COMMISSIONER OF INCOME-TAX Vs. PUNJABHAI SHAH
HIGH COURT OF MADHYA PRADESH
COMMISSIONER OF INCOME-TAX
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(1.) IN this reference by the Income-tax Appellate Tribunal under Section 256 (1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income tax, the question which has been placed for our decision is-
"whether on the facts and in the circumstances of the case, the assessee could be said to have concealed the particulars of his income for the assessment year 1959-60 so as to be penalised Under Section 271 (1) (c) of the Income-tax Act, 1961?"
(2.) THE material facts are that for the assessment year 1959-60 the total income of the assessee. Punjabhai Shah, was fixed at Rs. 10,953/ -. During the course of assessment for the next year, namely, 1960-61, it was noticed that the assessee had purchased a motor vehicle and made payments for the purchase of the vehicle as under-
The assessment for the year 1959-60, was therefore, reopened under Section 147 of the Act. The assessee's explanation with regard to these payments was that on 26th August, 1958 he had a cash balance of Rs. 14,168. 0. 0, and out of this cash balance he made a payment of Rs. 1000/- on 26th August 1958 and of Rs. 9,000/on 9th September 1958. This explanation was rejected by the Income-tax Officer, chhindwara. The Income-tax Officer found that in the cash book there were no entries of the withdrawal of Rs. 10,000/-; that in the Rokad there were certain jottings in pencil; and that if the payments had been actually made from the cash balance, then the amounts withdrawn would have appeared merged in the Rokad entries themselves and not in pencil jottings. In regard to the source of payment of the balance of the purchase price, the assessee said that he was allowed depreciation amount on his trucks for assessment years 1957-58 to 1959-60, and that this amount was utilised by him for making the payments. This explanation was also rejected by the Income-tax Officer, who observed-"in the circumstances of the case by no stretch of imagination he (assessee) can be said to possess hard cash of Rs. 21,126/-available for purchase of vehicle on the above-mentioned dates". The Income-tax Officer described the explanation as "obviously phoney and without any substance. " After rejecting the explanation of the assessee, the income-tax Officer held that Rs. 31,250/- was the income of the assessee from undisclosed sources in the assessment year 1959-60.
(3.) THEREAFTER penalty proceedings were initiated against the assessee by the inspecting Assistant Commissioner of Income-tax under Section 274 (2) of the act. Before the Inspecting Assistant Commissioner, the assessee repeated the explanation which he gave before the Income-tax Officer in the re-assessment proceedings He placed no material to show that the amount of Rupees 31,250/was not his income or that there was no concealment of income on his part. The inspecting Assistant Commissioner also found himself unable to accept the explanation. He found that the cash balance of Rs. 14,168/-, which existed on 26th August 1958, continued to be carried forward to full extent from day-to-day upto the close of the account year on 11th November 1958 and the assessee did not withdraw from his cash balance the amount of Rupees 10,000/- as alleged by him. The Inspecting Assistant Commissioner reached the conclusion that "cash came from concealed income in possession of the assessee for making these payments". While rejecting the assessee's explanation with regard to the payment of the balance of purchase price out of the depreciation amount allowed to him for some years, the Inspecting Assistant Commissioner said-
"the assessee has not created any depreciation reserve and has not carried forward an equivalent amount in the form of cash or other liquid reserve to be able to claim that the amount of depreciation allowed to him in the past before computing the assessable income was kept apart by him and that he did not withdraw or did not utilise the same for any purpose but used it for making a payment towards the purchase of the truck to the extent of Rs. 21,170/ -. It is apparent that the assesses is merely relying upon the notional allowance granted for statutory purposes before computing the total income to explain away his investments to the extent of Rs. 21,170/ -. . . . . It is thus clear that the assessee has financed and (sic) purchase of truck from some undisclosed sources. " The Inspecting Assistant Commissioner concluded by observing that the "fact of concealment of income is proved beyond reasonable doubt" and imposed a penalty of Rs. 5,000/- on the assessee under Section 271 (1) (c) of the Act.;
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