COMMISSIONER OF INCOME TAX Vs. MOHANLAL RADHAKRISHNA

JUDGEMENT

(1.) THE applicant (Commissioner of Income-tax, Bhopal) has filed this application under Section 256(2) of the Income-tax Act, 1961 (for short "the Act"), seeking a direction to the Tribunal to state the case and refer the proposed question, as extracted below, arising out of the order dated May 15, 1992, passed in I.T.A. No. 87/Ind of 1990, after rejection of the application, presented under Section 256(1) of the Act and registered as R. A. No. 137/Ind of 1992 for the assessment year 1984-85 on November 30, 1992 :

(2.) BRIEFLY stated, the facts of the case are that the assessee is a registered firm. The Income-tax Officer noticed that the sum of Rs. 50,000 was advanced on October 28, 1983, to a sister concern, Suman Oil Mills, vide entry on Rokad Panna 122. This amount was also found credited in the account held in the Bank of India and was drawn on the same date. A credit of Rs. 15,000 appeared in the cash book of the firm on May 16, 1983, but the entry in the pass book appeared on March 6, 1982. The amount was appropriated earlier and not in the accounting year relevant to the assessment year under consideration. The assessee was asked to prove the availability of the above amount credited in the cash book. The firm was also asked to prove the source of the amount. The assessee submitted a letter on March 10, 1985, to surrender the amount of Rs. 65,000 with the condition that no penalty should be imposed under Section 271(1)(c) of the Act. The above proposal was not accepted by the Income-tax Officer and the assessee was asked to explain after collection of evidence. The assessee surrendered the amount as unexplained credit of Rs. 65,000. Treating this as concealment of income, penalty was imposed under Section 271(1)(c) of the Act. Eventually, the penalty was cancelled by the Tribunal.

(3.) SHRI Vyas submitted that evidently it was a case of concealed income to the extent of Rs. 65,000 and as such the penalty was wrongly cancelled. He further submitted that the conclusion culminating in cancellation of penalty is perverse and perversity gives rise to a question of law. SHRI Jain, on the other hand, submitted that the penalty was cancelled on proper appreciation of the evidence and that the proposed question was not one of law.