# COMMISSIONER OF INCOME TAX WEST BENGAL v. ANWAR ALJ

- **Citation:** [1971] 1 S.C.R. 446
- **Court:** Supreme Court of India
- **Decided:** 1970-04-29
- **Case number:** Civil Appeal No. 2560 of 1966
- **Bench:** J. C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-west-bengal-v-anwar-alj-5082
- **Pages:** 6

## Headnote

Income-tax Act (II of 1922), s. 28-Penalty proceedings-Whether
of a criniinal nature-,-()nus on deparflnent show a1nount concealed CIS
incon1t>.
B
The Income-tax Officer, while assessing the respondent to tax discovered an undisclosed bank account of the respondent for a large sum.
He
C
did not accept the explanation of the respondent as to the source of the
amount and held that it represented income from an undisclosed source.
Therea'fter ne initiated penalty proceedings under s. 28 and imposed a
penalty which was confirmed by the Appellate Assistant Commissioner.
In appeal, the Tribunal held that penalty proceedings were of a criminal
nature and that the burden lay
on the department to show that the
amount concealed was of a revenue nature and was assessable as income
and that the onus was not discharged in the present case by merely showD
ing that the assessee's explanation was not accepted in the assessment proceedings. The High Court agreed with the Tribunal.
Jn appeal to this Court,
HELD . ( 1) Penalty proceedings
are included in the expression
"assessment" and the true nature of a penalty is the imposition of an additional tax.
But, one of the principal objects of s. 28 is to provide
a
deterrent against recurrence of default on the part of the assessee. Therefore, the section is a penal provision and the proceedings were elf a penal
nature. [450 B-C]
c. A. Abraham v. Income-tax Officer, 41 l.T.R. 425 (S.C.), explained.
Commissioner of Income-tax, Ahmedabad v. Gokuldas Harivallabhdas
34 I.T.R.
918,
Commissioner of Income-tax Gujarat v. L. H. Vora, 56
I.T.R. 126 and Commissioner of Income Tax Bihar and Orissa v. Mohan
Mal/ah, 54 I.T.R, 499, approved.
Mon1a11 Ran1 Ra1n Kun1ar v. Conimissioner of lnco1ne-tax, u·.P., 59
l.T.R. 135 and Lal Chand Gopal Das v. Commissioner of
lnco1ne-tax,
U.P., 48 I.T.R. 324, not approved.
Hi11durta11 Steel Ltd, v. State of Orissa, C.£.s.
Nos. 883-892/66 dt.
4-8-1969 and Fattorini (Thomas) (Lanchaslzire) Ltd, v. Inland Revenue
Commissioner, (1943) (II) I.T.R. Supp. 50, referred to.
E
F
G
(2) The gist of the offence under s. 28(1) (c) is that the assessee has
concealed the partjculars of his income or deliberately 'furnished inaccurate particulars of such income, and
therefore,
the
department
must
establish that the receipt of the amount in dispute constitutes income
H
of the assessee.
If there is no evidence on the· record except the explanation has been found to be false, if does not 'follow that the receipt constitutes his taxable income. f450 E-G]
C.I.T. v. ANWAR ALI (Grover, /.)
447
A
Commissioner of Income-tax, Alimedubad v. Gokuldas
HarivallabhB
c
D
E
F
.G
H
d11s, 34 l.T.R. 98, approved.
(3) Since the proceedings under s. 28 are of a penal nature and the
burden is on the department to prove that a particular amount is a revenue
receipt, the finding given in the assessment proceedings that the assessee's
explanation is false and that the disputed amount rer.resents income is.
evidence but is not conclusive.
Before penalty cou d be imposed the·
entirety of circumstanCes must reasonably point to the conclusion that
the disputed amount represented income and that the assessee
had
consciously concealed the particulars oJ his income or had cdiberately
furnished
inaccurate particulars. !.450-451 A.CJ

## Text

446
COMMISSIONER OF INCOME TAX WEST BENGAL
A
v.
ANWAR ALJ
April 29, 1970
(J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Income-tax Act (II of 1922), s. 28-Penalty proceedings-Whether
of a criniinal nature-,-()nus on deparflnent show a1nount concealed CIS
incon1t>.
B
The Income-tax Officer, while assessing the respondent to tax discovered an undisclosed bank account of the respondent for a large sum.
He
C
did not accept the explanation of the respondent as to the source of the
amount and held that it represented income from an undisclosed source.
Therea'fter ne initiated penalty proceedings under s. 28 and imposed a
penalty which was confirmed by the Appellate Assistant Commissioner.
In appeal, the Tribunal held that penalty proceedings were of a criminal
nature and that the burden lay
on the department to show that the
amount concealed was of a revenue nature and was assessable as income
and that the onus was not discharged in the present case by merely showD
ing that the assessee's explanation was not accepted in the assessment proceedings. The High Court agreed with the Tribunal.
Jn appeal to this Court,
HELD . ( 1) Penalty proceedings
are included in the expression
"assessment" and the true nature of a penalty is the imposition of an additional tax.
But, one of the principal objects of s. 28 is to provide
a
deterrent against recurrence of default on the part of the assessee. Therefore, the section is a penal provision and the proceedings were elf a penal
nature. [450 B-C]
c. A. Abraham v. Income-tax Officer, 41 l.T.R. 425 (S.C.), explained.
Commissioner of Income-tax, Ahmedabad v. Gokuldas Harivallabhdas
34 I.T.R.
918,
Commissioner of Income-tax Gujarat v. L. H. Vora, 56
I.T.R. 126 and Commissioner of Income Tax Bihar and Orissa v. Mohan
Mal/ah, 54 I.T.R, 499, approved.
Mon1a11 Ran1 Ra1n Kun1ar v. Conimissioner of lnco1ne-tax, u·.P., 59
l.T.R. 135 and Lal Chand Gopal Das v. Commissioner of
lnco1ne-tax,
U.P., 48 I.T.R. 324, not approved.
Hi11durta11 Steel Ltd, v. State of Orissa, C.£.s.
Nos. 883-892/66 dt.
4-8-1969 and Fattorini (Thomas) (Lanchaslzire) Ltd, v. Inland Revenue
Commissioner, (1943) (II) I.T.R. Supp. 50, referred to.
E
F
G
(2) The gist of the offence under s. 28(1) (c) is that the assessee has
concealed the partjculars of his income or deliberately 'furnished inaccurate particulars of such income, and
therefore,
the
department
must
establish that the receipt of the amount in dispute constitutes income
H
of the assessee.
If there is no evidence on the· record except the explanation has been found to be false, if does not 'follow that the receipt constitutes his taxable income. f450 E-G]
C.I.T. v. ANWAR ALI (Grover, /.)
447
A
Commissioner of Income-tax, Alimedubad v. Gokuldas
HarivallabhB
c
D
E
F
.G
H
d11s, 34 l.T.R. 98, approved.
(3) Since the proceedings under s. 28 are of a penal nature and the
burden is on the department to prove that a particular amount is a revenue
receipt, the finding given in the assessment proceedings that the assessee's
explanation is false and that the disputed amount rer.resents income is.
evidence but is not conclusive.
Before penalty cou d be imposed the·
entirety of circumstanCes must reasonably point to the conclusion that
the disputed amount represented income and that the assessee
had
consciously concealed the particulars oJ his income or had cdiberately
furnished
inaccurate particulars. !.450-451 A.CJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2560 of
1966.
Appeal from the judgment and order dated May 11, 1966 of
'the Calcutta High Court in Income-tax Matter No. 98 of 1962.
S. T. Desai, G. C. Sharma and R. N. Sachthey, for the
appellants.
·
D. K. De, A. N. Sinha, Rathin Das for P. K. Mukherjee, for
respondent.
The Judgment of the Court was delivered by
Grover, J,
This is an appeal by special leave from a judgment of the Calcutta High Court answering the following question
which was referred to it by the Tribunal in the negative and
in favour of the assessee.
"Whether on the facts and in the circumstances of
the case, the Income-tax authorities were justified in
imposing a penalty on the assessee under Section
28 (1 ) ( c) of the Income-tax Act ?"
The assessee during the assessment year 1947-48, the corresponding previous year being the financial year ending on March 31,
1947 was a partner in the firm 'of M/s. Haji Sk. Md. Hussain
Md. Jan of Calcutta.
The Income-tax Officer while making the
assessment discovered an undisclosed bank account of the assessee
with the Central Bank of India ~td. Bettiah, Bihar. It was
found that a cash deposit of Rs. 87 ,000 had been made by the
assessee on November 21, 1946 in that Bank. He was asked
to explain the sourc~ of ihe amount of deposit.
According to his
e:pla~atio.n all. his relations got panicky during the communal
nots m Bihar m the year 1946 and entrusted him with whatever
rash amounts they had with them at that :ime for safe custody.
\
448
SUPREME COURT REPORTS
[1971] I . S.C.R.
It was stated that a sum of Rs. 87 ,000 had been received in the
A
following manner :
Zahir Hussain. alias Md. Zahir (Cousin)
Mohammad Jan (deceased father)
Mohd. Haniff (cousin)
Khairunnessa Bibi (mother)
Safihan Bibi (Sister)
Fatema Bibi (Wife)
Hasuia Bibi (Brothe(s wife)
Rs. 18,500/-
Rs.
t.OOJ
Rs.
1.750
Rs. 23,000
Rs. 13,000
Rs. 15,750
Rs. 12,000
Rs. 87.000
'fhese amounts which were received by the assessee from his
relations were deposited by him in a fixed deposit account in the
joint name of himself and his minor sons in the Bank at Bettiah.
The Income-tax Officer did not accept the explanation of the
assessee and held that the sum of Rs; 87 ,000 represented income
from undisclosed sources.
He added the amount to the total
income of the assessee in his personal assessment.
This addition
was maintained by the Appellate Assistant Commissioner in
· appeal.
The Appellate Tribunal also agreed with the decision of
the Income-tax Officer and the Appellate Assistant Commissioner.
Penalty proceedings were initiated after the assessment . and
in due course the Income-taic Officer imposed a penalty amounting
to Rs. 66,000 on the assessee under s. 28 ( 1) ( c) for concealing
income and deliberately furnishing inaccurate particulars. The
Appellate Assistant Commis~ioner in appeal held that the case
clearly called for a penal action but he redu.ced the amount of
penalty by Rs. 22,000.
Subsequently he rectified his order under
s. 35 and confirmed the penalty of"Rs. •66,000 imposed by the
Income-tax Officer.
The assessee went up to the'·Appellate Tribunal in appeal.
The Tribunal took the view that penalty proceedings were of a criminal nature.
The onus lay on the department to show by adequate evidence that the amoup.t of the cash
stated to have be.en concealed by the assessee was of a revenue
nature and was assessable as income and that the assessee had
concealed it or deliberately furnished false particulars in regard
thereto. This onus, in the opinion of the Tribunal, was not
discharged by the Income-tax !IUthorities by showing merely that
the explanation given by the assessee in the assessment pr111ceedings was found to
b~ unacceptable. The Income-tax Officer,
according to the Tribunal, must .find some material apart from :he
falsity of the assessee's explanation to support his finding that
the receipt from undisclosed sources was income.
As no satisfactory evidence had been produced by the department to establish
B
c
D
E
F
G
H
r
I.·
C.I.T. V. ANWAR ALI (Grover, 1.)
449·
A
tha.t the amount in question represented the in.come of the assesseec
the. Tribunal held that no penalty _could be imposed.
' Now penalty can be imposed under s. 28 (1 )( c) if the Income
·tai(Officer, the Appellate Assistant Commissioner or the Appellate
Tribunal in the course of any proceedings under the Income-tax
B:, Acf'1922 is satisfied that any person "has con,cealed the particularsf.
o( bis income or deliberately furnished inaccurate particulars o
stie1\'income".
In the judgment under appeal reference has been
m~e to the decisions of the various . High Courts on the true
ai\lJ!it and scope of. this provision and the burden in the matter of
es!!fli.Iishing concealment of particulars of incciine or deliberately
. c· ..
f1,1~hing inaccurate particulars of such income.
The majority
o(" High Courts, namely, Bombay in Codimissioner of Jncometai, Ahmedabad v. Gokuldas Harivallabhdas(1}, Gujarat in Com--
mf!isidner of Inciime-tax Gujarat v. L. H. Vora(') and' Patna in
Commissioner of Income-tax Bihar & Orissa v. Moha,h Mallafz( 3 )
hadJxpressed ihe view that proceedings under s. ~S(ll(c) were
of a penal nature and it was for the department to es!MJlish that
De:! the ·assessee was guilty of conceahrient of the particulars of income.
nil foe re fact that 'the assessee had given a false explanation did
not prove that the receiij[ necessai:ily constituted· inco_me of the '
assessee.
Allahabad Higfi Court, 1iowever, in Moman Ram Ram
Kumar(') v. Commissioner of Income-tax U.P. observed that
w~re the explanation offered by. the assessee i!L.te· t. of an
E : item of income sho.wn as._ capi\jll receipt was delibe . ly false it
was. open' to the tilcomi~tax authorities to impose a"pe alty under
s. 38 ( 1 )( c). In ~e earlier judgment in Lal Chand Go pal"
Das v. Commissioner of income-tax
U.P. (') the Allahabad·
C?wt. had. said· tp.at if a
r~ceipt was income. but was
d1sgwsed m the , account or 1rt the return as a non,assess-.
abl~ receipt it wa8 · cleai:Jy a case of concealment of the particulars
F . or ol furnishing iμaccurate particulars of income and a penalty
under s. 28 (I) ( c) sh<>uld be imposed on th., assessee.
' ,"the first. point wliich falls .for determination is whether the
imposition of penalty is in the nature of a penal provision.
The
determination of the question of burden of proof will depend
G . largely on the penalty proceedings being penal in nature or being
merely meant for imposition of an additional tax, the liability to
pay such tax having been designated as penalty under s. 28.
One·
line of argument which has prevailed particularly with H1•1 Allahabad High Court in Lal Chand Gopal Das(') case is that there
was no essential difference between tax and penalty because the
H , liability for payment of both was imposed as a part of the·
(I) 34 J.T.R. ~8.
(3) S4 J.T.R. 499.
(5) 48 l.T.R. 324.
(2) 56 J.T.R. 126.
(4) 591.T.R. 135.
'
450
SUPREME COURT REPORTS
[1971] l S.C.R.
machinery of assessment and the penalty was merely an additional
tax imposed in certain circumstances on account of the assessee 's
conduct.
The justification of this view was founded on certain
observations in C . .A. Abraham v. Income-tax Officer, Kottayam
& Anr. ('). It is true that penalty proceedings under s. 28 are
included in the expression "assessment" and the
true
nature
of penalty has been held to be additional tax.
But one of the
principal objects in enacting s. 28 i!. to provide a deterrent against
r.:currence of default on the part of -the assessee. The section is
penal in the sense that its consequences are intended to be an
effective deterrent which will put a stop to practices which the
legisl2•ure considers to be against the public interest.
It is significant :hat in C. A. Abraham's(') case this Court was not ca!Jed
upon to determine whether penalty proceedings were penal or of
-qaasi penal nature and the observations made with regard to
penalty being an additional tax were made in a different context
and for a different purpose.
It appears to have been taken as
-settled by now in the sales tax law that an order imposing penalty
is the result of a quasi criminal ;:iroceedings; (Hindustan
Steel
Ltd. v. The State of Orissa('). In England also it has never been
doubted that such proceedings are penal; Fattorini
(Thomas)
(Lanchashire) (Ltd., v. Inland Reven* Commissioner(•).
The next question is that when proceedings under s. 28
are
penal in character what would be the nature of the burden upon
the department for establishing that the assessee is liable to payment of penalty.
As has been rightly observed by Chagla C.J.,
in Commissioner of Income-tax, Ahmedabad v. Gokuldas Harivallabhdas(') th~ gist of the offence under s. 28 (1) ( c) is that the
assessee has concealed the particulars of his income or deliberately
furnished inaccurate particulars of such income and .~herefore the
department must establish that the receipt of the amoun~ in dispute
··constitutes income of the assessee. If there is no evidence on
the record except the explanation given by the assessee which
explanation has been found to be false it does not follow that the
receipt constitutes his taxable income.
Another point is whether a finding given in the assessment
proceedings that a particular receipt is income after rejecting 1he
explanation giv.~n by the assessee as false would P.rima facie be
sufficient for establishing in proceedings under s. 28 that the disputed ani.ount was the assessee's income. It must be remembereC:
that the proceedings under s. 28 are of a penal nature and the
burden .i.s on the department to prove that a particular amount
(I) 41 l. T.R. 425.
(3) 1943 (11) l.T.R. (Supp.)50.
(2) C.A.S. 883-392/66 dt. 4-8-1969.
(4) 34 I.T.R. 98.
A
B
c
D
E
F
G
H
A
B
c
D
C.I.T. v. ANWAR ALI (Grover, J.)
451
is a revenue receipt.
It would be perfectly legitimate to say that
the mere fact that the explanation of the assessee is false does not
necessarily give rise to the inference that the disputed amount
represents income.
It cannot be said that the finding given in
the assessment proceedings for determining or computing the tax
is conclusive.
However it is good evidence.
Before penalty can
be imposed the entirety of circumstances must reasonably point
to the conclusion that th.~ disputed amount represented income
and that the assessee had consciously concealed the particulars of
his income or had deliberately furnished inaccurate, particulars.
In the present case, it was neither suggested before the High
Court nor has it been contended before us that apart from the
falsity of the explanation give~ by the assessee there was cogent
material or evidence from which it could be inferred that the
assessee had concealed the particulars of his income or had
deliberately furnished inaccurate particulars in respect of the
~ame and that the disputed amount was a / revenue receipt. The
question was, therefore, rightly answered by the High Court.
The appeal fails and it is dismissed with costs.
V.P.S.
AppeQ/ dismissed • . ·