COMMISSIONER OF INCOME TAX Vs. AGARWALLA BROTHERS

JUDGEMENT

(1.) THE present two tax cases are being disposed of by a common judgment because the answer to the question referred in Tax Case No. 40 of 1978 is intimately dependent on the answer to the question involved and referred in Tax Case No. 39 of 1978. THE Income-tax Appellate Tribunal has referred the following questions of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") only :

(2.) WHETHER, on the facts and in the circumstances of the case, the cancellation of the penalty under Section 271(1)(c) of the Income-tax Act, 1961, by the Tribunal was legal ? (referred in Tax Case No. 40 of 1978)."

(3.) THE Tribunal, while considering the validity of the proceedings and the consequential order of assessment, examined the necessary facts and held that, at the time of the original assessment, the assessee had filed balance-sheets for the period ending December 31, 1960, as well as for the period ending December 31, 1961. THE Tribunal, after perusing the records, recorded a finding that a copy of the accounts of Agarwalla Brothers showing the amounts of investments was also filed. THE plan of the building and the remark that it was sanctioned on February 9, 1961, was also found on the records. THE assessee, in a letter dated May 22, 1964, had given the details of the floor area of the flats and this was considered by the Income-tax Officer. In the assessment year itself, the fact of construction has been found noted and the nature of buildings has also been indicated. THE period of construction of office buildings had been given as between April 1, 1961, and December 31, 1961. THE Tribunal also found that the Income-tax Officer had examined the investments made by the assessee in the building stated to have been constructed by him and he found the cost as shown in the balance-sheet and the books to be reasonable both in respect of the office building as well as the residential buildings. While analysing the facts further in order to examine the jurisdictional issue, the Tribunal opined that it was only as a result of further enquiry that it transpired that the cost of construction of the buildings in question would be much more if the nature of construction is taken into consideration and, in these circumstances, it needs to be legally determined whether there was any escapement as a result of omission or failure on the part of the assessee to disclose full and true facts. THE Tribunal further held that, at the time of the original assessment, the fact of construction, the plan of construction, the area of construction and the cost of construction were given by the assessee and the Income-tax Officer found the investments shown to be reasonable and, on consideration of all these factors, it cannot be said that the primary facts were not disclosed by the assessee.