BAPULAL RAMCHANDRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under Section 256(1) of the I.T Act, 1961 (hereinafter referred to as " the Act"), the Income-tax Appellate Tribunal, " Indore Bench, Indore, has referred the following questions of law for the opinion of this court:

(2.) THE facts giving rise to this reference as set out in the statement of the case are as follows; THE assessee is a registered firm carrying on business in groundnuts, cotton seeds and sugar. THE accounting period for the relevant assessment year 1969-70 is the year ending Diwali 1968. THE assessee has its head office at Ratlam and a branch at Jhabua. During the course of the assessment proceedings the ITO found that the remittances made by the branch to the head office were entered on different dates in the branch office and in the head office. THE ITO did not accept the assessee's explanation that the difference in dates was on account of the inadvertence of its partner at Jhabua and that the shortage of the cash balance in the branch office was made up by using cash available with Shaskiya Sewak Sahakari Samithi, Jhabua. THE ITO made an addition of Rs. 86,130 towards the total income as income from undisclosed sources. THE assessee preferred an appeal against the order of assessment. THE AAC partly allowed the appeal and reduced the additions to Rs. 56,130. On further appeal by the assessee the Income-tax Appellate Tribunal set aside the order of the AAC and remanded the case to him for disposing of the appeal after giving an opportunity to the assessee to meet the remand report of the ITO. After the remand the AAC maintained the addition of Rs. 17,300 to the income of the assessee from undisclosed sources. THE assessee preferred a further appeal to the Tribunal against the order of the AAC. However, the Tribunal dismissed the assessee's appeal. In the meantime, the ITO initiated penalty proceedings under Section 271(1)(c) of the Act for concealment of income. THE proceedings were referred to the IAC, Indore, who by his order dated March 20, 1973, imposed a penalty of Rs. 56,200 on the assessee by invoking the Explanation to Section 271(1)(c) of the Act. Aggrieved by the order imposing the penalty the assessee preferred an appeal before the Tribunal. THE Tribunal upheld the imposition of the penalty but reduced the amount to Rs. 17,300. At the instance of the assessee, the Tribunal has referred the aforesaid questions of law for the opinion of this court.

(3.) HAVING heard learned counsel for the parties we have come to the conclusion that the contentions of the learned counsel for the assessee are well founded. The IAC in his order imposing the penalty specifically held that the charge whether the assessee had concealed its income did not lie against the assessee, and the second charge, viz., whether the assessee can be regarded as having furnished inaccurate particulars of its income or not also cannot be driven home against the assessee. According to the IAC, the third charge as mentioned in para. 7 of the order was to the effect that whether the assessee could be deemed to be guilty of any of the foregoing two charges within the meaning of the provisions of the Explanation to Section 271(1)(c). He came to the conclusion that the returned income being less than 80% of the correct income the assessee shall be deemed to have concealed his income or furnished inaccurate particulars thereof because he failed to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. The IAC imposed the penalty placing reliance upon the Explanation to Section 271(1)(c) of the Act. The Tribunal also did not set aside the finding of the IAC that the charge of concealment of income or furnishing inaccurate particulars of income was not proved against the assessee. The Tribunal quoting in detail the decision of the Andhra Pradesh High Court in CIT v. Anantharam Veerasingaiah and Co. [1975] 99 ITR 544, held as follows in para 12 of its order: