COMMISSIONER OF INCOME TAX Vs. LAL BABU
LAWS(PAT)-1979-11-3
HIGH COURT OF PATNA
Decided on November 07,1979

COMMISSIONER OF INCOME-TAX Appellant
VERSUS
LAL BABU Respondents




JUDGEMENT

S.P. Sinha, J. - (1.)THE Patna Bench of the Income-tax Appellate Tribunal has referred the undermentioned questions of law for opinion to this court :
" (1) Whether, on the facts and in the circumstances of the case, the Tribunal were correct in law in holding that non-disclosure of income of the wife and minor sons, which was includible under Section 64 of the I.T. Act, 1961, in the total income of the assessee, did not attract the provisions of Section 271(1)(c) of the Income-tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal were correct in law in holding that the additions made on estimate under the head " Income from other sources " on account of inadequate withdrawals and unexplained investments over house constructions, did not attract the provisions of Section 271(1)(c) of the Income-tax Act, 1961 ? "

(2.)THE brief relevant facts are that the assessee is an " individual''. THE assessment year in this case is 1969-70. During the relevant previous year the assessee's wife and minor sons received interest amounting to Rs. 6,449 from the firm in which the assessee was a partner which fell for assessment for the said assessment year 1969-70. THE said sum of Rs. 6,449 was assessed in his hands in terms of Section 64 of the Income-tax Act, 1961 (hereinafter referred to as " the Act "). A sum of Rs. 3,500 on account of low drawings for meeting his expenditure plus a further sum of Rs. 4,660 on account of unexplained investment in house construction were also added to his income. THE latter two amounts were added as " income from other sources ". On making these additions, the returned income fell short of 80% of the income finally assessed and consequently proceedings for levy of penalty under Section 271(1)(c) of the Act were initiated against him.
Before the IAC of Income-tax, the authority competent to levy penalty in such cases, the assessee submitted that no penalty was leviable on him because there was no concealment of income by him ; neither of the income arising to his wife and minor sons included in his total income under Section 64 of the Act, nor of the income from other sources included in his income by estimate. The IAC, however, did not accept the assessee's plea and, since the income returned fell short of 80% of the income finally assessed, acting in terms of the Explanation to Section 271(1)(c), imposed a penalty of Rs. 14,609 on the assessee.

The assessee then appealed to the Income-tax Appellate Tribunal and once again it was reiterated that no penalty was leviable on him because he could not be deemed to have concealed his income by not including in his return of income the interest income arising to his wife and minor sons or even on the ground of the further estimated additions having been made to his income.

Before the Tribunal the department's case was that the assessee was under an obligation to include and show in his return of income the said interest income falling to the share of his wife and minor children. The further case of the department was that since the assessee's returned income fell short of 80% of the income assessed, a case for levy of penalty clearly arose against the assessee in terms of the Explanation to Section 271(1)(c) of the Act.

The Tribunal was conscious of the applicabilty of the Explanation to Section 271(1)(c) of the Act to the case. It held that a mere addition by estimate did not indicate that the income added was a concealed income of the assessee. The Tribunal further held that neither Section 64 of the Act nor Section 139 of the Act imposed any obligation on the assessee to include in his return the income of his minor sons or his wife, and, therefore, for such omission the penal provisions of Section 271(1)(c) of the Act were not attracted. The penalty levied on the assessee was accordingly cancelled. The department being aggrived by the decision of the Tribunal has then got this reference made under Section 256(1) of the Act to this court on the questions, as already stated above.

(3.)LEARNED counsel for the department submitted that it was obligatory on the part of the assessee to show in his return the income which was assessable in his hands in terms of Section 64 of the Act. In this connection, reference was made to the form of income-tax return in which a column had been provided for disclosing such income. It was further submitted that by virtue of the fact that the income arising under Section 64 of the Act is assessable in the assessee's hands, it is incumbent on the assessee to show such income in his return. In support of this proposition, reference has been made to Section 139(1) of the Act and the argument is that the return of income of any other person for which the assessee is assessable under this Act was required to be filed by him and this supported his contention that income assessable in his hands under Section 64 of the Act must be returned by the assessee.
In the instant case, it was submitted that the interest income, arising to his wife and minor sons from the firm of which the assessee was a partner, was clearly assessable in the assessee's hands. It was, therefore, his obligation under the said provision of the Act to return such income in his return of income. Since the assessee had failed to do so, the penal provisions of Section 271(1)(c) of the Act were attracted.

The further submission is that the Tribunal was oblivious of the applicability of the Explanation to Section 271(1)(c) of the Act to the case, because had it not been so, the Tribunal would not have brushed aside the further additions made to the assessee's income as arising out of other sources, as being irrelevant for the purpose of levy of penalty in terms of the Explanation to Section 271(1)(c) of the Act.



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