ANANTHARAM VEERASINGAIAH & CO. versus COMMISSIONER OF INCOME TAX, A.P.

Citation: [1980] 3 S.C.R. 618 · Decided: 15-04-1980 · Supreme Court of India · Bench: N.L. UNTWALIA · Disposal: Remitted to Lower Court

Judgment (excerpt)

618 
A 
ANANTHARAM VEERASINGAIAH & CO. 
v. 
COMMISSIONER OF INCOME TAX, A.P. 
April 15, 1980 
8 
[N. L. UNTWALIA, R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.] 
c 
D 
E 
II' 
G 
H 
Income Tax Act, 1961, Section 271(1)(c), scope of Penalty Proceedings irt 
quasi judicial and Burden of proof is on Revenue-Secret Profits or undisclosed 
income and their actual availability for application by the ass.esSfe-Power of the 
High Court in a Tax Reference case, explained. 
The appellant, assessee is an Abkari contractor. It -filed a return of its in-
come for the 
assessm1e-nt 
year 
1959-60, 
disclosing a total turnover 
of 
Rs. 10,92,132/- and an income of Rs. 7,704/-. The Income Tax Officer did 
not accept the correctness of the return. 
He found that on 12th December, 
l95'i and 16th January, 1958 the excess of expenditure over the disclosed avail-
able cash was Rs. 17,726/- and Rs. 65,066 respectively. He also noticed seve-· 
rat deposits, totalling Rs. 28,200, entered in the names of certain Sendhi shop~ 
keeP'ers. The Income Tax Officer rejected the account books of the asscssee 
and his explanations for the· discrepancies thereof and estimated the assessee's 
income on an overall figure of Rs. 5,00,018. In appeal before. the. Appellate 
Assistant Commissioner and thereafter before the Income Tax Appellate Tribunal 
the assessee succeeded in getting the assessed income reduced to Rs. 1,30,00Ct 
in addition to the books profits. Penalty proceedings were taken against the 
assessee and the case, was referred to the Inspecting Assistant Commissioner, 
who imposed a penalty of Rs. 75,000 under s. 27l(l)(c) of the Income Tax 
Act, 1961. On appeal by the assessee, the Appellate Tribunal held that there 
was no positive material to establish that the cash deposits represented con~ 
cealed inccime. 
In regard to th·e cash deficits, the' Appellate Tn"bunar noticed 
that for the assessment year 1957-58 an addition of Rs. 2,00,000 had been made 
to the book profits, and it observed that some part of that amount could have-
been ploughed back into tho business. It held that an amount of Rs. 90,000' 
representing unledgerised cash credits of that year could be said to have been 
introduced in that year. Allowing the appeal, the. Appellate Tribunal set aside 
the penalty order made by the Inspecting Assistant Commissioner. 
On a reference to the High Court, at the instance of the Commfssioner of 
Income Tax, the High Court held that the Appellate Tribunal was not justi~ 
ficd, in holding that no -penalty was 1eviable·. Hence the appeal by special 
leave. 
Directing the Appellate Tribunal to take up the appeal under s:ection 260(1)' 
i 
i 
' , 
of the Income Tax Act, the Court 
>--
HELD : An order imp-0sing a penalty is the· result of quasi criminal pro-
ceedings. The burden of proof Ji;es on the Revenue to establish that the dis-
puted amount represents income and that the assessee has consciously conceal-
ed the particulars of his income or has deliberately furnished inaccurate parti-
culars. It is for the Revenue to prove these ingredients before a penalty caru 
be imposed. 
[622B-C] 
VEERASINGAIAH V. C.l.T· 
619 
Since the burden of proof in a penalty proceeding varies from that in vol v-
ed in an assessment proce~dings a finding in an assessment proceeding that a 
particular receipt is income cannot automatically be .adopted as a finding to 
that effect in the penalty proceeding. In the penalty proceeding the taxing au-
thority is bound to consider the matter afresh on the material before it and, 
in the light of th{i burden to prove resting on the Revenue, to ascertain whether 
a particular amount is a revenue receipt. No doubt, the fact that the assess-
ment order contained a finding that the disputed amount represents 
income 
constitutes good evidence in the penalty proceeding but the finding in 
the 
assessment proceeding cannot be regarded as conclusive for the purposes of the 
penalty proceeding. 
Before a penalty can be imposed the entirety of the cir-
cumstances must be taken into account and must point to the conclusion that 
the disputed amount represents income and that the assessee has consciously 
concealed particulars of his income. or deliberately furnished ioaccurate parti-
culars. The mere falsity o.f the explanation given by the asse.ssee is insuffi-
cient without there being in additiun cogent material Or evidence from which 
the n~cessary conclusion attracting a penalty could be drawn. 
(622C-G] 
Commissioner of

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