CIT Vs. BHANDARI SILK STORE

JUDGEMENT

(1.) Following question of law has been referred for opinion of this Court under Section 256(1) of the Income Tax Act, 1961 (in short "the Act") by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") arising out of its order dated 30-9-1998 in ITA No. 448/Asr/1992 in respect of assessment year 1989-90:

(2.) The necessary facts for disposal of the reference may be noticed. Search and seizure operation was carried at the business premises of the Assessee and residential premises of the partners on 11-4-1989. The Assessee made disclosure statement under Section 132(4) of the Act whereby a surrender of Rs. 3,25,000 was made relating to assessment year 1989-90. A sum of Rs. 2,00,000 was declared on account of stocks not entered in the books of accounts whereas balance of Rs. 1,25,000 reflected other undisclosed income of the Assessee. However, this disclosure was included in the return of income filed for the assessment year in question. The assessing officer completed the assessment and also initiated penalty proceedings. The assessing officer concluded that since the Assessee did not fulfil the requirements laid down in Explanation 5 to Section 271(1)(c), the Assessee was liable to penalty. The assessing officer determined that tax on income sought to be evaded amounting to Rs. 3,25,000 would attract tax of Rs. 1,70,625 by treating the Assessee firm as unregistered firm, imposed 100 per cent penalty of the tax sought to be evaded, i.e. Rs. 1,70,625. On appeal, the Commissioner (Appeals) (in short "the Commissioner (Appeals)") deleted the penalty. The appeal filed by the revenue was dismissed by the Tribunal.

(3.) The Tribunal while deleting the penalty bifurcated the surrender into two components, i.e. Rs. 2,00,000 on account of lesser value of stock shown in the books of account and Rs. 1,25,000 relating to general disclosure made by the Assessee. The Tribunal recorded that surrender of Rs. 2,00,000 was covered under Explanation 5 to Section 271(1)(c) whereas disclosure of Rs. 1,25,000 was reflected in the return of income filed by the Assessee relating to assessment year 1989-90. The relevant observations made in paras 12 and 13 of the order of the Tribunal while upholding deletion of penalty, read thus: