S.N. Hamid Abdul Khader vs Commissioner of Income Tax

Ratnam, J.—u/s 256(2) of the Income Tax Act, 1961, (hereinafter referred to as ""the Act""), at the instance of the assessee, the following

question of law has been referred for the opinion of this court :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in its conclusion regarding the levy penalty u/s 271(1)(c) of

the Income Tax Act ?

The assessee is an individual having share income from a firm, income from property and interest on securities, etc. In respect of the assessment

year 1971-72, the assessee filed a return declaring a total income of Rs. 33,423. In completing the assessment, the Income Tax Officer included a

sum of Rs. 1,00,000 in the total income of the assessee. The amount so included represented a cash credit and the assessee claimed that that

amount related to the encashment of a raffle ticket which required the first prize in the held on September 25, 1970. Apart from some

discrepancies found by the Income Tax Officer in that regard, he also came to know that the prize winning raffle ticket actually belonged to one

Shankar, who was a worker in a hotel. Thereupon, the Income Tax Officer proceeded to collect further information and evidence and after

affording an opportunity to the assessee to rebut the same, came to the conclusion that the assessee was not the real owner of the raffle ticket, but

had somehow managed to project himself as the winner of the first prize by purchasing the prize winning ticket with his unaccounted money.

Besides, adding the sum of Rs. 1,00,000 in the total income of the assessee as income from undisclosed sources, penalty proceedings were also

initiated and after hearing the assessee, the Inspecting Assistant Commissioner imposed on the assessee a penalty of Rs. 1,00,000 u/s 271(1)(c) of

the Act. Aggrieved by this, the assessee preferred an appeal before the Tribunal. On a consideration of the entire materials, the Tribunal found that

independent evidence collected by the Income Tax Officer from several sources clearly established that the one Shankar had purchased the prize

winning ticket and had also won the prize and that the assessee who encash the prize winning ticket was not in a position to established the

purchase of the ticket and, therefore, it was not a mere case of the explanation offered by the assessee having been disbelieved, but the

uncontradicted circumstantial evidence was such that it established that the assessee had not purchased the ticket before it won the prize. In that

view, the Tribunal upheld the order imposing a penalty on the assessee. That is how the question of law referred to earlier has come up before this

court.

We may briefly refer to the several steps taken by the Department to ascertain whether the assessee had purchased the ticket which eventually

won the prize. In the course of his examination u/s 131 of the Act, the assessee stated that he bought nine tickets of the raffle and when he won the

prize, he came to know about it through a vernacular newspaper, but did not intimate the same to the director of Raffles or communicate it to any

other authority and that the ticket along with certain forms duly filled up were handed over to Canara Bank for collection. Further enquiries made

by the Department on the statement so made by the assessee disclosed that the prize winning ticket was sold by S. Santhanraghavachari, a raffle

agent, and that he had been awarded the agent''s prize. When he was enquired, it came to light that the first prize on the ticket was won by one

Shankar, who was working as a cook in Kanchi Hotel, and that when he attempted to contact Shankar in the next two days, he could not do so as

he was informed that he had left the hotel. Thereafter, Income Tax Officer made further enquires of the proprietor and confirmed that the first prize

of the draw held in September, 1970, was won by Shankar, one of the workers in the hotel. Further enquires made by the Income Tax Officer

from other persons like the flower-seller who sold a garland to Shankar revealed that Shankar belonged to Padavelu village Arni taluk and that

though it was stated that he was working in the some hotel, further details were not available as he had not visited the village and none knew about

his then where abouts. The efforts made by the Income Tax Officer to trace Munuswami, the cousin of Shankar, revealed that Munuswami got

sick and ultimately died. On the basis of the information so collected by the Income Tax Officer, the assessee was informed that the prize winning

ticket was owned by Shankar and not by the assessee and the assessee was also further requested to state whether he would like to cross-

examine any one of them and that was declined by the assessee on the ground that he did not see any useful purpose in cross-examining them. On

the basis of the materials so collected, the Income Tax Officer concluded that the assessee did not purchase the prize winning ticket, but it must

have been secured by him after the draw was held and the results were announced and he, therefore, added the amount of the prize as the income

of the assessee from undisclosed sources. Even in the appeal before the Tribunal, copies of the depositions were made available to the assessee

and even after numerous opportunities, the assessee did not place any materials to justify the deletion of the amount included and finally the

Tribunal also confirmed the assessment. On initiation of proceedings for the levy of penalty, the assessee took the plea that the assessee had

established that the credit represented realisation of the prize of the raffle ticket and that the Department had not discharged the onus of proving

concealment. After adverting to the efforts taken by the Income Tax Officer and also the evidence collected in the course of the enquiry made by

him of several persons, the Inspecting Assistant Commissioner found that the circumstantial evidence clearly established that the assessee did not

purchase the prize winning ticket, but that one Shankar, who was working as a servant in Kanchi Hotel, had purchased the same and the assessee

had paid from out of the income from undisclosed sources and acquired the prize winning ticket and it was reasonable to hold that the amount of

Rs. 1,00,000 represented his secret income undisclosed to the Department. The Tribunal has also considered the entire evidence and found that

the evidence collected by the Income Tax Officer from totally independent persons clearly established that it was only Shankar who had won the

prize and that the assessee had not been able to satisfy that purchase the prize winning raffle ticket. Considering the entire evidence as well as other

available materials, the Tribunal found that the interference is irresistible that the ticket purchased by Shankar, which eventually won the prize, had

been secured by the assessee and was later also encashed. The Tribunal also felt that the absence of a link to connect the purchase by the assessee

of the ticket from Shankar would not, in the face of the other evidence, lead to the conclusion that the assessee purchased the ticket prior to its

winning the prize. Though it was faintly contended that there was nothing to show that the assessee got the ticket from Shankar on payment of Rs.

1,00,000 we are not prepared, on the materials available in this case, to so hold, as the evidence clearly leads to the conclusion that the assessee

had purchased the ticket after the prize was won by that ticket and the further inference is that no prize winning ticket should have been parted with

for the amount other that the prize amount atleast. It may be, as pointed out by the Tribunal, that the assessee might have been paid a larger

amount taking into account the advantages that may be secured by him by adopting such a course with reference to his tax assessment. All the

assessment proceedings in relation to the assessee from 1962-63 onwards as referred to in paragraph 18 of the order of the Inspecting Assistant

Commissioner shows that the assessee was in a position to command substantial funds which had not been disclosed to the Department and in

order to bring to account at least a part of such amounts, the assessee had purchased the prize winning picket at least for a lakh of rupees. On a

careful consideration of the facts and circumstances and also the available materials, we are of the view that the Tribunal was quite right in holding

that the Department has established concealment of income by the assessee to the tune of one lakh of rupees and that penalty is also exigible. We

also find that only the minimum penalty had been levied on the assessee. We, therefore, answer the question referred to us in the affirmative and

against the assessee. The Revenue will be entitled to the costs of this reference. Counsel''s fee Rs. 500.