Sabyasachi Mukharji, J. - (1.) This petition for leave to appeal is directed against the judgment and order dated 10th Dec. 1985 of the High Court of Madhya Pradesh, Jabalpur. The High Court upheld the imposition of penalty as well as the addition of alleged concealed income in the income-tax assessment of the petitioner. The relevant assessment year with which we are concerned in this application is 1974-75.
(2.) It appears that the petitioner had submitted his return of income for the assessment year 1974-75 showing a total income of Rs. 3,113/- in response to a notice issued under S. 143(2), Income-tax Act, 1961 (hereinafter called 'the Act'). According to the petitioner, he had derived his income from 2 stores, i.e. M/s. Mohanani Fancy General Stores and M/s. Roopkala General Stores, Durg. It, however, appears that on 19th January, 1974 on the basis of the order passed by the Superintendent, Central Excise, Jagpur, dated 25th Dec. 1975 (sic) there was confiscation of foreign watches from the house of the petitioner and levy of penalty of Rs. 2 lakhs under the Customs Act, 1962. Accordingly, the Income-tax Officer issued a notice calling upon the assessee to show cause why the value of the watches seized from his residence should not be treated as his income from undisclosed sources. In this connection it may be relevant to note that on 12th May, 1973 a search was made of the petitioner's bedroom from where a total of 565 wrist watches of foreign make valued at Rs. 87.455/-were seized from a suitcase and in a secret cavity of a locked steel almirah and also behind the almirah there were watches folded in a bundle of waste papers. A panchanama was prepared at the same time mentioning these facts. According to the Customs Authorities, the petitioner found himself unable to make any statement at that time on account of which recording of statements was deferred. However, it is stated, the petitioner went out of the station on 14th May, 1973. The petitioner's statement was recorded on 13th May, 1973 as soon as he was available. In his statement Annexure R III duly signed by him he has admitted these facts and merely denied knowledge of the manner in which those watches came to be in his house.
(3.) It appears from the records of the customs case, with which we will have to deal later in S.L.P. No. 1008/86, the petitioner was given a show cause notice as to why the period of six months fixed under S. 110(2), Customs Act, 1962 should not be extended but no reply was given by the petitioner till 10th Nov. 1973 or even thereafter. Hence, by an order dated 10th Nov. 1973 before the expiry of six months, time was extended by the Collector of Customs for a further period of 6 months for giving a notice as required under S. 124(a) Customs Act, 1962. Under the proviso to sub-section (2) of S. 110, Customs Act, 1962, a show cause notice specifying the requisite particulars, was given to the petitioner on 4th May, 1974. In the reply the petitioner made a general denial. The enquiry was fixed on 30th Oct. 1975 for giving a personal hearing to the petitioner, when the petitioner's counsel appeared and sought for an adjournment to 20th Nov. 1975 which was granted. However, on 20th Nov. 1975 the counsel of the petitioner stated that the petitioner did not want to avail of the opportunity of personal hearing or even to cross-examine the witnesses in whose presence the panchanama was made at the time of the seizure of the watches. It is necessary to bear these facts in mind because it has repercussions on the notice dated 19th Jan. 1974, as mentioned hereinbefore issued by the Income-tax Officer, to show cause why the aforesaid sum of Rs. 90,768/- should not be treated as the petitioner's concealed income. The Income-tax Officer further directed issuance of the notice under S. 271(1)(c) of the Act.;