ARTICLES & CHEQUE BOUNCE CASES Etc.,& other courts

RECENT POSTS

• under Section 389 Cr.P.C. to suspend the sentence of imprisonment. The III Additional Sessions Judge, Kakinada, while suspending the sentence directed the petitioner to deposit Rs.50,000/- from out of the compensation amount of Rs.2,00,000/- awarded by the III Additional Judicial Magistrate of First Class, Kakinada. Questioning the same, the present petition is filed. 3. Considering the facts and circumstances, the order passed by the Court below is just and reasonable and does not require any interference by this Court. 4. Accordingly, the Criminal Petition is dismissed. 04/06/2013
• sec. 138 , 142 of N.I.Act – Whether the accused puts the signature on the acknowledgement in a different manner or whether some body signed on behalf of the addressee or whether addressee is having a knowledge about the contents of notice issued under Section 138 (b) of the Act, are questions of fact which cannot be resolved exercising the powers under Section 482 Cr.P.C. Simply because the signature of the accused is varying, it cannot be a ground to quash the proceedings because the complainant has to establish that the accused signed the acknowledgement and if the acknowledgement has not been signed by the accused, then the burden is on him to show that some body on his behalf signed the acknowledgment and he has no knowledge about the demand notice. Therefore, there are no grounds to quash the proceedings. 04/06/2013
• Sections 306 and 498A, IPC -whether the cruelty meted out to the victim had in fact induced her to end the life by committing suicide. If it transpires to the Court that a victim committing suicide was hypersensitive to ordinary petulance, discord and differences in domestic life quite common to the 18Page 19 society to which the victim belonged and such petulance, discord and differences were not expected to induce a similarly circumstanced individual in a given society to commit suicide, the conscience of the Court should not be satisfied for basing a finding that the accused charged of abetting the offence of suicide should be found guilty.” 15. For the aforesaid reasons, we allow this appeal and set aside the impugned judgment of the High Court and the judgment of the trial court holding the appellant guilty of the offences under Sections 306 and 498A, IPC and direct that the bail bonds executed by the appellant be discharged. 02/15/2013
• The Banking Public Financial Institutions and Negotiable Instruments (Amendment) Act, 1988 – Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact. 23. In other words, provided the facts required to form the basis of a presumption of law exists, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary = the absence of any details of the date on which the loan was advanced as also the absence of any documentary or other evidence to show that any such loan transaction had indeed taken place between the parties is a significant circumstance. So also the fact that the cheque was presented on the day following the altercation between the parties is a circumstance that cannot be brushed away. The version of the respondent that the cheque was not returned to him and the complainant presented the same to wreak vengeance against him is a circumstance that cannot be easily rejected. Super added to all this is the testimony of DW1, Jeevan Guru according to whom the accounts were settled between the father of the complainant and the accused in his presence and upon settlement the accused had demanded return of this cheque 27Page 28 given in lieu of the advance. It was further stated by the witness that the complainant’s father had avoided to return the cheque and promised to do so on some other day. There is no reason much less a cogent one suggested to us for rejecting the deposition of this witness who has testified that after the incident of altercation between the two parties the accused has been supplying milk to the witness as he is also in the same business. Non-examination of the father of the complainant who was said to be present outside the Court hall on the date the complainant’s statement was recorded also assumes importance. It gives rise to an inference that the non-examination was a deliberate attempt of the prosecution to keep him away from the court for otherwise he would have to accept that the accused was actually supplying milk to him and that the accused was given the price of the milk in advance as per the trade practice in acknowledgement and by way of security for which amount the accused had issued a cheque in question. 02/15/2013
• Whether the dishonour of a cheque on the ground that the signatures of the drawer of the cheque do not match the specimen signatures available with the bank, would not attract the penal provisions of Section 138 of the Negotiable Instruments Act.?=Thus, dishonour of cheques simpliciter for the reasons stated in Section 138 of the NI Act although is sufficient for commission of offence since the presumption of law on this point is no longer res integra,Thus although a petition under Section 482 of the Cr.P.C. may not be entertained by the High Court for quashing such proceedings,= The instant matter however do not relate to a case of ‘stop payment’ instruction to the bank as the cheque in question had been returned due to mismatching of the signatures but more than that the petitioner having neither raised nor proved to the contrary as envisaged under Section 139 of the NI Act that the cheques were not for the discharge of a lawful debt nor making the payment within fifteen days of the notice assigning any reason as to why the cheques had at all been issued if the amount had not been settled, obviously the plea of rebuttal envisaged under Section 139 does not come to his rescue so as to hold that the same would fall within the realm of rebuttable presumption envisaged under Section 139 of the Act. I, therefore, concur with the judgment and order of learned Brother Justice Thakur subject to my views on the dishonour of cheques arising out of cases of ‘stop payment’ instruction to the bank in spite of sufficiency of funds on account of bonafide dispute between the drawer and drawee of the cheque. This is in view of the legal position that presumption in favour of the holder of a cheque under Section 139 of the NI Act has been held by the NI Act as also by this Court to be a rebuttable presumption to be discharged by the accused/drawee of the cheque which may be discharged even at the threshold where the magistrate examines a case at the stage of taking cognizance as to whether a prima facie case has been made out or not against the drawer of the cheque.= In the result, we allow these appeals, set aside the judgment and orders passed by the High Court and dismiss the special criminal applications filed by the respondents. The trial Court shall now proceed with the trial of the complaints filed by the appellants expeditiously. We make it clear that nothing said in this judgment shall be taken as an expression of any final opinion on the merits of the case which the trial Court shall be free to examine on its own. No costs. 11/30/2012
• The revenue sought to deduct tax at source on the interest component- Section 145(b) of the Income Tax Act has been introduced which provides that the interest component of the compensation will be the income of the year in which it is received. As such, the question of spread over will not arise and if that question does not arise, tax must necessarily be deducted at source. 10/22/2012
• Bharathi Cements Corporation Private Limited – whether a letter/ communication No.ACIT.2(3)/VAL/BHA/2011-12 dated 07.12.2011 of the third respondent (Assistant Commissioner of Income Tax, Circle-2(3), Hyderabad) informing the petitioner that an earlier notice in File No.SE(V)/HYD/2485/ CG/895 dt.25.11.2011 given by the fourth respondent (District Valuation Officer of the Valuation Cell of the Income Tax Department, Hyderabad) and the earlier connected notices should be read as those issued under Section 142A are ultra vires the provisions of the Act and should be set aside. – It is also settled now that an assessing authority under the Act is also given inquisitorial powers while making assessment or re-assessment. Thus it cannot be said that the third respondent had accepted the valuation given by the petitioner in his books of account and the other bills and vouchers filed by him with regard to its plant and its other civil works in the previous assessment proceedings. It therefore follows that the third respondent was well within his power under Section 142A to take up that issue of valuation of or investment in petitioner’s plant for a re-assessment if necessary. Hence we are not inclined to accept this third plea of the petitioner also. Once a decision is taken by the third respondent in this matter and if it goes against the petitioner, it is always open for the petitioner to work out its remedies. Thus the writ petition can be said to be premature. 10/22/2012
• when a notice under s.148 of the IT Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.” 10/22/2012
• To rebut the presumption even the accused need not enter into the witness box and examine other witnesses in support of his defence. He need not disprove the prosecution case in its entirety. He may discharge his burden on the basis of the material already brought on record. He has a constitutional right to maintain silence. 09/30/2012
• “Whether payee or holder of cheque can initiate proceeding of prosecution under Section 138 of Negotiable Instrument Act, 1881 for the second time if he has not initiated any action on earlier cause of action?” =After all, neither the courts nor the parties stand to gain by institution of proceedings which may become unnecessary if cheque amount is paid by the drawer. The magistracy in this country is over-burdened by an avalanche of cases under Section 138 of Negotiable Instruments Act. If the first default itself must in terms of the decision in Sadanandan Bhadran’s case (supra) result in filing of prosecution, avoidable litigation would become an inevitable bane of the legislation that was intended only to bring solemnity to cheques without forcing parties to resort to proceedings in the courts of law. While there is no empirical data to suggest that the problems of overburdened magistracy and judicial system at the district level is entirely because of the compulsions arising out of the decisions in Sadanandan Bhadran’s case (supra), it is difficult to say that the law declared in that decision has not added to court congestion. 33. In the result, we overrule the decision in Sadanandan Bhadran’s case (supra) and hold that prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. The reference is answered accordingly. The appeals shall now be listed before the regular Bench for hearing and disposal in light of the observations made above. 09/28/2012
• 1. Whether the suit was properly instituted in the Court of the Senior Civil Judge at Vizianagaram and whether the plaintiff is a holder in due course? 2. Whether the judgments of the Courts below are not proper as the Courts have no jurisdiction to entertain the suits?”The assignment of a promissory note by the payee is a part of the “cause of action” within the meaning of S.20 (c), C.P.C. and the assignee can sue on it in the Court having jurisdiction where the assignment took place: Read Vs.Brown [ (1989) 22 Q B D 128.” 09/10/2012
• under Section 138 of the Negotiable Instruments Act – PW.1 in the beginning of the chief examination has stated that the accused borrowed the amount on 26.10.1998 and subsequently has stated six months prior to 26.10.1998 and in cross-examination he has deposed that he does not remember as to why he agreed to lend money and actually when he lent the money to the accused and his evidence is inconsistent with regard to date on which the amount was lent to the accused. The complainant as PW.1 has stated that he retired from service in the month of April, 1995 and according to him after one year he has received the retirement benefits and from the date of his retirement till he lent the money to the accused, he kept the money with him in the hands. According to him the amount was lent to the accused in the month of April or October, 1998 and there is a gap of nearly two years in lending the amount to the accused and according to the complainant he kept the said amount in his house for all these two years. The trial Court has rightly disbelieved said version of keeping such a huge amount without investing the same in his house. PW.1 further deposed that the accused has executed a bond on her own hand- writing after receiving the said amount of Rs.1,90,000/- and in the cross- examination he has deposed that the said bond was returned by the complainant one week or ten days prior to the issuing Ex.P-1 cheque. The trial Court has rightly disbelieved that version as no prudent man would return the bond executed by the borrower without obtaining the cheque in lieu of said bond and more particularly when there is a dispute with regard to the property between the accused and her daughter as per paper publication made in Vaartha newspaper. According to PW.3 P.Dharma Reddy, he has gone to the house of the accused along with the complainant and in his presence the accused has issued the said cheque to the complainant but he could not state about the location of the house or identity of the house of the accused. The accused has got marked Ex.D-2 a letter written by her to the bank requesting stop payment of the disputed cheque stating that she has issued two blank cheques bearing No.384351 (marked as Ex.P-1) and No.132958 to Ushodaya Finance Company and she had no liability to the said firm and in the event of presentation of the said cheque for encashment, the payment may be stopped. Admittedly, the said letter was addressed to the State Bank of Hyderabad on 08.10.1998 and the same was acknowledged by the said bank. The said letter was addressed by the accused to the said bank much prior to the date of issuing the cheque Ex.P-1. PW.1 admitted that he himself scribed the contents of Ex.P-1 cheque. Admittedly, the accused was working as a teacher as on that date and if really she has issued a cheque for Rs.1,90,000/- she would have written the blanks in the said cheque with her own hand writing. Thus, the complainant has scribed the same in his hand- writing supports the contention of the accused that she issued two blank cheques in favour of Ushodaya Finance Company. The above circumstances create a doubt with regard to lending of the money by PW.1 to the accused and the accused issued the cheque in favour of the complainant. Thus, the accused by relying upon the evidence produced by the complainant could able to rebut the presumption available under Section 139 of the N.I. Act by preponderance of possibilities. Thus, the trial Court has rightly held that the complainant has failed to establish the offence under Section 138 of the N.I. Act and rightly dismissed the complaint basing on the material available on record. In the result, the Criminal Appeal is dismissed. 09/07/2012
• Income Tax Act, 1961-s. 260A-Assessee purchasing land for Rs 4.10 lakhs-Notes on loose sheets recovered in the course of raid from assessee-Department on basis of statement of seller though contrary that sale was for a higher price and making assessment on basis thereof-CIT and Tribunal holding in favour of assessee-Appeal under s. 260A raising substantial questions of law pertaining to actual sale price of the property, implications of statements and counter statements made by seller, reliance on notes on loose sheets recovered-Dismissed by High Court-Interference with-Held: Order of High Court suffers from no infirmity-Questions so raised were all questions of fact and not substantial question of law. Judgment/Order-Writing of-Quoting from an order of some authority particularly a specialized one-Propriety of-Held: Cannot per-se be faulted as this procedure can often help in making for brevity and precision, but any ‘borrowed words’ used in a judgment must be acknowledged as a courtesy to the true author. Respondent-assessee purchased certain land. The sale deed showed Rs 4.10 lakhs as sale price. During search of certain premises, the Department found certain notes on loose sheets allegedly in the hands of the respondent and the respondent could not give any explanation for the same. The Department recorded the statement of the seller that he had received Rs 34.85 lakhs as sale consideration. Thereafter, seller gave a contradictory statement and then again reverted to the earlier statement. The Assessing Officer took Rs 34.85 lakhs as sale consideration for assessment and made an addition of Rs 3,75,005 as undisclosed income. Both the Commissioner of Income Tax and the Tribunal held in favour of assessee. Appellant-Revenue filed appeal under section 260A of the Income Tax Act 1961 raising substantial questions of law that whether the revenue was justified in fixing higher sale consideration amount than what was declared; that when the assessee did not give any explanation to the notings found and revenue was able to corroborate the same with the statement of seller for determination of actual sale value, whether the lower authority was justified in interfering; and when consistent sworn were taken into consideration along with evidence found at the time of search, would all be liable to be rejected on basis of one statement in between the contradicting the earlier ones. High Court dismissed the appeal on the basis that no substantial question of law arose for consideration. Hence the present appeal. Dismissing the appeal, the Court HELD: It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the Commissioner and passed them off as if they were themselves the author’s. Quoting from an order of some authority particularly a specialized one cannot per-se be faulted as this procedure can often help in making for brevity and precision, but any ‘borrowed words’ used in a judgment must be acknowledged as such in any appropriate manner as a courtesy to the true author(s). Even then, the questions raised can in no way be called substantial questions of law. The fact as to the actual sale price of the property, the implication of the contradictory statements made by vendor or whether reliance could be placed on the loose sheets recovered in the course of the raid are all questions of fact. Therefore, there is no infirmity in the order of the High Court. [Para 6] [953-B, C, D, E] G.E. Vahanvati, Solicitor General, Hrishikesh Baruah and B.V. Balaram Das for the Appellant. K. Swami, Yousa Lachenpa and Prabha Swami for the Respondent. , 2007(9 )SCR949 , 2007(10 )SCC487 , 2007(11 )SCALE110 , 2007(11 )JT290 08/19/2012
• Income Tax Act, 1961: Section 271(1)(c )-Concealment of income and furnishing of inaccurate particulars of such income-Ingredients of-Imposition of penalty-AY 1998-99-Assessee, an HUF, filed a return of income showing a long term capital loss-The said capital loss had arisen on account of sale of property in which the assessee had a 1/4th share-The assessee had appointed a registered valuer for valuation of the said property-The value of the property was fixed at a certain sum-In the valuation report, it was stated that the purpose of valuation was for computation of capital gains-The Assessing Officer referred the valuation to the District Valuation Officer-The valuation of the property as made by the District Valuation Officer was adopted and on the basis thereof long term capital gain was determined-As there was a difference between the two valuations, a show cause notice was served on the assessee for concealment of income and furnishing of inaccurate particulars of such income-The assessee explained that there was no concealment of income as all the details of property were submitted along with the return of income and the difference in the matter of valuation of the 1/4th share of the assessee did not amount to concealment-The Assessing Officer rejected the explanation of the assessee and levied a minimum penalty on the assessee-Appeals field by the assessee rejected by CIT (Appeals), ITAT and the High Court-Correctness of-Held: The expression “conceal” signifies a deliberate act or omission on the part of the assessee-Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars-The Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false-Primary burden of proof, therefore, is on the revenue-The statute requires satisfaction on the part of the assessing officer that the assessee deliberately concealed his income or furnished inaccurate particulars in respect of such income-A mere omission or negligence would not constitute a deliberate act-S. 271(1)(c ) remains a penal statute-Rule of strict construction shall apply thereto-Mere difference of opinion between two experts regarding the valuation of the property does not constitute concealment of income or furnishing inaccurate particulars-The impugned order, therefore, suffers from non-application of mind-Penalty set aside. Words & Phrases: “Concealment” and “inaccurate particulars”-Meaning of-In the context of Section 271(1)(c) of the Income Tax Act, 1961. The appellant was an assessee under the Income Tax Act, 1961 and was an HUF. For the assessment year 1998-99, a certain income was declared by him, inter alia, showing a long term capital loss. The said capital loss was said to have arisen on account of sale of property being land and building in which the appellant had a 1/4th share. The appellant entered into an agreement for the sale of the undivided 1/4th share in the said property for a certain sum with one Mr. `L’. For the purpose of valuation of the said property a registered valuer was appointed. The value of the said 1/4th share in the property was fixed at a certain sum. In the valuation report, it was stated that the purpose was valuation for computation of capital gains. As regard existence of sale instances, however, although a sheet was said to have been attached thereto, no such thing was done. By reason of a consent decree, the 1/4th undivided share was sold and possession was transferred to `L’ against final payment. The return filed by the appellant for the assessment year 1998-99 came up for scrutiny before the Assessing Officer, who, in exercise of the power under Section 55A of the Act, referred the matter for valuation of the said 1/4th undivided share of the appellant to the District Valuation Officer. The valuation of the land as made by the District Valuation Officer was adopted and on the basis thereof long term capital gain was determined. In view of the said order of assessment, a show cause notice under Section 274 read with Section 271 of the Act was served on the appellant to which a reply was filed by the appellant claiming that there was no concealment of income as all the details of property were submitted along with the return of income and the difference in the matter of valuation of the 1/4th share of the appellant did not amount to concealment. The Assessing Officer, however, levied a minimum penalty under Section 271(1)(c ) of the Act. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal dismissed the appeals filed by the appellant. The High Court dismissed the appeal preferred by the appellant in limine under Section 260A of the Act. Hence the appeal. Allowing the appeal, the Court HELD: 1. Interpreting Section 27(1)(c) of the Income Tax Act, 1961, some of the High Courts were of the opinion that the burden of proof and the onus lay upon the department to establish that the assessee was guilty of concealment of the particulars of income and even if the assessee had given a false explanation, the same by itself would not prove that the receipt necessarily constituted income of the assessee. However, some High Courts opined differently, holding that the penalty proceeding is included in the expression `assessment’ and the true nature of penalty had been held to be additional tax. [Para 19] [518-C-D] Commissioner of Income Tax v. Anwar Ali, [1970] 2 SCC 185; Commissioner of Income Tax v. Gokuldas Harivallabhas, 34 ITR 98 and Commissioner of Income Tax v. M/s Khoday Eswarsa & Sons, [1971] 3 SCC 555, referred to. 2. Thus, it appears that there is a distinct line of authorities which clearly lay down that in considering a question of penalty, mens rea is not a relevant consideration. Even assuming that when the statute says that one is liable for penalty if one furnishes inaccurate particulars, it may or may not by itself be held to be enough if the particulars furnished are found to be inaccurate is anything more needed but the question would still be as to whether reliance placed on some valuation of an approved valuer and, therefore, the furnishing of inaccurate particulars was not deliberate, meaning thereby that an element of mens rea is needed before penalty can be imposed, would have received serious consideration in the light of a large number of decisions of this Court. [Para 35] [528-B-C] Sherras v. De Rutzen, (1895) 1 QB 918; Director of Enforcement v. MCT M. Corp. Pvt. Ltd., [1996] 2 SCC 471; Addl. CIT v. Dargapandarinath Taliayya and Co., (1977) 107 ITR 85; Gujarat Travancore Agency v.CIT, (1989) 177 ITR 455 (SC); Lim Chin Aik v. The Queen, (1963) Appeal Cases 160 and Ummali Umma v. Inspecting Assistant Commissioner of Income Tax 64 ITR 669 (Kerala), referred to. Corpus Juris Secundum 85, Para 1023 and the Law Quarterly Review, [1936], p. 66, referred to. 3. The legal history of Section 271(1)(c ) of the Act traced from the Income Tax Act, 1922 prima facie shows that he explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of explanation, having regard to the principle of statutory interpretation, must be done in mind before interpreting the aforementioned provisions. Section 271(1)(c ) categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty not only is discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings, as has been noticed in some of the decisions of this Court, inure on the face of the statutory provisions. Penalty proceedings are not be initiated only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective. [Para 37] [528-E-G] 4.1. Section 271(1)(iii) again provides for a discretionary jurisdiction upon the assessing authority inasmuch as the amount of penalty may not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of his income, but it may not exceed three times thereof. The factors which are materials for the purpose of computation of total income as is sought to be emphasized in Explanation-1, refer to computation of income on the part of the assessee which is directly relatable to: (a) failure to offer an explanation and/or offering an explanation which is false: and (b) which he not able to substantiate and fails to prove that such explanation is bona fide. [Para 38] [528-H; 529-A] 4.2. Only in the event the factors enumerated in clauses (A) and (B) of Explanation-1 are satisfied and a finding in the behalf is arrived at by the Assessing Officer, the legal fiction created there under would be attracted. [Para 39] [529-B] Ashok Leyland Ltd. v. State of T.N., [2004] 3 SCC 1, S. Sundaram Pillai v. V. R. Pattabiraman, AIR (1985) SC 582 and Swedish Match AB v. Securities & Exchange Board of India, [2004] 11 SCC 641, referred to. 5. The expression “conceal signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars. [Para 44] [530-F] Law Lexicon and Webster’s Dictionary, referred to. 6.1. The term “inaccurate particulars” is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the explanations are taken recourse to, a finding has to be arrived at having regard to clause (a) of Explanation-1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and materials to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which were material to the computation of his income. [Para 45] [530-G-H; 531-A] Commissioner of Income Tax v. Ram Commercial Enterprises Ltd., 246 ITR 568 and Diwan Enterprises v. Commissioner of Income Tax, 246 ITR 571, relied on. 6.2. Primary burden of proof, therefore, is on the revenue. The statute requires satisfaction on the part of the assessing officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the department. [Para 48] [531-E] D.M. Manasvi v. Commissioner of Income Tax, [1973] 3 SCC 207, relied on. 6.3. While considering as to whether the assessee has been able to discharge his burden, the assessing officer should not begin with the presumption that he is guilty. [Para 49] [531-F] 6.4. Once the primary burden of proof is discharged, the secondary burden of proof would shift on the assessee because the proceeding under Section 271(1)(c ) is of penal nature in the sense that its consequences are intended to be an effective deterrent which will not a stop to practices which the Parliament considers to be against the public interest and, therefore, it was for the department to establish that the assessee shall be guilty of the particulars of income. [Para 50] [531-G] Commissioner of Income Tax v. Anwar Ali, [1970] 2 SCC 185 and Commissioner of Income Tax v. M/s Khoday Eswarsa & Sons, [1971] 3 SCC 555, relied on. 7.1. The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the department to establish that the assessee had concealed his income. Since burden or proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the basement proceeding constitute good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. [Para 51] [531-H; 532-A-B] Anatharam Veerasinghaiah & Co. v. CIT, [1980] Supp. SCC 13, relied on. 7.2. The appellant in the penalty proceedings had produced relevant particulars to show that there were material in support of the valuation report, although a part of which was not annexed with the report. [Para 52] [532-C] 7.3. Before, thus, a penalty can be imposed, the entirely of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had furnished inaccurate particulars thereof. [Para 53] [532-D] 7.4. It is now a well-settled principle of law that more stringent of law, more strict construction thereof would be necessary. Even when the burden is required to be discharged by an assessee, it would not be as heavy as the prosecution. [Para 55] [532-F] P.N. Krishna Lal v. Govt. of Kerala, [1995] Supp. 2 SCC 187, relied on. 8. It may be true that the legislature has attempted to shift the burden form revenue to the assessee. It may further be correct that different views have been expressed as regard construction of statutes in the light of the changing legislative scenario, but the tenor of a penal proceeding remains the same. [Para 61] [534-D] Union of India v. Pramod Gupta, [2005] 12 SCC 1 and D. M. Manasvi v. Commissioner of Income Tax, [1973] 3 SCC 207, referred to. 9. Section 271(1)(c ) remains a penal statute. Rule of strict construction shall apply thereto. Ingredients of imposing penalty remain the same. The purpose of the legislature that it is meant to be deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20% under the 1922 Act to 300% in 1985. [Para 66] [535-B] Sadhu Singh v. District Board (1969) RCR 156, P.J. Irani v. State of Madras, [1962] 2 SCR 169 and The Workmen of M/s Firestone Tyre & Rubber Co. of India (P) Ltd. v. The Management AIR (1973) SC 1227, referred to. 10. `Concealment of income’ and `furnishing of inaccurate particulars’ are different. But concealment and furnishing inaccurate particulars refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression veri or suggestion falsi. Although it may not be very accurate or apt but suppression veri would amount to concealment, suggestion falsi would amount to furnishing of inaccurate particulars. [Para 67] [535-C-D] 11.1. The authorities did not arrive at a finding that the consideration amount fixed for the sale of property was wholly inadequate. The authorities also do not show what inaccurate particulars are furnished by the appellant. They also do not state what should have been the accepted principles of valuation. It is, therefore, not possible to accept the submissions of the respondent that concealment or furnishing of inaccurate particulars would overlap each other, but the same would not mean that they do not represent different concepts. Had they not been so, the Parliament would not have used the different terminologies. [Para 68] [535-E-F] 11.2. What was, therefore, necessary to be found out in respect whereof the assessing officer was required to arrive at a satisfaction was `falsity’ in furnishing of explanation by the assessee. Explanation-1, therefore, categorically states that such explanation must either be false or not otherwise substantiated. Even in explanation-4, the expression “evaded” finds place. [Para 69] [535-H; 536-A] Commissioner of Income Tax v. Mussadilal Ram Bharose, [1987] 2 SCC 39 and Commissioner of Income Tax v. K.R. Sadayappan, [1990] 4 SCC 1, relied on. 12.1. The assessee could get the valuation done through any other mode of index value or the assessee could have engaged any other valuer other than a registered valuer also. In the instant case, the assessee had chosen to obtain the opinion of a registered valuer. [Para 79] [539-B] 12.2. The registered valuer has arrived at its opinion on certain basis. He, while making the valuation report, disclosed all the particulars. He disclosed that he had chosen the index method. He did not rely upon any sales instance. He might have referred to the valuation of the property as mentioned in a local newspaper. But it is not in dispute that he did not furnish any inaccurate particulars. It is true that he has not enclosed the sheet showing sale instance but nothing turns out thereupon as he had not relied upon any sale instance. [Para 80] [539-C] 13. A duty may be enjoined on the assessee to make a correct discloser of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars. [Para 82] [539-G-H] 14. It is of some significance that in the standard proforma used by the Assessing Office in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same has not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even, the respondent, while placing the order of assessment, laid emphasis that he had dealt with both the situations. [Para 83] [540-A-B] 15. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [Para 84] [540-C] Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, [2000] 2 SCC 718, relied on. 16. The Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal. [Para 85] [540-D] K. C. Builders v. Assistant Commissioner of Income Tax, [2004] 2 SCC 731, referred to. Anil B. Dewan, Sr. Adv., S.J. Mehta, Ramesh Singh, Bina Gupta and Inklee Barooah for the Appellant. Gopal Subramanium, ASG., Amit Dayal, and B.V. Balaram Das for the Respondents., 2007(7 )SCR499 , 2007(6 )SCC329 , 2007(8 )SCALE304 , 08/19/2012
• Income Tax Act, 1961; Sections 132: Search of premises of assessee-Recovery and seizure of unaccounted money, gold biscuits, gold jewellery and documents-Assessing authority ordering certain additions in assessment-Additions in the assessment confirmed by the appellate authority holding that presumption under Section 132 (4A) available for framing the regular assessment-Reversed by the Tribunal excepting additions relating to value of the properties-Tribunal referring questions of law pertaining to scope of Section 132 (4A) of the Act-High Court answering all the questions in favour of Revenue-On appeal, Held: Object of introduction of Section 132 is to prevent evasion of tax-Since search and seizure is a serious invasion into the privacy of a citizen, it has to be construed strictly-Sub-section (4A) of Section 132 enables an assessing authority to raise a rebuttable presumption that the recovered goods/money/material/documents belonged to the person from whose possession these were recovered and the contents of the documents are true and in his handwriting-High Court erred in its finding that the presumption under Section 4(A) of Section 132 is irrubuttable presumption in so far as it relates to passing an order under Section 132(5) of the Act and rebuttable presumption for the purpose of framing a regular assessment as it is not provided in the provisions that the presumption could be raised for the purpose of regular assessment-Moreover, whenever the Legislative intended to continue the presumption, it has provided so-Presumption under Section 132(4A) is available only in regard to the proceedings for search and seizure and for retention of the assets seized in terms of Section 132(5) and their application under Section 132(B)-However, material seized could be used as a piece of evidence in any other proceeding under the Act-Hence, the matter remitted to the assessing authority for framing the assessment afresh in accordance with law. Words and Phrases: ‘Presumption’ and ‘conclusive proof’-Meaning and implication of in the context of Section 132 of the Income Tax Act, 1961. The question arose for determination in these appeals preferred by the assessee was as to whether the High Court was right in deciding the questions as mentioned below, referred to it by the Income Tax Appellate Tribunal at the instance of the parties, in favour of the Revenue. (A) The questions referred to the High Court at the instance of the Revenue were: (1) as to whether the Income-tax Appellate Tribunal was correct in law in holding that the presumption under Sub-section (4A) of Section 132 of the Income-tax Act, 1961, is only for the limited purpose of passing an order under Sub-section (5) of the said section; (2) as to whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the documents seized from the residential premises of the assessee-Hindu undivided family were not of the said Hindu undivided family and the entries therein did not pertain to it, particularly when the Income-tax Appellate Tribunal itself has accepted that the entries in the said documents culminating in addition of Rs. 2,62,100 in the assessment for the assessment year 1982-83. (B) The questions referred to the High Court at the instance of the assessee were: (1) Whether, on the facts, the Tribunal was justified in holding that the applicant HUF was liable to be taxed in respect of Rs. 2,62,100/- being alleged unexplained investment in the property invoking the provisions of Section 69 of the Act; (2) On the facts, whether the Tribunal was justified in holding that the part of the entries in the seized documents could be attributed to the applicant HUF when the applicant had denied the knowledge or ownership of the document. Allowing the appeals, the Court HELD: 1.1. Sections 132 to 132B of the Income Tax Act embody an integrated scheme laying down the procedure comprehensively for search and seizure and the power of the authorities making the search and seizure to order the confiscation of the assets seized. Section 132 of the Act is a Code in itself. It provides for the conditions upon which and the circumstances in which the warrants of authorization can be issued. 1.2. The proceedings under Section 132(5) as it existed till 31.5.2002 are of a quasi-judicial nature as it provided affording of reasonable opportunity to the person concerned of being heard and pass an order after making an enquiry as might be prescribed. Enquiries under sub-section 132(5) is to enable the assessing officer to determine the tax liability of the assessee in a summary manner and determine the undisclosed income in relation to the money, bullion, jewellery etc. seized under Section 132 and retain the assets seized till the regular assessment is framed. The order passed under Section 132 (5) is for the purpose of retaining the assets seized and it is subject to the framing of the regular assessment. 1.3. Search and seizure under Section 132 is a serious invasion into the privacy of a citizen, therefore, it has to be construed strictly. Sub-section (4A) was inserted by Taxation Law (Amendment) Act, 1975 to permit a presumption to be raised in the circumstances mentioned therein. Before the insertion of sub-section (4A) the onus of proving that the books of account, other documents, money, bullion, jewellery etc. found in possession or control of a person in the course of a search belonged to that person was on the Income Tax Department. Sub-section (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, money, bullion etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. 1.4. The object of introduction of Section 132 is to prevent the evasion of tax and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is a serious invasion in the privacy of the person. Section 132 which is a complete code by itself provides that the money, bullion or the books of account etc. should not be retained unnecessarily and that the provisional assessment made under Section 132 for the purpose of retention of the books is passed within a specified time in accordance with law. It provides that the books of account, money and bullion which are not required are not retained unnecessarily thereby causing harassment to the person concerned. In order to see that the assessment order is framed within the time frame provided under Section 132, legislature provided for a rebuttable presumption to be raised against the person from whose possession and control the books of account, money, bullions etc. are seized so that the order can be passed within the time frame provided under Section 132 of the Act. 2.1. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) “may presume”, (ii) “shall presume” and (iii) “conclusive proof”. “May presume” leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. “Shall presume” leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. “Conclusive proof” gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption. 2.2. The words in sub-section (4) are “may be presumed”. The presumption under sub-section (4A) therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-section (4A) is a irrebuttable presumption in so far as it relates to the passing of an order under sub-section (5) of Section 132 and rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in Section 132 or any other provisions of the Act which could warrant such an inference or finding. 2.3. There is nothing either in Section 132 or any other provision of the Act to indicate that the presumption provided under Section 132 which is a self contained code for search and seizure and retention of books etc. can be raised for the purposes of framing of the regular assessment as well. Wherever the legislature intended the presumption to continue, it has provided so. 2.4. It is evident from the fact that whereas the legislature under Section 132 (4) has provided that the books of account, money, bullion, jewellery and other valuable articles or things and any statement made by such person during examination may thereafter be used as evidence in any other proceedings under the Act but has not provided so under Sub-section (4A) of Section 132 of the Act. 3.1. Presumption under Section 132 (4A) is available only in regard to the proceedings for search and seizure and for the purpose of retaining the assets under Section 132(5) and their application under Section 132B. It is not available for any other proceeding. except where it is provided that the presumption under Section 132 (4A) would be available. 3.2. The High Court of Allahabad in Pushkar Narain Sarraf and the High Court of Delhi in Daya Chand have taken the correct view in holding that the presumption under Section 132(4A) is available only in regard to the proceedings for search and seizure under Section 132 of the Constitution. Such presumption shall not be available for framing the regular assessment. The High Court of Karnataka in the impugned judgment has clearly erred in holding to the contrary. Consequently, question No. 1 of the Revenue is answered against the Revenue and in favour of the assessee. Pushkar Narain Sarraf v. CIT, (1990) 183 ITR 388 and Daya Chand vs. CIT, (2001) 250 ITR 327, approved. 3.3. It is clarified that though presumption under Section 132(4A) is not available to authorities while framing the regular assessment but the material seized can be used as a piece of evidence in any other proceedings under the Act, all contentions are left open. 3.4. The orders passed by the assessing authorities as well as the CIT (Appeals) are vitiated as they have proceeded to frame the assessment raising the presumption under sub-section (4A) of Section 132. The same are set aside and the case is remitted back to the assessing authority for framing the assessment afresh in accordance with law. Question No. 2 claimed by the Revenue and the question No. 2 claimed by the assessee are returned unanswered as the case is being remitted back to the assessing authority for framing a fresh assessment. 4. The assessing authority shall frame the assessment in accordance with law, without being influenced by any of the observations made in the previous orders or this order. Dhruv Mehta and Harshvardhan Jha (for M/s. K.L. Mehta & Co.) for the Appellant. B.B. Ahuja, Arijit Prasad (for B.V. Balaram Das) for the Respondent. 2007 AIR 386 , 2006(9 )Suppl.SCR1 , , 2006(12 )SCALE429 , 2006(10 )JT537 08/19/2012