COMMISSIONER OF INCOME TAX Vs. PAWAN KUMAR DALMIA

JUDGEMENT

(1.) AT the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal has referred the following two questions of law, under Section 256(1) of the Income-tax Act, for the decision of this court:

(2.) THE respondent is an assessee to income-tax. He is a salaried employee of M/s. Punalur Paper Mills Ltd. A search of the person of the assessee was conducted on February 27, 1970, at the Madras airport. A sum of Rs. 1,50,000 along with certain documents were recovered from him. THE documents showed that the assessee had made a remittance of Rs. 33,500 through banks by three separate drafts. Proceedings under Section 132 of the Income-tax Act were initiated. THE assessee contended that the amounts belonged to his uncle. THE Income-tax Officer, Quilon, rejected the said plea and passed an order on May 20, 1970, under Section 132 of the Act, estimating his income at Rs. 2,45,500. THE sum of Rs. 1,50,000, recovered from the person of the assessee, was retained to meet the income-tax liability for the assessment year 1970-71. THEreafter, proceedings were initiated by issuing a notice, under Section 148 of the Income-tax Act. THE assessee filed a return. He did not include in his return the sum of Rs. 1,50,000 or Rs. 33,500, nor did he claim any exemption for the same on the ground that it belonged to his uncle. In the course of assessment proceedings, the explanation about the nature and source of Rs. 1,50,000 and Rs. 33,500 was found to be unsatisfactory. So, the said amount of Rs. 1,83,500 was included as the income of the assessee for the said year. THE said additions were affirmed by the Appellate Assistant Commissioner as also by the Appellate Tribunal. Proceedings under Section 271(1)(c) of the Income-tax Act were initiated. After tracing the entire history, the Inspecting Assistant Commissioner, by order dated April 22, 1976, levied a penalty of Rs. 2,00,000. In appeal, the Income-tax Appellate Tribunal held that there is no material to hold that Rs. 1,50,000 is the income of the assessee and that no penalty is exigible on that account under Section 271(1)(c) of the Act. Regarding Rs. 33,500, the Appellate Tribunal held that the matter is different. In any event, penalty will have to be restricted to the amount of Rs. 33,500. THE levy of penalty of Rs. 2,00,000 was cancelled. THEreafter, the Commissioner of Income-tax moved the Income-tax Appellate Tribunal to refer certain questions of law said to arise out of the appellate order dated November 13, 1978, and that is how the Appellate Tribunal has referred the above two questions of law for the decision of this court.

(3.) ON page 21 of the report, the Supreme Court proceeded to state as follows :