Income-tax---

----Reference---Penalty---Concealment of income---Revised return filed under Amnesty Scheme covered by Circular No-451, dated 17-2-1986---Amposition of penalty without getting instruction from CIT and levy of minimum penalty without considering scope of circular, whether valid-- Questions of law--Indian Income Tax Act, 1961, Ss. 256 & 271---Circular No.451, dated 17-2-1986.

Held, (i) that the question whether the Tribunal was correct in law to holding that the Income-tax Officer was right in imposing penalty when he had not sought instructions from the Commissioner about the revised return filed under the Amnesty Scheme admitting the addition and whether in such circumstances, the order imposing penalty by the Income-tax Officer was in accordance with law was a question of law; ,

(ii) that the question whether, on the facts and circumstances of the case, the order passed by the Tribunal confirming the minimum penalty on addition of Rs.74,044 even when the return was under the scheme and was protected by Circular No.451, dated February 17, 1986, was correct in law, when the merits of the said addition had not been gone into either by the Commissioner of Income-tax (Appeals) or by the Tribunal to find out the scope of the circular, was a question of law.

S.C. Goyal for the Assessee.

A.M. Mathur and A.K. Shrivastava for the Commissioner.

JUDGMENT

A.R. TIWARI, J.---The assessee has filed this application under section 256(2) of the Income Tax Act, 1961 (for short "the Act"), seeking direction to the Tribunal to state the case and refer the under noted questions, labelled as of law, arising out of the order dated March 17, 1994, passed by the Tribunal in I.T.A. No.680/Ind. of 1989 for the assessment year 1982-83 after rejection of the application, presented under section 256(1) of the Act and registered as R.A. No.67/Ind. of 1994 on October 5, 1994, for our opinion:

"(i)Whether the Tribunal is correct in law to hold that the Income-tax Officer was right in imposing penalty when he has not sought instructions from the Commissioner about the revised return filed under the scheme admitting the addition and whether in such circumstances, the order imposing penalty by the Income Tax Officer is in accordance with law?

(ii)Whether, on the facts and circumstances of the case, the order passed by the Hon'ble Tribunal confirming the minimum penalty on addition of Rs.74,044 even when the return wits under the scheme and is protected by Circular No.451 (see (1986) 158 ITR (St.) 135), dated February 17, 1986, is correct in law, when the merits of the said addition is not gone into either by the Commissioner of Income-tax (Appeals) or by the Tribunal to find out the scope of the Circular?

(iii)Whether, on the facts and circumstances of the case, the order of the Tribunal is valid in law in confirming the minimum penalty and not sending it back to the Commissioner of Income-tax (Appeals) to consider on merits about the said addition and whether the penalty could still be leviable on such addition, even of minimum quantum?"

Briefly stated, the facts of the case are that the assessee had income from manufacture of groundnut and other edible oils. In the course of the assessment proceedings certain additions were made. Firstly, according to the Assessing Officer, purchases were not verifiable and there was no day to day production record. An addition of Rs.76,040 was made on account of low yield of oil out of which an addition of Rs.10,340 was confirmed by the Commissioner of Income-tax (Appeals). During the previous year, the flying .quad of the Sales Tax Department had conducted a raid at the business premises of the assessee and seized certain books of account which were examined by the Assessing Officer also in the presence of the assessee. Certain discrepancies were noticed due to which the Assessing Officer made an addition of Rs.29,970 as income from undisclosed sources and further an addition of Rs.44,074 as income on account of alleged unaccounted payment. The assessee felt dissatisfied by these additions and, therefore, filed an appeal before the Commissioner of Income-tax (Appeals), in regard to the above two additions. Later, the assessee withdrew the appeal and filed a revised return offering a sum of Rs.74,044 as income from undisclosed sources. It was claimed that the benefit of the Amnesty Scheme be given to the assessee since the revised return was filed on March 31, 1986, and no penalty be levied. The Assessing Officer, however, negatived the contention and levied the minimum penalty of Rs.56,000 on account of the above three additions. The Commissioner of Income-tax (Appeals) observed that the assessee had written a letter to the Commissioner of Income-tax showing the position of the return filed under the amnesty scheme and requesting that no penalty and interest be charged as the appeal had been withdrawn. The attention of the Commissioner of Income-tax was also invited to the Central Board of Direct Taxes Circular No.451(see (1986) 158 ITR(St.) 135), dated I, February 17, 1986. The Commissioner of Income-tax (Appeals) accepted the contention of the assessee and held that the imposition of the penalty was premature and unwarranted. The penalty was, therefore, deleted. The Department felt aggrieved by the order of the Commissioner of Income-tax (Appeals) and thus filed the appeal before the Tribunal. The Tribunal allowed the appeal in part. The Tribunal held that levy of penalty with respect to the two additions totalling Rs.74,044 was just and liable to be restored. The Tribunal, however, also held that no penalty under section 271(1)(c) was leviable with reference to the addition of Rs.10,340. The appeal was thus partly allowed. Aggrieved by the order of the Tribunal, the assessee filed an application for rectification, which was registered as M.A. No.15/Ind. of 1994. That was rejected on August 3, 1994. The applicant then filed an application under section 256(1) of the Act. That was rejected on October 5, 1994, by an elaborate order. The assessee thereafter filed this application under section 256(2) of the Act.

We have heard Shri S.C. Goyal, learned counsel for the applicant/assessee, and Shri A.M. Mathur, learned senior counsel with Shri A.K. Shrivastava, for the non-applicant/Department.

Right at the threshold counsel for the applicant submitted that question No. (iii), as noted above, is not being pressed in this application as according to him the entire controversy is fully covered by questions Nos. (i) and (ii), as noted above.

The question to be considered is whether it was obligatory to obtain instructions from the Commissioner in regard to the revised return under the amnesty scheme? Further question is whether minimum penalty was liable to be foisted and additions of Rs.74,044 in the face of the revised return having been filed under the protective umbrella of Circular No.451 (see (1986) 158 ITR (St.) 135, dated February 17, 1986, were to be made?

In our view, a prima facie case is made out for issuing the direction to the Tribunal to state the case and refer the first two questions i.e., questions Nos.(i) and (ii) as noted above.

In view of this direction, we deem it improper to express a definite opinion for or against at this stage.

In the result, we allow this reference to the extent of questions Nos.(i) and (ii) and call upon the Tribunal to state the case and refer these two questions to this Court for opinion as expeditiously as possible.

A copy of this order be 'transmitted to the Tribunal for expeditious compliance.

This reference stands disposed of in terms indicated above but without any order as to costs.

Counsel fee is, however, fixed at Rs.750 for each side, if certified.

M.B.A./1838/FOrder accordingly.