JUDGMENT
K. Ramaswamy, J.
1. In this Income-tax Case, the assessee is seeking under section 256(2) of the Income-tax Act, 1961(43 of 1961), for short “the Act”, a direction to the Tribunal to state the case on the following questions :
” (1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in proceeding on the basis that the findings in the Tribunal’s order disposing of the quantum appeal themselves justified the levy of penalty under section 271(1) (c) ?
(2) Whether, on the facts and in the circumstances of the case, the conclusion of the Tribunal that there was evidence establishing concealment of income by the assessee is rationally possible and is perverse ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that penalty could be levied under section 271(1) (c) of the Income-tax Act, 1961, in the assessee’s case ?
(4) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to come to the conclusion that the assessee sold the First Prize Winning ticket in the 13th Raffle of the Andhra Pradesh Welfare Fund to Kumari Alpana of Bombay for a sum of Rs. 3,50,000 ?”
(The above questions were referred to as questions Nos. 3, 4, 5 and additional question respectively in the reference filed under section 256(2) of the Act).
2. The facts found by the Income-tax Appellate Tribunal are that the assessee, an individual, was an honorary Secretary of the Andhra Pradesh State Council of Child Welfare Fund and Viswabharathi Socio-Cultural League. He filed a return as individual for the assessment year 1971-72 relevant to the accounting year ending on March 31, 1971, declaring his income as Rs. 30,000, being the remuneration received from the above institutions. In his capacity as secretary of the Andhra Pradesh Welfare Fund, he conducted several raffles and the 13th raffle was drawn on November 15, 1970. The first prize winning ticket bearing No. Y 400760 was won by Sri Mattaparthi Sriramulu of Vanapalli village of East Godavari District. The said Sriramulu took the services of Sri L. Malakondaiah, the District Collector, and approached the assessee for payment. It is the case of the Revenue, that the assessee paid a sum of Rs. 2,50,000 to the winner, M. Sriramulu, on November 18, 1970, and sold the ticket to Kumari Alpana, daughter of one Dr. Mohanlal Peermal, a mill owner of Bombay, for Rs. 3,50,000. Similarly, the ticket bearing No. Y 934608 which won the second prize of Rs. 25,000 was won by one M. Shankaraiah of Seetharampuram, Jangaon taluk of Warangal District. When he approached, the assessee purchased the ticket for Rs. 21,000 and sold it to one Shri Chunilal L. Vyas for Rs. 28,000. On a complaint laid for offences under sections 409 and 420 of the Indian Penal Code, the police investigated into it and it revealed that the assessee had the services of one Shri Diwakar Setty, paid him Rs. 5,000 and got sold the first prize ticket to Kumari Alpana and thereby he made a profit of Rs. 95,000. With regard to the second ticket, he purchased it for Rs. 21,000 and sold it for Rs. 28,000 and thereby he earned Rs. 7,000 as profit. He did not disclose the source of Rs. 21,000 and thereby he concealed an income of Rs. 1,23,000. That amount was added to the income returned by the assessee. The assessee disputed the same. But the Appellate Tribunal found as a fact that the assessee earned an income of Rs. 95,000 and Rs. 7,000 on the first and second prize tickets in the 13th raffle and did not disclose the source of Rs. 21,000 and he did not account for Rs. 1,23,000 and accordingly it was added. Thereafter, proceedings under section 271(1) (c) of the Act, (viz., penalty proceedings), were initiated against the assessee. In the first instance, when an explanation was sought for, it would appear that Sri S. Ramamohan Rao, chartered accountant, filed vakalath on behalf of the assessee and he stated that nothing more was to be added to what was urged before the appellate authorities during the assessment proceedings. On that basis, the Inspecting Assistant Commissioner considered the matter and imposed a penalty of Rs. 2,46,000. On appeal, the Income-tax Appellate Tribunal, by order dated August 16, 1977, called for a finding from the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner after giving opportunity to both parties to adduce evidence – both oral and documentary – submitted his report on June 1, 1978. Thereafter, the Appellate Tribunal considered the appeal on merits and held that the assessee had concealed an income of Rs. 1,23,000, but, however, it reduced the penalty to Rs. 1,23,000. The assessee sought for reference on the above questions in addition to two more questions. The Tribunal found that questions Nos. 1 and 2 mentioned in paragraph 7 of the statement of the case (R. C. No. 30 of 1980 – Thakur V. Hari Prasad v. CIT [1987] 167 ITR 603) alone raise questions of law and accordingly made a reference on questions Nos. 1 and 2 in R. C. No. 30 of 1980 – Thakur V. Hari Prasad v. CIT [1987] 167 ITR 603 – (which is just now disposed of) and refused to make a reference on questions Nos. 3 to 5 and additional question. Accordingly, this application came to be filed.
3. Sri Ratnakar, learned counsel for the assessee, has contended that the findings of the Appellate Tribunal are based on no evidence and no reasonable man would reach the finding on the basis of the evidence on record. He, therefore, says that this court may direct the Appellate Tribunal to state the case on those four questions for decision of this court. He has taken us through the order of the Appellate Tribunal. On going through the order of the Appellate Tribunal, we are satisfied that the Appellate Tribunal is well justified in stating that no questions of law arise for decision on the questions sought by the assessee in his reference. After remanding the matter to the Inspecting Assistant Commissioner, evidence was adduced both by the Department and the assessee. The Appellate Tribunal has considered the entire evidence including the findings recorded by the Income-tax Appellate Tribunal in the quantum appeal. On the basis of that evidence, the Appellate Tribunal recorded the finding, as already stated, that the assessee had concealed an income of Rs. 1,23,000 and reduced the penalty to Rs. 1,23,000. These findings are based on evidence on record.
4. It is contended by Sri Ratnakar that when fresh evidence was adduced by the Department in the penalty proceedings, the Appellate Tribunal ought to have held that it is devoid of jurisdiction to direct the Inspecting Assistant Commissioner to record evidence. So, if the evidence is thus excluded, the conclusion that the assessee concealed the income of Rs. 1,23,000 is based on no evidence and, therefore, the assessee is not liable for imposition of penalty. We are unable to agree. After the remand, the assessee himself has adduced evidence; the Department has produced the statements of the winners of the two lottery tickets (first and second prizes), viz., M. Sriramulu, Shankaraiah and also the statements of Sri Malakondaiah, the District Collector, and Diwakar Setty, etc., on record and they were subjected to close cross-examination. The entire evidence was considered, the findings of the Appellate Tribunal during the quantum assessment proceedings also was considered. This is the evidence available on record. We have considered in extenso in R. C. No. 30 of 1980 (Thakur V. Hari Prasad v. CIT [1987] 167 ITR 603) just now disposed of and held that the Appellate Tribunal has power to call for a report from the Inspecting Assistant Commissioner after recording evidence, that it is evidence and it is in statutory compliance of section 274(1) of the Act for varied reasons given in support thereof. We need no reiteration of the same. Since R. C. No. 30 of 1980 is also inter se between the same parties, the same may be treated as part hereof. So, we hold that the evidence on record is legal evidence.
5. It is true that the mere finding that the assessee has not returned the correct income during the proceedings of the quantum appeal by itself is not conclusive. But the totality of the circumstances including the findings recorded in the assessment proceedings are good and relevant evidence and have to be taken into account including the conduct of the assessee in concealing the income. Even the false explanation offered by the assessee also is a relevant circumstance telling against the assessee. In R. Srinivasan & Co. v. CIT , it was held (headnote) :
“However, it cannot be contended that in all cases there should be fresh material in the penalty proceedings and the Tribunal cannot act on the material produced at the assessment stage. It may be that the findings given by the authorities on certain material at the assessment stage may not be conclusive but still the material constitutes good and relevant evidence in penalty proceedings.”
6. In Kedar Nath Sanwal Dass v. CIT [1978] 111 ITR 440, the Punjab and Haryana High Court held that (headnote) :
“Where the finding in the assessment proceedings was that losses were falsely claimed by the assessee to set off the profits made by the assessee, the finding that the losses put forward were false is sufficient to hold that there was a scheme on the part of the assessee to defeat the Revenue. That would be sufficient to attract the penalty proceedings under section 271(1) (c) of the Income-tax Act, 1961, without any further finding.”
7. In D. M. Manasvi v. CIT , the Supreme Court pointed out at page 565 as follows :
“In this respect, we find that in the present case the inference that 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 contrary, 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 was 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 been deliberately created by the assessee for the purpose of concealing his income. The assessee as such can derive no assistance from Anwar Ali’s case .”
8. The next contention of Sri Ratnakar is that the evidence recorded by the Inspecting Assistant Commissioner is no evidence and the finding is based on no evidence on record. We express our inability to accede to this contention. It is true that in a criminal trial, the statements recorded under section 162 of the Code of Criminal Procedure should be used only to contradict the statement of the maker. But a penalty proceeding under the Act is not a criminal trial, nor the officer a court, as defined under the Evidence Act. The strict evidence under the Evidence Act is inapplicable to the proceedings to impose penalties under the Act. It is now well-settled that the statements recorded by the enforcement officers under the Central Excises Act is evidence for the purpose of imposing penalties (vide State of Punjab v. Barkat Ram, ). Equally the statements recorded by the Inspector of Railway Protection Force is admissible in a prosecution under the Railway Property (Unlawful Possession) Act, 1966, as held by Sarkaria J., for their Lordships of the Supreme Court, in Balkishan v. State of Maharashtra, . In Ramesh Chandra Mehta v. State of West Bengal, , five judges) and Badaku Joti Svant v. State of Mysore, , five judges), it was held that the statements recorded by customs officials are also evidence. Therefore, it must be held that the statements of M. Sriramulu, Shankaraiah, Sri L. Malakondaiah, District Collector, East Godavari, Diwakar Setty, etc., constitute clear evidence and they can be relied upon. They were also examined and cross-examined. The findings in the assessment proceedings were also taken into consideration. The conduct of the assessee in concealing the income and the false explanation are also connecting links to the totality of circumstances. Therefore, the finding that the assessee had concealed the income is based on evidence on record. The conclusions reached by the Tribunal are well-supported by the reasoning given in support thereof. Therefore, we cannot hold that the findings recorded by the Tribunal are based on no evidence nor that no reasonable man can come to those conclusions. Accordingly, we find no justification to direct the Tribunal to state the case on the questions referred to above. The case is accordingly dismissed. No cost.