1972 PLP 189 (PTD)

P. S. Khirwadkar for the Commissioner. R. K. Tankha for the Assessee. DIXIT, C. J.‑In this reference under section 66(1) of the Indian Income‑tax Act, 1922, at the instance of the Commissioner of Income‑tax, the Income‑tax Appellate Tribunal has referred the following two questions to this Court for decision:‑ "(1) Whether in respect of the assessment for 1961‑62 made under the provisions of the Indian Income‑tax Act, 1922, penalty proceedings could be validly initiated and concluded under section 271 read with section 274 of the Income‑tax Act, 1961 ? (2) If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, the assessee had concealed the particulars of his income or given inaccurate particulars thereof within the meaning of section 271(1)(c) so as to justify the imposition of penalty?" The material facts are that the assessee is an individual carrying on money‑lending business. In the assessment proceed ings for the assessment year 1961‑62 the income‑tax Officer added two sums, namely, Rs. 3,800 and Rs. 15,000 as the assessee's income from undisclosed sources. The first amount represented credits of Rs. 2,000 on 14th August 5960, and Rs. 1,800 on 25th September 1960, in the account of one Harikishan Sitaram. The Income‑tax Officer did not accept the statement of Harikishan Sitaram that these amounts were genuine advances to him by the assessee. He concluded that the deposits totalling Rs. 3,800 were the assessee's own secreted Profits. The assessee claimed that the amount of Rs. 15,000 was received by him from his separated brother, Murlidhar, on 10th June 1960. It was stated that in 1958 the assessee and Murlidhar decided to start motor transport business jointly and for this purpose Rs. 15,000 were credited to the joint account of the assessee's minor son and Murlidhar's minor son. Later on; the assessee decided not to take part in the business and, therefore, the joint account of the minor sons was closed by transferring the amount of Rs. 15,000 to the debit of the minor son of Murlidhar alone. The Income‑tax Officer did not accept the statement of the assessee that the amount of Rs. 15,00 was owed by Murlidhar to the assessee. He treated the sum of Rs. 15,000 credited on 10th June 1960, as the assessee's own income for the material year from undisclosed sources. The assessment for the material year was completed under section 23(3) of the Indian Income‑tax Act, 1922, on 17th July 1963. In the course of assessment proceedings, the Income‑tax Officer issued notice to the assessee to show cause why penalty under section 271(1)(c) of the Income‑tax Act, 1961, should not be imposed on him for concealing the particulars of his income represented by the amount of Rs. 18,800 added as income from undisclosed sources. These proceedings were subsequently taken up by the Inspecting Assist‑ant Commissioner as competent authority to levy penalty under the Income‑tax Act, 1961, and ultimately a penalty of Rs. 7,500 was levied. The assessee then preferred an appeal before the Tribunal against the quantum of assessment as well as the penalty levied. The Tribunal upheld the addition of Rs. 3,900 and Rs. 15,000 as the assessee's income from undisclosed sources. It, however, set aside the order of the Inspecting Assistant Commissioner imposing the penalty taking the view that as the assessment for the year 1961‑62 was completed under sections 23(3) of tire Indian Income‑tax Act, 1922, no penalty could be imposed under section 271(1) of the Income‑tax Act, 1961, and further, that the addition of certain unexplained cash credits by itself did not justify the levy of penalty for concealment of income. The answer to the first question is obvious from the pro visions of section 297(2)(g) of the Income‑tax Act, 1961. That provision says that, notwithstanding the repeal of the Indian Income‑tax Act, 1:922, any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st March 1962, or any earlier year, which is completed on or after the 1st April 1962. may be initiated and such penalty may be imposed under this Act. Here, the assessment was for the year 1961‑

62. The assessment was completed on 17th July 1963, that is, after 1st April 1962, when the 1961‑Act came into force. Therefore, clause (g) of section 297(2) was plainly attracted for the initiation of proceedings for the imposition arid levy of penalty und‑r the Act of 1961. The reasoning given by the Tribunal that, as section 271(1) of the 1961‑‑Act uses the expression "in the course of any proceedings under this Act" and as the assess ment proceedings in this case were under the 1922‑Act, therefore, section 271 could not be invoked for levy of penalty is altogether fallacious. Under clause (g) of section 297(2) the initiation of proceedings for imposition of penalty and the levy of penalty under the Act of 1961 is not with reference to the fact whether the assessment was made under the 1961‑Act or the 1922‑Act. That apart, in this case, the return having been filed on 19th October 1961, that is, before the commencement of the 1961‑Act, the assessment under the 1922‑Act was by virtue of the provisions of section 297(2)(a) of the Act of 1961. The proceedings for assessment under the Act of 1922 were thus proceedings under the 1961‑.Act itself. The matter is really concluded by the decision of a Division Bench of this Court in Kishanlal v. Commissioner of Income‑tax ((1967) 64 I T R 285). In that case, it has been held that an assessee is liable to penalty under section 271(1) of the 1961‑Act for defaults referred to in section 28(1) of the 1922‑Act in respect of any assessment for the year ending on 31st March 1962, or any earlier year which is completed on or after 1st April 1962. All than leas been said in the case of Kishanlal applies here with greater force, and it must be field that in the present case penalty proceedings could validly be initiated under section 271 of the 1961‑Act. The other question placed before us for decision is really a question of fact. In Commissioner of Income‑tax v. Punjabhai Shah ((1968) 67 I T R 337), it has been held by a Division Beach of this Court that the question whether an assessee has concealed particulars of his income or whether he has committed an offence in this connection is a question of fact to be determined on the circumstances of the case. In that case, it has also been observed:‑- "Now, a penalty under section 28(1)(c) of the 1922‑Act or section 271(1)(c) of the 1961‑Act can be imposed on an assessee only if the authority mentioned in those provisions is satisfied that the assessee has concealed the particulars of his income. The penalty proceedings, being in their very nature penal proceed ings, the degree or quantum of proof for finding an assessee guilty is that of a criminal prosecution. The assessment proceedings and penalty proceedings are different in their nature. The findings given in assessment proceedings are no doubt relevant and admissible in penalty proceedings. But they do not operate as res judicata so as to preclude the production of other evidence in penalty proceedings to show that the assessee concealed his income or to rebut this charge, Again, the bare fact that the explanation offered by the assessee in the assessment proceeding; was rejected and it was held in those proceedings that he had concealed his income or that the explanation was unsatisfactory by itself cannot be made the basis of the conclusion that he has been guilty ob deliberately concealing the particulars of his income. No doubt, if the assessee's explanation is found to be deliberately false, then it is possible to infer that he concealed his income. But the authority competent to impose a penalty must expressly find that the assessee's explanation is false." The Income‑tax Officer must himself expressly find in penalty proceedings that the explanation given by the assessee was false before imposing a penalty for concealment of income. In the present case, the Inspecting Assistant Commissioner, no doubt, held that the assessee had deliberately furnished inaccurate particulars of his income. But his approach to the matter of imposition of penalty was vitiated by the fact that he treated the penal proceedings as proceedings for imposition of additional tax and observed that the quantum of evidence required for levy of penalty would be the same as required for the purpose of inclusion of an additional amount in the total income of the assessee for the purpose of assessment. The Tribunal, however, rightly treated the penalty proceedings as penal proceedings. But it did not expressly find that the assessee had deliberately concealed particulars of his income. The Tribunal took the view that the bare fact that the assessee's explanation was not satisfactory or that it was false did not justify the imposition of penalty when there was no conclusive proof about the concealment of particulars of income. the finding reached by the Tribunal that the assessee did not conceal particulars of his income is a finding on a question of fact. As the second question is a question of fact, we refuse to answer it. For these reasons, our answer to the first question is in the affirmative. We decline to answer the second question as it is a question of fact. The assessee shall have costs of this reference. Counsel's fee is fixed at Rs. 100.