ADDITIONAL COMMISSIONER OF INCOME TAX Vs. JANKIDAS MOHANLAL

JUDGEMENT

(1.) THIS is a reference under Section 256(2) of the I.T. Act, 1961 (hereinafter to be referred to as " the Act" for the sake of brevity). Pursuant to this court's order/direction dated July 9, 1974, the Income-tax Appellate Tribunal, Patna, has submitted a case and referred the following question of law for our opinion :

(2.) THE facts relevant for disposal of this case are set out in the statement of the case as submitted by the Tribunal. THE assessee is a registered firm carrying on business in milling, arhat, film distribution and jute. THE assessment year involved is 1964-65. THE ITO made certain additions to the book results shown as he found that the commercial taxes authorities had seized a khata and a cash book from the assessee's business premises. Besides various additions made in the trading account, the ITO added Rs. 3,66,000 as income from undisclosed sources and the total income was determined at Rs. 9,38,292. This was later on enhanced by a sum of Rs. 1 lakh under Section 154 of the Act. A copy of the assessment order of the asses-see has been marked annexure "A" to the statement of the case. THE ITO then initiated proceedings under Section 271(1)(c) and the IAC imposed a penalty of Rs. 1,14,360 by making a reference to the additions made by the ITO. This order of the IAC was passed before the appeals in the matter of quantum of assessment had been decided by the AAG or the Appellate Tribunal. THE order of the IAC has been marked annexure "B" to the statement of the case.

(3.) THE main attack of the Revenue on the order of the Tribunal is that it was oblivious of the provision engrafted in the Explanation. This argument is wholly misconceived. It will bear repetition to say that the Tribunal more than once referred to the provision of the Explanation and in that light considered the submissions made on behalf of the assessee and accepted the proposition that the additions to the income and disallowances of the expenditure in the assessment proceeding of the assessee was based on bare estimate. In other words, the alleged imposition of penalty was more as a result of suspicion than on any material on the record to contradict the assessee's stand. Keeping the well-settled principle of law with regard to the true purport and meaning of the Explanation to Section 271(1)(c) of the Act, the Tribunal has for all practical purposes accepted the explanation furnished by the assessee that the preponderance of probabilities was in favour of the assessee which could very easily be accepted. Though the Tribunal may not have said so in so many words, the entire tenor of the Tribunal's order is a pointer to such an inference.