COMMISSIONER OF INCOME TAX Vs. RATHNASWAMY C J

JUDGEMENT

(1.) PURSUANT to the direction of this court on October 27, 1981, in TCP. No. 143 of 1981, the Tribunal referred the following two questions for the opinion of this court:

(2.) THE assessee filed his return for the assessment year 1973 -74 admitting loss of Rs. 41, 689. The Income -tax Officer noticed that there were two cash credits totalling Rs. 15, 000 during the financial year ended on March 31, 1973. The Income -tax Officer enquired regarding the source, but the assessee agreed to the addition of the above sum as income from undisclosed sources. The Income -tax Officer also initiated penalty proceedings under section 271(1)(c) of the Act in respect of the above addition. The assessee replied to the penalty notice that he had readily agreed to the addition of Rs. 15, 000 and hence the penalty should not be levied. On appeal, before the Appellate Assistant Commissioner, the assessee submitted that the entries of the sum of Rs. 15, 000 in the capital account were made by mistake by the accountant, who was new to the job, that the assessee had made gifts of Rs. 10, 000 and Rs. 5, 000 each to his brother and wife and the accountant by mistake had recorded the same as cash credits instead of gifts. The assessee further argued that the tax effect was only Rs. 337 and that there was no mens rea, that he had not admitted that it was his concealed income, but only agreed to the addition of Rs. 15, 000 in the assessment. The Appellate Assistant Commissioner agreed with the assessee that the Income -tax Officer has not established that it is the concealed income of the assessee and held that no penalty is leviable, relying on the decision of the Supreme Court in the case of CIT v. Anwar Ali 1970 (76) ITR 696, 1970 AIR(SC) 1782, 1970 (2) SCC 185, 1971 (1) SCR 446, 1970 UPTC 594. Aggrieved, the Department preferred a second appeal before the Tribunal. The Tribunal was of the view that on the basis of the agreed addition alone penalty under section 271(1)(c) cannot be levied. The Tribunal relied upon the decision in the case of Anwar Ali 1970 (76) ITR 696, 1970 AIR(SC) 1782, 1970 (2) SCC 185, 1971 (1) SCR 446, 1970 UPTC 594 (SC). The Tribunal further pointed out that apart from the fact that the assessee agreed for the assessment of undisclosed income, the Department has not brought on record any material to point out that there is any concealment on the part of the assessee. Thus, the Tribunal agreed with the Appellate Assistant Commissioner in cancelling the penalty levied under section 271(1)(c) of the Act.

(3.) IN that decision, this court applied the decision of the Bombay High Court in the case of Western Automobiles (India) v. CIT 1978 (112) ITR 1048. In that case also, the assessee agreed to the addition of a sum of Rs. 90, 000. The legality of the penalty proceedings taken in respect of the concealment of the said sum came up for consideration by the Bombay High Court. The decision in CIT v. Anwar Ali 1970 (76) ITR 696, 1970 AIR(SC) 1782, 1970 (2) SCC 185, 1971 (1) SCR 446, 1970 UPTC 594 (SC) was cited and at page 1053, the Bombay High Court observed as follows: