# D. M. MANASVI v. C. I. T., GUJARAT II, AHMEDABAD

- **Citation:** [1973] 2 S.C.R. 389
- **Court:** Supreme Court of India
- **Decided:** 1972-09-19
- **Bench:** K. $. Hegde, P. ]Aganmohan Reddy, H. R. KllANNA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/d-m-manasvi-v-c-i-t-gujarat-ii-ahmedabad-5857
- **Pages:** 10

## Headnote

(
D
E
F
G
II
JnconH' TCEx Act,
196 I-Section 271 ( 1) (c)-Scopc of-Satisfactio11
r(·:.:urding 11u1fte'rs iii els. (a) to (c) pre<.'edes the issue of notice-Notice
11t'1'rl nnt he h.:rued in the ,·o•irse of assess111cnr proceedincs-N1J notice
f 011te1nplated he/ore arri~·ing at the satisfacrion--Provision for reference
to Inspecting Assistant Conunis.sioner does not 1nean proceedings cannot be
initiated by /nro111e Tax Officer.
\Vhat i" contcmplutcd by clause l1) of section 271, Income Tax: Act.
l:J61, is that 1hc Income Ti.ix Officer or the Appellate Assistant C-ommis-
... ioncr shoul<l h:i.vc been s:.tlisfied in the course of proceedings U"lder the
ACl regarding n1attcrs mentioned in the clauses of that sub-section.
It is
not howcvl!r e'>scntial that notice to the pcrs0!1 piocceded against should
have also been i.:;~~uc<l during the course of the
ussessn1r:r1t
proceedings.
S:ilisfac~ion. in the very narui:c of things, precedes the issue of notice and
it \\"Ould not be correct to equate the satisfaction of the Income 'fax
Officer or Appellate Assistant Commissioner with the actual issue of notice.
·rhc issue of notice, indeed, is a conseque;rl'CC of the f.atisf:action of the
Income T<lx ·Officer .or the.Appellate A'Ssistant Commi~sioner and it \vou1d
h~ sufficient complianc.'p with the provisions of the statute if the Income
i·ax Officer or the Appellate AssiStant_Comptissioncr is ~atisficd about the
matters referred to in clauses (a) to (c) qf sub·scction (!)·Of section 271
duri.ng the course of proceedings under· the Act,
even though
notice
In the perso11 ·procceded against in pur~Uance of that satisfacrion is issued
~l1bsequcnt to the muking of the assessment ord.zrs would not shOY.' that
there was no s:1tisfaclion of the Income Tax Officer during the a1\sessmcnt
rruceedings, that the assessee had concealed the particulars of his income
Pf had furnished incorrect particulars b[ such lncome.
f393E]
Co111111i\'.\'io11cr of lnco111e Tax,..:..Madra.r and Anr,
v.
S. V. A11gidi
Climiar, (1962( 44 I.T.R. 739, referred to.
The fact th"t the Incomll...J°ax Officer has to refer the case to the
I nspcling Assist:int Commbsioner if the minin1un1 imposable penalty ex·
c~cds the sun1 of rupees one thousand in n case "falling under clause ( c)
l'I .'i;ub-scction (I) of section 271. would not sho\v !hat the proccct..lings in
-uch a ca'c cannot be initiated by the Income Tax Officor.
f394F)
J t is not necessary that .the Income Tax. Officer. before feeling satisfied
r ... ·gnrding the ncc.~ssity of initiating proceedings for imposition of penalty
anU before is.,uir.g C'0!!1'Sequential notice should have i· sued another notice
10 the a\scssec and held a preliminary enquiry reg::irding the necessity of
init:ating proceeding.;;.
Such a course \.\'Ould result in mere
duplication
of the procedure without anv advnntage to the. parties.
The final conclu-
'iC'n on the point ns to whether thi:: requir..:ments of clauses (a). (b) and
tc) of s. 27 l have ix:~n satisfied \\·ould be reached only after the asses.sec
ha!' been heard or has been given a reasonable opportunity' of being heard.
iJ95E, BJ
CIVIL APPELLA";'E JURISDICTION: Civil Appeals Nos. 1447 to
1450 of 1969.
390
SUPREME COURT REPORTS
[1973] 2 s.c.R.
Appeals by special leave from the judgment and order dated
August 30, 1968 of the Gujarat High Court at Ahmcdabad in
Income-tax Reference No. 6 of 1968.
M. C. Chag/a and I. N. Shroff, for the appellant.
N. D. Karkhanis, R-7 N. Sachthey and S. P. Nayar, for the. respondent.
The Judgment- of the Court was delivered by
KHANNA, J.-This judgment would dispose of four civil
appeals Nos. 1447 to 1450 of 1969 which have beeu filed by
the assesse-: by special leave against the judgment of Gujarat
High Court whereby that court answered the following two questions in a reference under section 256(1) of the Income Tait
Act, 1961 (hereinafter referred to tis the Act) in the affinnative and in favour of 1he department :
"(1) Whether on the facts and in the c

## Text

A
NAGESHWARA v. MAHARASHTRA (Dua, J.)
D. M. MANASVI
v.
C. I. T., GUJARAT II, AHMEDABAD
September 19, 1972
38911
[K. $. HEGDE, P. ]AGANMOHAN REDDY AND H. R. KllANNA, JJ.J
(
D
E
F
G
II
JnconH' TCEx Act,
196 I-Section 271 ( 1) (c)-Scopc of-Satisfactio11
r(·:.:urding 11u1fte'rs iii els. (a) to (c) pre<.'edes the issue of notice-Notice
11t'1'rl nnt he h.:rued in the ,·o•irse of assess111cnr proceedincs-N1J notice
f 011te1nplated he/ore arri~·ing at the satisfacrion--Provision for reference
to Inspecting Assistant Conunis.sioner does not 1nean proceedings cannot be
initiated by /nro111e Tax Officer.
\Vhat i" contcmplutcd by clause l1) of section 271, Income Tax: Act.
l:J61, is that 1hc Income Ti.ix Officer or the Appellate Assistant C-ommis-
... ioncr shoul<l h:i.vc been s:.tlisfied in the course of proceedings U"lder the
ACl regarding n1attcrs mentioned in the clauses of that sub-section.
It is
not howcvl!r e'>scntial that notice to the pcrs0!1 piocceded against should
have also been i.:;~~uc<l during the course of the
ussessn1r:r1t
proceedings.
S:ilisfac~ion. in the very narui:c of things, precedes the issue of notice and
it \\"Ould not be correct to equate the satisfaction of the Income 'fax
Officer or Appellate Assistant Commissioner with the actual issue of notice.
·rhc issue of notice, indeed, is a conseque;rl'CC of the f.atisf:action of the
Income T<lx ·Officer .or the.Appellate A'Ssistant Commi~sioner and it \vou1d
h~ sufficient complianc.'p with the provisions of the statute if the Income
i·ax Officer or the Appellate AssiStant_Comptissioncr is ~atisficd about the
matters referred to in clauses (a) to (c) qf sub·scction (!)·Of section 271
duri.ng the course of proceedings under· the Act,
even though
notice
In the perso11 ·procceded against in pur~Uance of that satisfacrion is issued
~l1bsequcnt to the muking of the assessment ord.zrs would not shOY.' that
there was no s:1tisfaclion of the Income Tax Officer during the a1\sessmcnt
rruceedings, that the assessee had concealed the particulars of his income
Pf had furnished incorrect particulars b[ such lncome.
f393E]
Co111111i\'.\'io11cr of lnco111e Tax,..:..Madra.r and Anr,
v.
S. V. A11gidi
Climiar, (1962( 44 I.T.R. 739, referred to.
The fact th"t the Incomll...J°ax Officer has to refer the case to the
I nspcling Assist:int Commbsioner if the minin1un1 imposable penalty ex·
c~cds the sun1 of rupees one thousand in n case "falling under clause ( c)
l'I .'i;ub-scction (I) of section 271. would not sho\v !hat the proccct..lings in
-uch a ca'c cannot be initiated by the Income Tax Officor.
f394F)
J t is not necessary that .the Income Tax. Officer. before feeling satisfied
r ... ·gnrding the ncc.~ssity of initiating proceedings for imposition of penalty
anU before is.,uir.g C'0!!1'Sequential notice should have i· sued another notice
10 the a\scssec and held a preliminary enquiry reg::irding the necessity of
init:ating proceeding.;;.
Such a course \.\'Ould result in mere
duplication
of the procedure without anv advnntage to the. parties.
The final conclu-
'iC'n on the point ns to whether thi:: requir..:ments of clauses (a). (b) and
tc) of s. 27 l have ix:~n satisfied \\·ould be reached only after the asses.sec
ha!' been heard or has been given a reasonable opportunity' of being heard.
iJ95E, BJ
CIVIL APPELLA";'E JURISDICTION: Civil Appeals Nos. 1447 to
1450 of 1969.
390
SUPREME COURT REPORTS
[1973] 2 s.c.R.
Appeals by special leave from the judgment and order dated
August 30, 1968 of the Gujarat High Court at Ahmcdabad in
Income-tax Reference No. 6 of 1968.
M. C. Chag/a and I. N. Shroff, for the appellant.
N. D. Karkhanis, R-7 N. Sachthey and S. P. Nayar, for the. respondent.
The Judgment- of the Court was delivered by
KHANNA, J.-This judgment would dispose of four civil
appeals Nos. 1447 to 1450 of 1969 which have beeu filed by
the assesse-: by special leave against the judgment of Gujarat
High Court whereby that court answered the following two questions in a reference under section 256(1) of the Income Tait
Act, 1961 (hereinafter referred to tis the Act) in the affinnative and in favour of 1he department :
"(1) Whether on the facts and in the circumstances
of the case, the proceedings for the imposition of penalty were properly commenced in the course of any proceedings under 1he Act as required by section 271 of
the Income Tax Ac.t, 1961 for the assessment years
1959-60 to 1962-63 7
(2) Whether on the facts and in the circumstances
of the case, there was any m<rterial or evidence before
the Tribunal to hold that the asscssee had deliberately
concealed particulars of his income or deliberately furnished inaccurate particulars of such income as required
by sec. 271 (1 )( c) of the Act for the assessment years
1959-60 to 1962-63?"
While answering question No. 1 in the affimrative, the High
Court observed that so far as the asses,ment year 1961-62 was
concerned, the penalty proceedings
were invalid.
The assessee is an individual and ilie matter relates to the
assessment years
1959-60, 1960-61,
1961-62 and
1962-63.
During the relevant years the assessee
derived income from
several sources. The assessment for the first year was made under
section 23 ( 3) of the Indian Income Tax Act, 1922. The Income
Tax Officer sub:sequently found that income from the business
in th:;, name of M/s. Kohinoor Crain Mills Sales Depot (hereinafter referred to as the Kohinoor Mills) was not included in the
return filed by the assessee and he had not shown any connection with or interest in the said business. For the subsequent
three years the assessce disclosed 20 per cent as his share of the
profits from Kohinoor Mills. The Income Tax Officer was oi. the
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D. M. MANASVI v. c.I.T. (Khanna, J.)
39!
opinion thac Kohinoor Mills was not a genuine partnership but
was the sole
proprietorship
concern of the
assessee and the
whole of the income from the said concern belonged to the assessee. As the assessment for the first two years had already been
completed before the.,. Iilcome Tax Officer got the infonnation
regarding the interest in Kohinoor Mills, the' Income Tax Officer
reopened the assessment for those two years. The income from
the Kohinoor Mills was thereafter included in the income of the
assessee for the first two years as well as in the assessments relating .to fhe remaining two years. The order of the Income Tax
Officer in this respect was
upheld by the Appellate Assistant
Commissioner as well as by the Income Tax Appellate Tribunal.
The
non-disclosure of the business profits from Kohinoor
Mills was considered by the Income Tax Officer to represent
deliberate concealment, and so he initiated penalty proceedings
under section 271 of fhe Act for the four assessment years in
question. As, however, the minimum penalty levia~le under section 271 (I)( c) of the Act exceeded
the sum of rupees one
thousand, the cases were reforred under section 274(2} of the
Act to the Inspecting Assistant Commissioner.
The Inspecting Assistant Commissioner thereupon ga\le an
opportunity to fhe assessee of being heard and, after hearing him.
came to the conclusion tha·t the assessee had concealed his income
and deliberately furnished
inaccurate particulars the·eof for all
the four assessment years i;J question.
He accordingly levied
penalties of Rs. 21,062,
Rs. 1,14.477, Rs. 2.02.5~4 and Rs.
1,02, 731 for the assessment years 1959-60, 1960-61, J 961-62
and 1962-63 respectively. In appeal before the Tribunal it was
submilled on behalf of the asscssec that there had hccn no valit.l
levy of the penalties because the penalty
proceedings had not
been commenced in the course of proceedings under the Act.
The Tribunal rejected this contention and observed that as the
Income Tax Ollicer had given direC'tions in the assessment order
for the . issue of a notice under section 277 (t )( c) the penalty
procecdmgs could be said to have commenced during the course
of the assessment proceedings and then;Jore levy of penalty was
not invalid. The Tribunal also rejected ·the submission made on
behalf of the assessce that there was no evidence to show that
the assessee was the owner o.f the business of Kohinoor Mills and
that there had been concealment of his income on the part of
the assessee. The Tribunal, however, gave relief to the assessee in
the ,matter of quantum of penalty. On application made by the
assessee, the questions reproduced earlier were referred to the
High Court.
The High Court, as already mentioned, answered
392
SUPREME COURT REPORTS
[ 1973) 2 s.c.R.
both the questions in the affirmative and in favour of 1he department.
So far as the assessment year 1961-62 was concerned
the penaHy proceedings were held to be invalid on a
ground
with which we are not concerned.
...
Mr. Chagla on behaLf of the assessee appellant has befor~
us assailed the answers to the two questions given by the High
Court. It is urged that there was no proper initiation of proceedings for the imposition of penalty. The requisite satisfaction of
the Income Tax Officer, according to the learned counsel, has
also not been shown to have existed for the initiation of the proceedings. There was also no material or evidence before ·the Tribunal, it is submitted, to hold that the assessee had deliberately
concealed the particulars of his income or had deliberately furnished inaccurate particulars of his income. The above submissions have been controverted by Mr. Karkhanis on behalf of the
dcoartment and, in our opinion, arc without merit.
According to clause ( c) of sub-section ( 1) of section 271
of the Act, if the Income Tax Officer or the Appellate Assistant
Commissioner in the course of any proceedings under the Act
is satisfied that any person has concealed the particulars of his
income or furnished inaccurate ·particulars of such income, he
may direct that such person shall pay in addition to the amount
of tax, by way of penalty a sum calculated in accordance with
clause (iii) of that sub-section.
Section 274 of the Act prescribes the procedure for the imposition of penalty and reads as
undP,r :
"274. I'roced11re.-No order imposing
a penalty
under this Chapter shall be made unless the assessee
has been heard, or has been given a reasonable opportunity of being heard.
( 2) Notwithstanding anything contained in clause
(iii) of sub-section (1) of section 271, if in a case
falling under clause (c) of that sub-section, the miaimum penalty imposable exceeds a
sum
of
rupees
one thousand, the Income Tax Officer shall refer the
case to the Inspecting Assistant Commissioner
who
shall, for the purpose, have all the powers conferred
under this Chapter for the imposition of penalty .
•
(3) An Appellate
Assistant
Commissioner
on
making an order under this Chapter imposing a penalty, shall forthwith send a copy of the same
to
the
Income Tax Officer."
Clause ( c) of sub-section (1) of section 271 shows that occasion
for taking proceedings for payment of penalty arises
if
the
Income Tax Officer or the Appellate Assistant Commissioner j5
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D. M. MANASVI v. c.1.T. (Khanna, J.)
satisfied that any person has concealed the particulars of
hh
income or furnished inaccurate particulars of such inCQme.
It
\las also to be shown that the Income Tax Officer or the Appellate
Assistant
Commissioner
was
so
satisfied
in the course of
proceedings under the Act.
In the present c~se, we find that
the Jncome Tax Officer while making the assessment orders for
the assessment years in question held that Kohinoor Mills had
been· wrongly shown to be a partnership finn and that the oth~r
alleged partners were simply name lenders for the assessee.
1J
1v~:s further held that Kohinoor Mills was the Proprietary concern
of the assessee and the income from that concern should
b~
considered to be the income
of
the
assessee.
Notice
wa'
ordered to be
issued
for
proposed
penalty
under
section
271 (l) ( c) of the Act to the asscssee "in regard to the concealment of and furnishing inaccurate particulars of income" fro!ll
Kohinoor Mills.
Notices, it would
appear,
\\'ere·
thereafkr
issued by the Income Tax Officer to the assessee.
The fact that notices were issued subsequent to the making
of the assessment orders would not, in our opinion, show that
there was no satisfaction of the Income Tax Officer during th~
assessmept proceedings that the assessee
had
concealed
the
particulars of bis income or bad furnished incorrect particular>
of such income.
What is contemplated by clause (I) of section 271 is that the Income Tax:
Officer
or
the
Appell.ak
Assistant Commissioner should have been satisfied in the course
of proceedings under the Act regarding matters mentioned in
the clauses of that sub-section.
It is not, however, es»!ntial that
notice to the person proceeded against should have
also been
issued during the course of the assessment proceedings.
Satisfaction in the very nature of things precedes· the issue of ndtice
a11d it would not be correct to equate the satisfaction of the
Tncome Tax Officer or Appellate Assistant Commissioner with
the actual issue of notice. The issue of notice indeed is a consequence of the satisfaction of the Income Tax Officer or the
Appellate Assistant Commissioner and it would, in our opinion.
be sufficient compliance with. the provisions of the s'tatute it the
Income Tax Officer or the Appellate Assistant Commissioner is
satisfied about the matters referred to in clauses (a) to (c) of
sub-section (1) of section 271 during the course of proceeding.
under the Act even though notice to the person
proceeded
against in pursuance of that satisfaction is issued subsequently.
We may in this context refer to a decision of five judges bench
of this Court in the case of Commivsioner of Income
Tax.
Madras and Another v.
S. V. Angidi Chettiar(1). Shah J.
speaking for the Court while dealing with section 28
of the
Indian Income Tax Act, 1922 observed :
(I) [1962] 44 J.T.R. 739.
394
SUPREME COURT REPORTS
[1973) 2 S.C.R.
"The power to impose penalty under section 28
depends unon the satisfaction o~ the
Income
T<l!l
Officer in the course of proceedrngs under the Act; 1t
cannot be exercised if be is not satisfied about
the
existence of conditions specified in clauses (a), (b) or
( c) before the proceedings are concluded.
The proceeding to levy penalty has, however, not to be commenced by the Income Tax Officer before the completion
of the assessment proceedings by
the
Income
Tax
Officer.
Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or
initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction."
The appellant in the present case, it may
be mentioned,
has r,ot produced or got printed in the paper book the notice
which was issued to him by the Income Tax Officer in connection
with the imposition of penalty.
In the absence of that notice,
it cannot be said, as has now been suggested on behalf of the
assessee appellant, thnt there was no mention in the notice of
the satisfaction of the Income Tax Officer on the point that the
assessee had ·concealed the particulars of his income
or had
furnished inaccurate particulars thereof.
We are also not impressed by the argument· advanced on
behalf of the appellant that the proceedings for the imposition
of penalty were initiated not by the Income Tax Officer but by
the Inspecting Assistant Commissioner when the matter had been
referred to him under section 274(2) of the Act.
The proceedings for the imposition of penalty in terms of sub-section (I)
of section 271 have necessarily to be initiated either by
the
income Tax Officer or by the Appellate Assistant Commissioner.
The fact that the I ncomc Tax Officer has to refer the case to
the Inspecting Assistant Commissioner if the minimum imposable
penalty exceeds the sum of ruoees one thousand in a case falling
under clame (c) of sub-section (I) of section 271 would
not
show that the ·orocee<:lin2s in such a case cannot be initiated bv
the Tncome Tax Officer.
The Income Tax Officer in such an
c.vcnt can refer the case to the Inspecting Assistant Commissioner
;ifter initiating the
proceedings.
It would, indeed,
be
the
satisfaction of the Income Tox Officer in the course
of
the
;:sse~sment proceedings regarding the concealment
of income
which would constitute th; basis-and foundation of. the proceedings for levy of penalty.
There is al$o no force in the submission made on behalf of
the .aooellant that the Income Tax Officer before feeling satisfied
regarding the necessity of initiating proceedings for imposition
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395
of penalty and before issuing consequential notice shJuld have
issued another notice to the assessee and held
a
preliminary
enquiry regarding the necessity of initiating proceedings.
Such
a course, in our opinion, would result in mere duplication of the
procedure without any advantage to
the
parties.
A
similar
contention was advanced in a case relating to initiation of proceedings under section 34 of the Indian Income Tax Act, 1922
and was repelled by the Judicial Committee in
the
case of
Commissioner of Income
Tax,
Bengal
v.
M fs.
Mahaliram
Ramjidas(') in the following words :
'"Therefore a construction of section 34 which
requires a ·quasi:judicial enquiry to be ht;ld before the
powers under the section can be operated would result
in mere duplication of procedure and in two enquiries
of the same kind, into the same matter. conducted by
the same official. and without any advantage· to the
parties.
A construction so unreasonable aud unpractical ought not to be preferred when another construction is open.
Accordingly. their Lordships
are
of
opinion that the Income Tax Officer is not required by
the section to convene the assessee, or to intimate to
him the nature of the alleged escapement, or to give
him an opportunity of being heard, before he decides
to operate the powers conferred by the section."
It may. also be observed that what is contemplated by
sections
271 and 274 of the Act is that there should be /Jrima
facie
satisfaction of the Income Tax Officer or the Appellate Assistant
Commissioner in respect of the
matters
mentioned
in
subsection ( 1) before he hears the assessee or gives him an opportunity o.f being heard.
The final conclusion on the point as
to
whether the requirements of clauses (a). ( b) and ( c) of section 271 ( 1) have been satisfied would be reached only after the
assessee has been heard or has been given a reasonable opportunity of being heard.
The argument that there was no material or evidence before
the Tribunal to hold that the assessee had deliberately concealed
the particulars of his income or had deliberately furnished inaccurate particulars of such income is equally bereft of force.
The Tribunal while dealing with this aspect of the matter referred to its earlier observations in the appeal relating to the .
refusal of the Income Tax authorities to register Kohinoor Mills
as a firm.
Those observations were as under :
"In oi.r view, the Income-Tax authorities were fully
justified in refusing to grant registration to the firm for
(I) [19401 8 IJR 442.
8-L498SupCl/73
.396
SUPREME COURT REPORTS
[1973] 2 S.C.ll.
all )he three years.
On going through the statements
of. Ramanbhai Thakorlal and Gopaldas, we have no
doubt at all that Ramanbhai; Thakorlal and Kirit were
not partners in this business.
Thakorlal
was
mere
student for a considerable part of the period, during
which he masqueraded as a partner.
The qualifications of both Thakorlal and Ramanbhai to be partners
of this business were only wholly inadequate to
the
point of being non-existence.
They had no knowledge
of the happening of the business and they had no control whatsoever on the profits which were accumulated
in their names.
The profits were finally qisposed of
after Shri D. M. Manasvi became the sole proprietor
of the business and even before he became the sole
proprietor he had extracted the profits from the business· under guise of loans to be utilised for his own
purpose.
There is no doubt left in our minds that the
business was under the control of Shri D. M. Manasvi
once the three dummies are out of the way, Shri D. M.
Manasvi is the only adult person left in
charge of
the business and the three minors are only his
grand
children.
We are, therefore, of the view that not only
there was no firm in existence as alleged by the partnership deed but that the business belonged to Shri D. M.
Manasvi.
The inclusion of the profits of the business
in the assessment of Shri D. M. Manasv1 is
not far
fetched or fantastic, as the learned counsel suggested
in the course of his arguments.
According
to
the
partnership deed, there were four adult partners. If
three out of these four were dummies the only real and
effective partner was Shri D. M. Manasvi.
The three
minors who were admitted to the benefits of the partnership were his grand children.
The accumulated profits while the business was run in the guise of a firm
were taken over by Sh;i D. M. Manasvi for use according to his own sweet will.
The final .disposition of the
profits was made only after he shed the disguise
and
became the sole proprietor of the business
and
the
manner in which the funds were ultimately channelised
into the investment in the company in which his family
was interested in the name of his son Ravindra only
adds the finishing touch to the scheme.
We would,
therefore, confirm the orders of the Income Tax authorities refusing registration to the firm for all the three
assessment years in question."
'It would thus follow that the Tribunal came to the conclusion
on the basis of relevant evidence that the b!Usiness of Kohinoor
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D. M •. MANASVI v. C.!.T. (Khanna, J.)
397
Mills was under the control of the assessee and that there was
no firm in existence as alleged. The Tribunal also found that the
· income of the said concern belonged to the.assessee himself even
though the business was run in the guise of a firm. It was held
that the whole scheme was to disguise the profits of the assessee
as those of the firm. It cannot therefore be said that there was
no relevant material or evidence before the Tribunal to hold that
the assessee had deliberately concealed the
particulars of his
incciile or had deliberately furnished inaccurate particulars of
such incoihe.
Mr. Chagla has referred to the case of Commissioner of
Income Tax, West Bengal Iv. Anwar Ali(') wherein the relevant
head-note which is based upon the observations in the body of
the judgment, reads as under :
"Proceedings unaler section 28 of the Income Tax
Act, 1922 are penal in character. The gist of the
offence under section 2 8 ( 1 ) ( c) is that the assessee has
concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and
the burden is on the department to establish that the
receipt of the amount in dispute constitutes
income
of the assessee.
I.f there is no evidence on the record
except the explanation given by the assessee, which
explanation has. been found to be false, it aoes
not
follow that the receipt constitutes his taxable income.
It would be perfectly legitimate to say that the mere
iaot 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 deteril'Jning 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 the disputed amount represented
incom¥ and that the assessee had consciously concealed
the particulars of hi& income or had deliberately furnished inaccurate particulars."
On the basis of the dictum laid down in the above case, it is
urged by Mr. Chagla that from the mere fact that the explanati?n of the assessee in the present case was found to be false it
did not follow that the disputed amount represented his income
and that the assessee had consciously concealed the particulars
of his income or had deliberately furnished inaccurate particulars.
In this resi;ect we find that in the present case the inference that
(I) [1970] 76 I.T.R. 696.
398
SUPREME COURT REPORTS
[1973] 2 S.C.R.
the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars is based
not merely upon the falsity of the explanation given by the assessee. On the ccntrary, it is made amply clear by the order of
the Tribunal that there was
positive material to indicate that
the business of Kohinoor Mills belonged to the assessee and the
whole scheme wa' to disguise the profits of the assessee as those
of a firm of four partners. The present is not a case of inference
from mere falsity of explanation given by the assessee but a case
wherein there are definite findings .that a device had bee;. deliberately created by the assessee for the purpose of concealing his
income. The assessee as such can derive no assistance from ,111\var
A /i's case.
Reference has also been made to the observations in the case
of Commissioner of Income Tax. Madras v. Khoday Esivarsa and
Sons (') that penalty cannot be levied solely on the. basis of >the
reasons given in the original order of assessment. It is, however,
not necessary 10 go into this aspect of the matter because the
penalty in the present case has nor been levied solely on the basis
of the reasons given in the original order of assessment. The Tribunal in this respect has mainly taken
into account the facts
brought to light by the order made in appeal arising out of the
refusal of the Income Tax authorities to register Kohinoor Mills.
As a result of the above, we dismiss the appeals with costs.
One hearing fee.
K.B.N.
Appeals dismissed .
•
(!) [19721 83 r.T.R. 369.
l
A
B
c
D
E