Commissioner of Income Tax vs V.L. Balakrishna Naidu

Thanikkachalam, J.—The Commissioner of income tax, Coimbatore, requests this court to direct the Tribunal to refer the following

questions of law for the opinion of this court said to arise out of the common order of the Tribunal for the assessment years 1968-69 to 1975-76

u/s 256(2) of the income tax Act, 1961 :

1.Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right and had valid materials to hold that the amounts in

respect of which concealment is established and in respect of which penalty could be imposed is only Rs. 6.14 lakhs in the aggregate ?

2.Whether the Appellate Tribunal is right and had valid materials to. hold that the penalty that has to be levied for each year would be only Rs.

80,000 which was the minimum penalty imposable under law and not Rs. 1,25,000 in each year ?

The assessee is a Hindu undivided family, consisting of Sri V.L. Balakrishna Naidu, as the karta, his wife and his married daughter. There was a

larger Hindu undivided family consisting of Sri V.L. Balakrishna Naidu and his two brothers, Sri V.L. Venkatachalapathy and Sri V.L.

Varadarajan. It was carrying on the business of purchase of kappas and ginning the same and sale of cotton under the name and style of Sundaram

Mills. There was a partition of the larger Hindu undivided family on December 31, 1974, and it was recognised by the income tax Officer by an

order passed on January 31, 1979, u/s 171(1) of the income tax Act. In the said partition the aforesaid mill fell to the share of Sri V.L. Balakrishna

Naidu and it became the property of his smaller Hindu undivided family, which is the assessee herein. Subsequently, the karta of the assessee-

Hindu undivided family filed a petition u/s 273A of the income tax Act on May 30, 1980 to the Commissioner of income tax offering a sum of Rs,

4 lakhs as the concealed business income from the said mill for the assessment years 1968-69 to 1975-76. Later on, on August 16, 1980, another

petition was filed offering a sum of Rs. 4.82 lakhs as the income of the said assessment years. The Commissioner of income tax, however, after

going through the applications filed by the assessee and the report of the Inspecting Assistant Commissioner, determined the income to be assessed

at Rs. 10 lakhs and accepted the assessee''s request for spread over of this amount equally for the assessment years 1968-(19 to 1975-76.

Subsequently, assessments were made, spreading over the amount of Rs. 10 lakhs and bringing to tax in each of the assessment years 1968-69 to

1975-76 an amount of Rs. 1,25,000 in the proceedings initiated by the issue of notices dated November 28, 1981, u/s 148 of the income tax Act

in respect of which reassessments were completed on October 30, 1982. The assessee had accepted the reassessments and no appeals were

filed. Thereafter, the assessee filed a petition for waiver of the total penalties of Rs. 10 lakhs (Rs. 1,25,000 for each assessment year) u/s 271(1)( c

) of the income tax Act, 1961, for all the assessment years involved herein. This was rejected by the Commissioner of income tax by order dated

October 17, 1980, on the ground that the disclosure made by the assessee was not full and true and that the assessments made on higher amounts

were the result of quantification of the concealed income made by the authorities, after making necessary enquiries and investigation, and could not

be termed as voluntary. As against the levy of penalties u/s 271(1)( c ) for all the assessment years 1968-69 to 1975-76 the assessee filed appeals

to the Commissioner of income tax (Appeals) who declined to interfere with the penalty orders u/s 271(1)( c ) and dismissed the appeals.

Thereafter, the assessee filed appeals before the Appellate Tribunal. The assessee contended that there was no justification for levy of penalties u/s

271(1)( c ) merely because the assessee agreed to the additions made by the Department and that the penalties u/s 271(1)( c ) could be imposed

only if it was established that the assessee had concealed the income by relying upon the decision of the Supreme Court in the case of Sir Shadi Lal

Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, On the other hand, the Department contended that on the

facts and circumstances of the present case concealment of income was clearly established when all the petitions filed by the assessee were read as

a whole and that having regard to the decisions of the Madras High Court in the case of Commissioner of Income Tax Vs. Krishna and Co., and

Rathnam and Co. Vs. Inspecting Assistant Commissioner and Another, the penalties could be sustained since the assessee offered the income as

its own concealed income and agreed to the additions made in the reassessments. The Tribunal held that the amount in respect of which

concealment was established and in respect of which penalties u/s 271(1)( c ) could be imposed was only Rs. 6.44 lakhs in the aggregate for all

the assessment years and that the penalty that had to be imposed for each assessment year would be only Rs. 80,000 as against the penalty of Rs.

1,25,000 imposed by the income tax Officer. The assessee also contended that the penalty u/s 271(1)( c ) levied on March 30, 1985, on the

defunct Hindu undivided family was not valid in law. This contention was not accepted by the Tribunal on the ground that the said section would

apply to both levy and collection of penalty and that since the date of partition was December 31, 1974, the levy and collection of penalty up to

and inclusive of the assessment year 1975-76 was legal and in order. The Tribunal also held that for each of the assessment years where the

concealment was established the penalty had to be imposed with reference to the income concealed and not on the amount of tax sought to be

evaded. In the result, the Tribunal allowed the assessee''s appeals in part and reduced the penalty u/s 271(1)( c ) from Rs. 1,25,000 to Rs. 80,000

for each of the assessment years 1968-69 to 1975-76.

The Tribunal was in agreement with the Department in the matter of levying penalty u/s 271(1)( c ) of the Act since concealment was

established. But only in the matter of quantum of penalty levied the Tribunal considering the facts arising in this case came to the conclusion that the

quantum of penalty for each of the assessment years would be Rs. 80,000 and not Rs. 1,25,000 as levied by the income tax Officer. This

conclusion was arrived at by the Tribunal on the basis of facts arising in each of the assessment years under consideration. A similar question came

up for consideration before the Supreme Court in the case of Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of

Income Tax, Delhi, , wherein the Supreme Court held as under (headnote) :

... reversing the decision of the High Court on that question, that the Tribunal had considered all the facts and the admission made by the appellant

as well as the time of the admission. The appellant had only accepted certain amounts as taxable; it had not been accepted by the appellant that it

had deliberately furnished inaccurate particulars or concealed any income. This was not a case where there was no evidence to support the

Tribunal''s conclusion. Nor had the Tribunal acted on material which was irrelevant to the enquiry or considered material partly relevant and partly

irrelevant or based its decision partly on conjecture, surmises or suspicion. In preferring one view to another view of factual appreciation, the High

Court transgressed the limits of its jurisdiction on a reference in answering the question that it had reframed against the appellant.

Thus, inasmuch as, in the present case, the Tribunal came to the conclusion that only a sum of Rs. 80,000 alone is leviable as penalty in each of the

assessment years under consideration on the basis of the facts arising in this case, we consider that no referable question of law arises out of the

order of the Tribunal as framed and suggested by the Department. Accordingly, the T.C. Ps. are dismissed.

No costs.