COMMISSIONER OF INCOME TAX Vs. AZAD BHARAT FINANCE CO

JUDGEMENT

(1.) THE question in this case related to the justification and/or legality of the penalty sought to be levied by the Revenue on the assessee in the asst. year 1952 -53 (previous year ending March 31, 1952). The assessee enjoyed certain overdraft facilities from the United Commercial Bank and had furnished security for the same. Part of the said security was represented by three deposits of Rs. 10,000 each in the names of Lal Singh, Gobind Singh and Pishorilal. There was an additional security furnished, being a deposit of Rs. 10,000 standing in the name of one Faqir Chand but that was in the subsequent year and, therefore, in the opinion of the Tribunal, had no relevance to the year in question. By the time the assessment proceedings were taken up, Pishorilal had died and was, therefore, not produced. The other two persons were, however, produced and deposed that they offered their deposits as security to enable the assessee to enjoy the overdraft facilities. The ITO and the AAC came to the conclusion that the said three deposits represented undisclosed income of the assessee and, therefore, taxed the same in his hands. The said amounts had been deposited by the deposit holders in November, 1951. The assessee then took an appeal before the Tribunal. The Tribunal dealt with the statement of the depositors in its order dated 19th July, 1962. About Faqir Chand the Tribunal took the view that the person produced was different from the real depositor and observed :

(2.) THE Tribunal dismissed the appeal with the observation that the Department had succeeded beyond reasonable doubt in establishing that the assessee itself brought in the security moneys in the shape of those fixed deposits in the names of various persons who were totally at its influence or were obliged.

(3.) HE , therefore, levied a penalty of Rs. 20,000. The AAC dismissed the assessee's appeal and the assessee took the matter up in appeal before the Tribunal. The Tribunal allowed the penalty appeal and held that, "since mens rea has not been established by the Department to warrant levy of penalty under S. 28(1)(c), we cancel the order levying penalty . . .". In the judgment, the Tribunal observed :