COMMISSIONER OF INCOME TAX Vs. R. BHARATHAN

JUDGEMENT

(1.) HEARD standing counsel appearing for the applicant and counsel for the respondent/assessee. The assessee an Abkari Contractor, was assessed by the AO for the year 1983 -84 by rejecting the books of account and making an addition of above Rs. 17 lakhs. The addition pertains to higher sales price estimated by the AO for the sale of arrack. The AO concluded that the assessee was selling arrack at the minimum rate of Rs. 25 per litre as against Rs. 18. The AO also found that the assessee had suppressed the sale proceeds of arrack during the relevant year by Rs. 17,98,950.

(2.) THE assessee being aggrieved by the said assessment order of the AO filed appeal before the CIT(A). After considering the arguments advanced on behalf of the assessee the CIT(A) upheld the addition of Rs. 17,98,950 to the income of the assessee. The AO also initiated penalty proceedings and issued a notice under s. 271 r/w s. 274. The assessee did not give any explanation. Therefore the AO held that there was no explanation by the assessee for the penalty proceedings also. He also levied a penalty of Rs. 27,74,619 under s. 271(1)(c) of the IT Act, for concealment of income or furnishing inaccurate particulars of income under s. 271(1)(c). The assessee being aggrieved by the said order imposing penalty for concealment of income agitated the dispute before the CIT(A). The CIT(A) relying upon the order of the Tribunal in the quantum appeal, cancelled the penalty levied under s. 271(1)(c).

(3.) EVEN though appeals were filed against the assessment order as well as the penalty, the Tribunal accepted the sales rate at Rs. 18, but sustained the addition of Rs. 5 lakhs. The case of the Department is that penalty should have been considered under s. 271(1)(c) with reference to the sustained addition. The contention of the counsel for the assessee is that penalty was levied solely based on the differential rate adopted on the sale price and when this is cancelled by the CIT(A), penalty gets automatically cancelled. We are unable to accept this contention because the CIT(A) has only changed the pattern of disallowance and addition under other heads. We are not expressing any opinion as to whether penalty is leviable for the sustained addition. In fact from the order of the Tribunal it is not clear that they have not considered the consequences of the addition sustained by them. We therefore dispose of this reference case by declining to answer the question but by setting aside the order of the Tribunal and of the CIT(A) and remand the case back to the AO to consider whether penalty is leviable under s. 271(1)(c) with the Explanation then in force, with specific reference to the amount sustained by the Tribunal i.e., Rs. 5 lakhs. The AO shall decide afresh if penalty is leviable or not and pass fresh orders after issuing notice to the respondent/assessee.