COMMISSIONER OF INCOME TAX Vs. BIJAY IRON STORES

JUDGEMENT

(1.) ON an application under S. 256(1) of the IT Act, 1961, the Tribunal has referred, the following question, set out at pp. 11 and 12 of the paper books, for our opinion:

(2.) THE relevant assessment year is 1984-85. The assessee-firm consists of two partners and it is carrying on business in iron and steel sheets. On 30th March, 1984, the search and seizure was carried out in the business and residential premises of the partners and certain books and loose papers had been seized at the time of search. Apart from the papers and other materials, the relevant part of the seized material is 3 loose sheets of papers found at the residence of Sri Satyanarayan Gupta, partner of the assessee-firm. The residence from where papers were seized is shared by one of the partners Sri Satyanarayan Gupta and his son Sri K.L. Kanoi. Sri Kanoi in his statement had admitted that the profit worked out in the seized papers related to the business of the assessee-firm and he has also admitted that he inscribed these loose sheets. Though the total income from clandestine business assessed is Rs. 17,27,006. But for the purpose of penalty the amount added on the basis of admission of the son of one of the partners of the assessee-firm is relevant. The AO has made an addition of Rs. 4,60,980 by treating it as the profit earned by the firm outside the books of accounts. Penalty thereon imposed Rs. 2,11,740 being 200 per cent of the tax evaded. In appeal before the Tribunal, the Tribunal has reduced the addition to Rs. 1,81,876. In appeal before the CIT(A), CIT(A) though confirmed the penalty, but directed the AO to recalculate the penalty on the basis of addition of Rs. 1,81,876 sustained by Tribunal. In appeal before the Tribunal, the Tribunal has cancelled the penalty on the ground that on mere addition in the income during the course of assessment, penalty under S. 271(1)(c) cannot be imposed. Tribunal has placed reliance on the decision of Giridhari Lal Soni vs. CIT (1990) 82 CTR (Cal) 73 : (1989) 179 ITR 111 (Cal) : TC 50R.638.

(3.) WHILE sustaining the penalty by the CIT(A) in para 3 of its order, the part of the order of Tribunal in the quantum appeal has been reproduced. For ready reference that read as under :