MAJESTIC AUTO LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a petition under S. 256(2) of the IT Act, 1961 for directing the Tribunal, Chandigarh Bench, Chandigarh, to refer the following six questions of law to this Court :

(2.) THE assessee-petitioner is engaged in the manufacture of moped and bicycle spokes. For the asst. yr. 1981-82, the ITO (Central Circle-I), Ludhiana, prepared a draft assessment order and submitted it to the IAC (Central Circle-I), Ludhiana, after making an addition of Rs. 5,50,746 under the head (Bogus purchases sale outside the books of accounts). During the pendency of the proceedings before the IAC, the petitioner was given hearing under S. 144B(4) of the Act. It surrendered a sum of Rs. 1,68,991 in respect of premium paid to unauthorised dealers from whom various types of oils had been purchased for running generators and other machinery. The IAC issued a direction on 3rd Sept., 1984, to the ITO to frame the assessment of the petitioner. Pursuant to this direction the ITO finalised the assessment proceedings under S. 143(3) r/w s. 144B of the Act. While doing so, he made an addition of Rs. 1,68,991. Simultaneously he initiated penalty proceedings under S. 271(1)(c) of the Act by alleging concealment of income. The petitioner contested the notice by stating that its stand regarding purchase of oil had been accepted by the Department and, therefore, no penalty could be levied. However, the IAC did not accept the plea set up by the petitioner. He passed order dt. 18th Feb., 1987, and imposed penalty of Rs. 1,09,000 on the ground of concealment of the income.

(3.) IT also appears from the record that criminal complaint No. 256 of 1987 came to be filed by the Department against the petitioner and the same was pending on the date of filing of the present petition. Shri B.S. Gupta relied on the judgments of this Court in Hira Lal Ram Dayal vs. CIT (1975) 101 ITR 591 (P&H): TC 54R.1018, Kanshi Ram Wadhwa vs. ITO (1983) 36 CTR (P&H) 134 : (1984) 145 ITR 109 (P&H) : TC 48R.859 and D.N. Bhasin and Anr. vs. Union of India and Ors. (1987) 66 CTR (P&H) 55 : (1988) 171 ITR 7 (P&H) : TC 48R.860 and argued that the questions relating to imposition of penalty is a question of law which clearly arises for adjudication in the present case. Shri Gupta submitted that in spite of the cancellation of the penalty, the finding recorded by the IAC, the CIT(A) and the Tribunal are still being used against the petitioner and, therefore, the Tribunal was not correct in rejecting the petitioner's request for reference of the questions to this Court. Shri R.P. Sawhney relied on P. Jayappan vs. S.K. Perumal, ITO (1984) 42 CTR (SC) 180 : (1984) 149 ITR 696 (SC) : TC 48R.501 and argued that although cancellation of the penalty cannot lead to automatic exoneration of the petitioner, the questions sought to be raised by the petitioner are purely academic.