COMMISSIONER OF INCOME TAX Vs. KULDEEP SINGH

JUDGEMENT

(1.) THE Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for opinion to this Court: 1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in canceling the penalty?

(2.) WHETHER on the facts and in the circumstances of the case the Hon'ble Tribunal was justified in holding that penalty proceedings Under Section 273(b) cannot be initiated in reassessment proceedings? 2. The reference relates to the Assessment Year 1972 -73 in respect of the penalty proceedings initiated under Section 271(1)(a), (b) and (c) and 273(1)(b) of the Act.

(3.) WE have considered the submission of the parties and have gone through the ratio of the decisions in the case of C.I.T. v. Paira Singh 124 ITR 40 SC and in the case of C.I.T. v. Smt. Jagjit Kaur : [1980]126ITR540(All) , Alld. In the case of C.I.T. v. Piara Singh (supra), the Hon'ble Supreme Court held as under:That the carriage of the currency notes across the border was an essential part of the smuggling operation and detection by the customs authorities and consequent confiscation was a necessary incident and constituted a normal feature of such an operation. The confiscation of the currency notes was a loss occasioned in pursuing the business of smuggling it was a loss in much the same way as if the currency notes had been stolen or dropped on the way while carrying on the business. It was loss which sprang directly from the carrying on of the business and was incidental to it and its deduction had to be allowed under Section 10. In the case of C.I.T. v. Smt. Jagjit Kaur (supra), it was held that the assessments made under Section 147(a) read with Section 143(3) were not 'regular assessments' within the meaning of Section 273(b) read with Section 212(3) and, therefore, the levy of penalty was not valid. We have taken into account the decisions of the Hon'ble Supreme Court and Allahabad High Court and we are of the opinion that the smuggled ganja was confiscated by the Police and it was destroyed and, therefore, it was a business loss of the assessee and as such there was a nil income and no penalty was leviable in either Sections 271(1)(a), 271(1)(b), 271(1)(c) and 273(b) of the Income -tax Act, 1961. Further, notice under Section 148 was issued and the assessment was framed accordingly. Therefore, it is hit by the decision in the case of Smt. Jagjit Kaur (supra) as well. In our opinion, there is no case of penalty in either of the sections referred to above and the penalties levied and confirmed by the authorities before were improper and accordingly, the same is knocked off. 4. We have heard Sri Shambhoo Chopra, learned Standing Counsel for the Revenue and Sri Krishna Agrawal, learned Counsel for the respondent assessee.