COMMISSIONER OF INCOME TAX Vs. KAILASH CROCKERY HOUSE

JUDGEMENT

(1.) THE Tribunal has referred the following question for opinion of this court under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") :

(2.) THE assessee derives income from crockery business. For the assessment year 1979-80, to which this reference relates, it submitted a return showing turnover of Rs. 4,37,285 and gross profit at 10.5 per cent. THE Assessing Officer found that the income shown was not correct. He estimated the sale and gross profit at Rs. 5,12,500 and at 15 per cent respectively. In view of the discrepancy between the income returned and the income asssessed, he initiated penalty proceedings under Section 271(1)(c) of the Act and, ultimately, imposed penalty of Rs. 11,290. THE Appellate Assistant Commissioner confirmed the order. THE Tribunal, however, cancelled the penalty holding that there was no finding of concealment of income by the assessing/appellate authorities. It held that although the addition of income had been sustained by the Tribunal, it could not follow that the books of account which the assessee had produced contained inaccurate particulars of total income. However, on an application for making a reference of the question as to whether it had correctly deleted the penalty the Tribunal referred the above-noted question for opinion to this court.

(3.) THE question referred for opinion, as noted at the outset, is as to whether in view of Explanation 1(B) appended to Section 271(1)(c) of the Act as applicable during the relevant assessment year, the Tribunal committed an error in cancelling the penalty. THE contention of Mr. Vidyarthi, on behalf of the Revenue is that where the assessee has offered an explanation but fails to substantiate the same he would be deemed to have concealed the amount added or disallowed in computing the total income for the purpose of clause (c) of Section 271(1). Mr. Binod Poddar, learned counsel for the assessee, on the other hand, contends that the Tribunal was correct in deleting the penalty on the ground that the explanation furnished by the assessee was bona fide taking the aid of the proviso. He submits that although the decision in the cases of Nathulal Agarwala [1985] 153 ITR 292 (Patna) [FB] and Mussadilal Ram Bharose [1987] 165 ITR 14 (SC) had been rendered in the context of the Explanation as it stood prior to 1976 the principles laid down in those judgments hold good. Furnishing inaccurate particulars of income per se will not warrant imposition of penalty unless it is found to be lacking bona fides. Mr. Poddar submits that, in the present case, it may not be necessary to go into the larger question in view of the finding of fact recorded by the Tribunal on the point of inaccuracy or otherwise of the particulars of income.