(1.) The Income Tax Appellate Tribunal, Cochin Bench, has referred to this Court the following question of law which is said to arise out of the Tribunal's order in I.T.A. No. 54 (Coch)/76-77 dated 12th October, 1978, under S.256 (1) of the Income Tax Act, 1961 (hereinafter referred to as the Act):
(2.) The assessee is a registered firm. For the accounting year ending with 31-3-1965 (for the assessment year 1965-66), the assessee firm filed a return on 31-12-1965 showing an income of Rs. 33,979/-. The assessment was completed on 13-6-1966 on an income of Rs. 49,710/-. Annexure 'A' is the copy of this order of assessment. Investigations made by the Income Tax Officer subsequently revealed that certain credits aggregating to Rs. 58,000/- in the Books of Account of the assessee firm represented the income of the assessee firm itself. The Income Tax Officer, therefore, on 10-9-1969 initiated re-assessment proceedings under S.147 of the Act against the assessee firm. In compliance with the notice issued for re-assessment the assessee firm filed a return on 5-1-1970 showing an income of Rs. 49,710/- which was the total income assessed originally by the Income Tax Officer for the assessment year 1965-66. When the matter was taken up for assessment, the assessee firm submitted a petition to the Commissioner of Income Tax requesting for a settlement of the whole matter, offering a sum of Rs. 1,67,500/- to be distributed over the accounting years 1963-64 to 1965-66. For the assessment year 1965-66, the amount came to Rs. 40,000/-. The Commissioner, however, rejected the assessee firm's request for waiver or reduction of penalty, and by order dated 15-3-1971 confirmed the re-assessment proceedings. Thereafter, the Income Tax Officer on 17-2-1971 wrote a letter to the assessee regarding the additions to be made. The assessee firm by its letter dated 16-3-1971 agreed to an addition of Rs. 50,000/- for the assessment year 1965-66. The assessee firm also filed a return on 2-11-1973 showing an income of Rs. 98,983/-. This was arrived at by adding Rs. 58,000/- representing the cash credits to the income, as per the original return of Rs. 33,979/-. The Income Tax Officer completed the assessment on 30-8-1974 adding Rs. 58,000/- to the originally assessed income of Rs. 49,710/-. Annexure "B" is the copy of the revised assessment order.
(3.) The Income Tax Officer had even prior to the passing of the revised assessment order (Annexure "B") initiated penalty proceedings and referred the matter to the Inspecting Assistant Commissioner, who, on 9-2-1976 imposed a penalty of Rs. 58,000/- on the assessee firm. Annexure "C" is the copy of the said order dated 9-2-1976. On appeal, the Tribunal while holding that there was sufficient material with the department for the levy of penalty granted some relief, directing the Income Tax Officer to re-work the quantum with reference to the tax avoided, i.e., with reference to the liability as it stood in 1965, and fixing the penalty to be levied at the minimum under the statute, that is to say, 20 percent of the tax avoided. Annexure "D" is the copy of the Tribunal's order dated 12th October, 1978.