JUDGEMENT
T.D.SUGLA ,J. -
(1.)THERE are three questions of law referred to this Court by the Tribunal at the instance of the
Department. They read thus :
" 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, due to disclosure made by the assessee in Part IV of the return, the assessee could not be said to have furnished inaccurate particulars of income within the meaning of S. 271(1)(c) of the Act, and consequently, the levy of penalty under the said section was not justified ? 2. Whether the disclosure of the prize money receipts in Part IV of the return of income could be considered as true and full disclosure within the meaning of S. 271(1)(c) of the Act ? 3. Whether the Tribunal was right in law in holding that, except for the falsity of the explanation of the assessee, it was not established by positive evidence by the Revenue that the impugned amount was income earned by the assessee during the year under appeal and, therefore, the penalty under S. 271(1)(c) of the Act cannot be sustained ?"
(2.)THE assessee is an individual. The assessment year involved is 1969 70. Return of income for the year was filed on December 29, 1969, declaring total income of Rs. 5,801. However, in Part IV
of the return, the assessee had declared three amounts totalling Rs. 4,09,677 as income exempt
from tax being receipts by way of agricultural income, marriage chandla and cross word prize. The
assessment was completed on January 31, 1972, under S. 144 of the IT Act, 1961, on a total
income of Rs. 7,72,735. The additions included :
Being of the view that the penal provisions of S. 271 were attracted, the ITO referred the
proceedings to the Inspecting Asstt. CIT, under S. 274(2) of the Act, who, after allowing the
assessee an opportunity of being heard, imposed a penalty of Rs. 8,00,000 by an order dated
March 25, 1974.
It appears that, subsequent thereto, the assessee approached the CIT for a settlement and a settlement was arrived at on August 13, 1974. The terms of the settlement are not on record.
What is on record is the assessee's letter to the CIT on the basis of which the settlement appears
to have been arrived at. The letter has been quoted in extenso in the order of the Tribunal. This
letter clearly shows three things, viz.,
(1) The assessee asserted that all his claims regarding puzzle prize money and the chandla received at the time of the marriage were correct. (2) He also asserted that the prize money received by his brother was correct. However, it was only in order to buy peace that he was agreeing to be assessed on the aforesaid amounts and (3) The settlement should not be considered as an admission or confession in the prosecution or penalty proceedings which had to be considered on the basis of evidence and merits.
(3.)THE question that arose before the Tribunal was whether, in a case like the one before it, the penal provisions of S. 271(1)(c) r/w or without the Explanation thereto were attracted. It was the
case of the assessee that, apart from holding that the assessee's statements were not correct or
that the assessee was not able to prove the correctness of his claim, the Department had not
brought any material on record to suggest that the amounts in fact represented his income.
Secondly, having shown the amounts in Part IV of the return, the assessee should be treated as
having been exonerated from the penal provisions even if it was held that the assessee was
otherwise liable to penalty under S. 271(1)(c). On behalf of the Department, the arguments
advanced were that Part IV of the return would come to the assessee's help only if the statement
made by the assessee was correct and it was only its legal implication which was not acceptable. In
the present case, the Department had, after making full investigation, proved that the assessee's
explanation was false.