two applications under Section 256(1) of the Income Tax Act, 1961 for the assessment years 1984 -85, 1985 -86 and prayed to the Appellate Tribunal to refer the question arising out of the order of the Tribunal for answer by this Court. Hence, after setting out the relevant facts, the Tribunal solicited the opinion of this Court on the following question of Law: Whether on the facts and in the circumstances of the case the Hon'ble Members of the Tribunal were justified in deleting the penalty of Rs. 2,97,631/ -?

(2.) THE brief facts of the case are that the assessee was assessed under the status of individual. He is the proprietor of M/s. S.R. and Co. The assessee maintained mercantile system of accountancy and the accounting period is the financial year ending on 31st March of each year. For both the assessment years, the assessments were completed under Section 143(3) of the Income -tax Act on 19.3.1985 and 20.12.1985. A search and seizure was conducted under Section 132 of the Act and in course of the said search operation, certain books of account papers relating to business of the assessee were found and seized. The said books of account pertained to the financial years 1985 -86 and 1986 -87. Certain loose -sheets including sales, etc for the financial years 1983 -84 onwards were also seized. The transactions made through bank accounts were found to have mostly kept out of the books of account. After the aforesaid search and seizure carried out on 26.8.1986, the assessee filed revised return on 29.9.1986 under the Amnesty scheme disclosing additional income of Rs. 4,50,000/ - and Rs. 2,50,000/ - respectively for the assessment years 1984 -85 and 1985 -86. The assessments were regularized by getting service of notice under Section 148 of the Act and the assessment were completed for both the years on disclosed amount only. Though the assessments were completed on the additional amount disclosed by the assessee, but it was noted by the Assessing Officer from the various incriminating documents that the assessee was carrying on business outside the books of account even in fact bank account with initial deposit of Rs. 3.50 lacs was brought to light. The Assessing Officer particularly noted that the assessee had accounted transactions for sales for more than Rs. 21 lakhs and Rs. 50 lakhs respectively during the previous years relevant to the assessment years 1984 -85 and 1985 -86. The Assessing Officer, accordingly, estimated the turnover of Rs. 30 lakhs and Rs. 10 lakhs for those previous years and also worked out the income of Rs. 15000/ - and Rs. 30000/ - by way of commission. Accordingly, the Assessing Officer recorded a finding that the assessee resorted to concealment of income through these transactions made outside the books of account. Consequently, while regularizing the return by issuing notice under Section 148 of the Act, it was decided for initiation of penalty proceedings under Section 271(1)(a) and 271(1)(c) of the Act.

(3.) MR . Binod Poddar, learned Counsel appearing for the assessee, firstly submitted that the Income -tax Appellate Tribunal, being the highest fact -finding body, came to a finding that the Revenue have failed to prove the very basic thing that the disputed amount, in fact, represented the income of the assessee. The Tribunal further stated that there is no evidence that the assessee has mens rea in his mind to infract the provisions of Section 271(1)(c) of the Act. Learned Counsel submitted that some concrete and positive evidence is required to prove that the assessee has failed to file the correct income and has acted with ill -motive having mens rea in his mind. Learned Counsel submitted that after the search and seizure was conducted, the assessee, just for his peace of mind, settled the dispute voluntarily, owned the transaction recorded in the said documents and filed revised return and surrendered additional income. In that view of the matter, the question of imposing further penalty under Section 271(1)(c) of the Act does not arise. Learned Counsel relied upon the decision of the Supreme Court in the case of Commissioner of Income Tax, Indore v. Suresh Chandra Mital : [2001]251ITR9(SC) , in the case of .K. C. Builders and Anr. v. Assistant Commissioner of Income -tax : [2004]265ITR562(SC) and the case of Sir Shadilal Sugar and General Mills Ltd. and Anr. v. Commissioner of Income -tax, Delhi (SC) : [1987]168ITR705(SC) and the Commissioner of Income Tax v. Ashim Kumar Agarwal (High Court of Jharkhand) 275 ITR 48.