COMMISSIONER OF INCOME TAX Vs. MEDIWALA AND COMPANY

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred the following two questions to this court for its opinion :

(2.) THE facts of the case, in a nutshell, are that in proceedings for determination of assessment, a best judgment assessment was made by the Income-tax Officer. Ultimately, the matter was taken up before the Tribunal and the Tribunal confirmed the total income of Rs. 73,407 determined by the Income-tax Officer, THE assessee, in its return, had for the relevant assessment year, disclosed its total income as Rs. 24,387. Thus the total income disclosed by the assessee was less than 80 per cent. of the total income assessed and the provisions of the Explanation to Section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), were attracted. THE Income-tax Officer made a reference to the Inspecting Assistant Commissioner of Income-tax, who imposed a penalty of Rs. 20,000 under Section 271(1)(c) of the Act. THE matter was taken up by the assessee before the Tribunal. THE appeal was allowed by the Tribunal and while doing so, it recorded the following finding :

(3.) HAVING considered the respective submissions made by counsel for the parties, we are of opinion that the submission made by learned counsel for the Revenue that the order of reversal passed by the Tribunal as well as its finding that the assessee had discharged the initial onus, is based on no other circumstance or material, except the circumstance that it was a case of a best judgment assessment, The question which falls for consideration is whether in law it was possible for the Tribunal to hold that the case of a best judgment assessment stands on a different footing in the matter of imposition of penalty. In our opinion, the Tribunal committed an error in taking the view which it did. Addl. CIT v. Lakshmi Industries and Cold Storage Co. Ltd. [1984] 146 ITR 492 (All) was also a case of best judgment assessment and it was held in that case that the provisions of Section 271(1)(c) of the Act were applicable. Similar view was taken by a Division Bench of this court in Hansraj Aggarwal v. Addl. CIT [1979] 119 ITR 688. The only circumstance on the basis of which the Tribunal came to the conclusion that the initial onus had been discharged by the assessee, namely, that it was a case of a best judgment assessment, is no circumstance in the eye of law. It is settled law that a finding based on no evidence or a finding to which no reasonable person, properly instructed in law, could have come, would be a perverse finding. If a finding is perverse, it is not possible to say that the Tribunal was right on the basis of such a finding to come to the conclusion that the initial onus had been discharged by the assessee.