COMMISSIONER OF INCOME TAX Vs. SATNAM MALIK

JUDGEMENT

(1.) IN pursuance of the directions issued by this court under section 256(2) of the Income -tax Act, 1961 (for short 'the Act'), the Income -tax Appellate Tribunal, Jaipur, has referred the following question of law for our opinion :

(2.) BRIEFLY recounted, the material facts giving rise to this reference are that the assessee is an individual. The assessment year in dispute is 1967 -68. The assessee filed the return for the aforesaid year on September 14, 1967, declaring an income of Rs. 3,986. Subsequently, she filed a revised return on July 29, 1971, declaring an income of Rs. 11,703 therein. The Income -tax Officer determined the income of the assessee at Rs. 67,907 by his order, annexure 1, dated March 28, 1972. He also held in his assessment order that the assessee was the owner of a truck RJY 1600. But she has neither shown the income earned from this truck in the original nor in the revised returns. He, therefore, took it to be a case under section 271(1)(c) of the Act where the assessee had concealed the particulars of her income or had furnished inaccurate particulars of the income. According to the Income -tax Officer, the assessee had earned Rs. 3,000 as income by plying the truck. He also added a sum of Rs. 12,119 as profit under section 41(2) of the Act. The total income from the truck was thus determined to be Rs. 15,119. But he was not competent to impose penalty; hence he referred the matter to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner issued notice to the assessee and heard both the parties at length. The assessee contended before the Inspecting Assistant Commissioner that she was not the owner of the truck RJY 1600. The truck belonged to one Behari Lal. Behari Lal had shown the income from this truck in the return filed by him and tax was assessed thereon. This contention did not find favour with the Inspection Assistant Commissioner. He held that this contention of the assessee that the truck did not belong to her was rejected by the Appellate Assistant Commissioner and the Income -tax Appellate Tribunal earlier in the assessment proceedings. The Inspecting Assistant Commissioner, therefore, rejected the contention of the assessee that the truck did not belong to her. He further held that the assessee was guilty of concealing her income which she earned from this truck. He, therefore, imposed a penalty of Rs. 15,500 on the assessee under section 271(1)(c) of the Act. The assessee went in appeal before the Tribunal. The Tribunal set aside the order of the Inspecting Assistant Commissioner. The Tribunal took the view that penalty proceedings are independent proceedings and the Inspecting Assistant Commissioner should have, therefore, examined the explanation submitted by the assessee and the evidence on record independently of the finding given in the assessment proceedings. The Commissioner of Income -tax thereafter submitted an application before the Tribunal to make a reference to this court, but the Tribunal rejected that application also. The Commissioner thereafter come to this court under section 256(2) of the Act. This court directed the Tribunal to state the case and refer to this court the question of law. It is thus that we have the reference before us.

(3.) IT was contended by Mr. Arora that the view taken by the Tribunal is wholly erroneous and unsustainable. The assessment year is 1967 -68. section 271(1)(c) had undergone a change and an Explanation was added in 1964. The word 'deliberately' occurring clause (c) was deleted and the onus was kept on the assessee to show that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. The Tribunal did not take this Explanation into consideration while deciding the appeal. It was argued that if the Tribunal had taken into consideration the Explanation, the error would not have crept in. It was argued that the bare and bald submission of the assessee that she was not the owner of the truck was given undue weight and importance at the cost of the Explanation occurring in the section. It was further argued that the Tribunal did not record a finding whether the submission made by the assessee was sufficient to show that she was not guilty of any fraud or any gross or wilful neglect in not disclosing her income for the year 1967 -68 which she earned from the plying of the truck and its sale. Reliance, in support of the contention, was placed on CIT v. Ketini Krishnamurty : [1976]103ITR487(Orissa) , CIT v. Puranmal Prabhudayal : [1977]106ITR675(Orissa) , CIT v. Gyan Prakash : [1979]116ITR513(All) , Vishwakarma Industries v. CIT and Addl. CIT v. Mangalsen Mohanlal : [1982]136ITR905(All) . It was, on the other hand, contended by Mr. Daga that the question whether the assessee was guilty of any fraud or any gross or wilful neglect in concealing the particulars of her income or furnishing inaccurate particulars, was a question of fact. Since the Tribunal has held this question against the Revenue, this question of fact should not be reopened in this reference proceeding. He strived his best to sustain the order of the Tribunal. We have taken the respective submissions into consideration.