COMMISSIONER OF INCOME TAX Vs. LALLUBHAI JOGIBHAI PATEL

JUDGEMENT

(1.) THIS is an application under S. 256(2) of the IT Act, 1961, and the CIT, Gujarat Central, Ahmedabad prays that the Tribunal, Ahmedabad Bench, should be asked to raise and refer the following questions of law for the opinion of this Court:

(2.) IN our opinion, if no reference could be granted on questions Nos. 1 and 3, question No. 2 would be rendered academic and we would, therefore, consider first whether this is a fit and proper case, in which questions Nos. 1 and 3 of the Revenue's application under S. 256(2) can be entertained.

(3.) THE ITO started penalty proceedings for a levy of penalty under S. 271(1)(c) in the course of assessment proceedings for the asst. yr. 1971 72. The proceedings came to be referred to the IAC as the ITO was of the view that the minimum penalty leviable exceeded Rs. 25,000. The IAC came to the conclusion that the investment in question was made out of some undisclosed income of the assessee and that, therefore, there was a concealment of particulars of income to the extent of Rs. 25,000 in the assessment year in question. In view of the said finding, the IAC levied a penalty of Rs. 20,000 under S. 271(1)(c) and directed the ITO to issue demand notice and challan accordingly. In appeal, the Tribunal held, on merits, that it was not clear that the investment of Rs. 20,000 in the construction of the property in question had been made out of the undisclosed income of the assessee assessable to tax for the asst. yr. 1971 72. The entire proceeding proceeded on the basis of the letter addressed by the assessee to the CIT, Gujarat II, wherein he admitted that the sum of Rs. 1,75,000 be treated as his non returnable contribution to the HUF towards the cost of construction of the property, and that the same be treated as his income from undisclosed source for the asst. yrs. 1968 69 to 1972 73. The assessee requested the CIT to tax the sum of Rs. 20,000 out of the aforesaid income from undisclosed source as income for the asst. yr. 1971 72.