COMMISSIONER OF INCOME TAX Vs. BHANDARI SILK STORE

JUDGEMENT

(1.) FOLLOWING question of law has been referred for opinion of this Court under s. 256(1) of the IT Act, 1961 (in short "the Act") by the Income -tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") arising "Whether on the facts and in the circumstances of the case, the learned Tribunal is justified in law in confirming the order of the CIT(A) deleting the penalty of Rs. 1,70,625 imposed under s. 271(1)(c) of the IT Act, 1961 -

(2.) THE necessary facts for disposal of the reference may be noticed. Search and seizure operation was carried at the disclosure statement under s. 132(4) of the Act whereby a surrender of Rs. 3,25,000 was made relating to asst. yr. 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 AO completed the assessment and also initiated penalty proceedings. The AO concluded that since the assessee did not fulfil the requirements laid down in Expln. 5 to s. 271(1) (c), the assessee was liable to penalty. The AO 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 of Income -tax (Appeals) [in short "the CIT(A)"] 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 Expln. 5 to s. 271(1)(c) whereas disclosure of Rs. 1,25,000 was reflected in the return of income filed by the assessee relating to asst. yr. 1989 -90. The relevant observations made in paras 12 and 13 of the order of the Tribunal while upholding deletion of penalty, read thus :