COMMISSIONER OF INCOME TAX Vs. HANUMANBUX INDERCHAND

JUDGEMENT

(1.) THE assessee, M/s. Hanuman Bux Inderchand, is a registered firm, carrying on business in Police Bazar, Shillong, dealing in cloth, wholesale and retail sale. For the assessment year 1958-59, it filed a return on July 28, 1960, disclosing an income of Rs. 65,668. It was, however, assessed by the ITO on February 28, 1963, under Section 23(3) of the Indian I.T. Act, 1922, on a total income of Rs. 1,19,055. He included in the assessment a sum of Rs. 53,039 on the basis of the estimated turnovers and gross profits. THE ITO included the said amount holding that the assessee carried on business benami in the names of Sri Keshardeo Agarwalla and Ram Narain Sharma. THE assessee went in appeal to the AAC, who confirmed the said order of assessment, but no further appeal was taken to the Appellate Tribunal. THE ITO, taking the view that the assessee had concealed particulars of his income, initiated penalty proceedings. As the minimum penalty exceeded Rs. 1,000, the ITO referred the matter to the IAC under Section 274(2) of the I.T. Act, 1961, on November 30, 1964. THE IAC, after hearing both the parties, passed an order on February 25, 1965, levying a penalty of Rs. 39,000 on the assessee under Section 271(1)(c) of the I.T. Act, 1961.

(2.) THE assessee preferred appeal, being ITA No. 8348 of 1965-66, to the Income-tax Appellate Tribunal which, by its order, dated November 24, 1967, set aside the order of penalty. In the appeal, two questions were raised ; first, penalty under the Act of 1961 did not lie on the facts of the case ; and, secondly, even if the penalty could be levied under the Act of 1961, the order was bad because the IAC had not commenced the penalty proceeding before completion of the assessment. THE Tribunal held that the assessment having been completed under Section 23(3) of the Indian I.T, Act, 1922, penalty could not be levied under Section 271(1)(c), read with Section 297(2)(g) of the I.T. Act, 1961. Having held so, the Tribunal considered it not necessary to give findings on the other question and also on the merits as to whether the assesses had concealed its income and the penalty was justified or not. THE Tribunal set aside the order of penalty solely on the question of law above. At the instance of the department, reference was made on two questions of law, which were said to arise out of the said order. This court, in Income-tax Reference No. 9/65, answered the first question in the negative and in favour of the department, the question being, whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, for the assessment year 1958-59, penalty could not be effectively levied under Section 271(1)(c) read with Section 297(2)(g) of the I.T. Act, 1961 ; but the court declined to answer the second question in the view that the Tribunal was not competent to refer it under Section 256(1) of the I.T. Act, 1961.

(3.) THE Tribunal by its order dated November 25, 1974, rejected the application under Section 256(1) of the I.T. Act, 1961. In respect of the first question, it held that even though the question raised in an application for reference is a question of law arising out of its order dated April 29, 1974, the answer to it is evident and free from doubt ; that when the High Court differed from the order of the Tribunal on the point of law, the Tribunal was bound to decide the appeal on merits and decide the question about the concealment of income ; and that the Tribunal, which had decided one of the contentions raised by the assessee, could decide the other issues which were left undecided on the earlier occasion, without any direction of the High Court. It, therefore, held that the question could not be referred to this court. As regards the remaining two questions (ii) and (iii), the Tribunal held that they relate to findings of fact, and as such no question of law arose. It arrived at the finding that there were no cogent materials to hold that the assessee had concealed the income by carrying on business benami in the names of Keshardeo Agarwalla and Ram Narain Sharma. On the rejection of the application for a reference, the department has made this application under Section 256(2) of the I.T. Act, 1961.