Income-tax---

----Reference---Penalty---Concealment of income---Original assessments for assessment years 1983-84 and 1984-85 completed at nil income---Return for assessment year 1986-87 filed declaring loss---Search of business premises of assessee---Additions made to income of assessee on account of unexplained investments in order passed under S.132(5)---Revised returns filed by assessee offering additional income for four assessment years---Assessing Officer accepting additional income offered as undisclosed income-- Initiation of penalty proceedings and penalty imposed on assessee for four years---Revised returns filed after detection of concealment after search-- Tribunal cancelling penalties---Question of law arises for reference---Indian Income Tax Act, 1961, Ss.256(2) & 271(1)(c).

The assessments of the assessee for the assessment years 1983-84 and 1984-85 were completed at "nil" income. The return for the assessment year 1986-87 was filed by the assessee declaring a loss of Rs.1,95,575 on June 30, 1986. In the meanwhile, a search was conducted on the business premises of the assessee on June 29, 1985, and on the basis of the evidence collected in the search, an order under section 132(5) of the Income Tax Act, 1961, was passed making an addition of Rs.10,56,012 to the income of the assessee on account of various unexplained investments. In consequence of queries made by the Assessing Officer, the assessee filed revised returns of income for the four relevant assessment years offering additional income. The Assessing Officer accepted the additional income offered by the assessee as undisclosed income. He also initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961, and imposed penalties on the assessee for all the four years. The Commissioner of Income-tax (Appeals) dismissed the appeals filed by the assessee. The Tribunal however cancelled the penalties for all the four years. The Tribunal rejected the application under section 256(1) of the Revenue to refer a common question of law. On an application under section 256(2) for directing the Tribunal to refer a question of law, the Revenue contended that the assessee filed revised returns only after detection of concealment and it was not a case of voluntary disclosure, that the contumacious conduct on the part of the assessee in filing the initial returns, which, if accepted, would have resulted in evasion of tax was not wiped out by his filing subsequent returns, clearly born of an urge to avoid the wrath of law and that the finding of the Tribunal was not supported by evidence and was perverse:

Held; that in the face of the search and revised returns filed by the assessee, it could not be said that the decision of the Tribunal cancelling the penalties was based purely on correct appreciation of facts. Therefore, a question of law arose for reference.

Arulprakasam (S.R.) v. Smt. Prema Malini Vasan, ITO (1987) 163ITR 487 (Mad.); Indian Cloth Depot v. CIT (1988) 173 ITR 330 (Ker.); Mohammad Shabbir v. CIT (1984) 148 ITR 111 (MP) and Sir Shadilal Sugar and General Mills Ltd. v. CIT (1987) 168 ITR 705 (SC) ref.

D.D. Vyas for the Commissioner.

J. W. Mahajan for the Assessee.

JUDGMENT

N.K. JAIN, J.---The aforesaid miscellaneous civil cases contain common question of facts and law and thus, were, heard analogously and are being disposed of by this common order.

By these four applications under section 256(2) of the Income Tax Act, 1961 (for short, "the Act"), the Department seeks a direction to the Income-tax Appellate Tribunal, Indore, to state the cases and refer to this Court the following common question, said to be of law, arising out of the consolidated order, dated May 29, 1992, of the Tribunal passed in I.T.A. Nos.673 to 676/Ind. of 1990 and its refusal to make reference by the order, dated February 16, 1993, passed in R.As. Nos. 158 to 161/Ind of 1992 relating to the assessment years 1983-84 to 1986-87:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty levied under section 271(1)(c) of the Income Tax Act, 1961?"

The Assessing Officer levied penalties of Rs.12,000, Rs.1,00,000, Rs. 92,000 and Rs. 1,10,000 on the non-applicant/assessee under section 271(1)(c) of the Act for the assessment years 1983-84, 1984-85, 1985-86 and 1986-87, respectively. The appeals filed by the assessee against these penalties were dismissed by the Commissioner of Income-tax (Appeals) by a common order, dated March 23, 1980. The order of the Commissioner of Income-tax (Appeals) was then challenged in second appeals before the Tribunal. The Tribunal allowed all the appeals and cancelled the penalties.

To place the record straight it may be stated here that originally the assessment for the assessment year 1983-84 was completed on December 17, 1986, while for the years 1984-85 it was completed on March 26, 1987, at nil income. The return for the year 1986-87 was filed on June 30, 1986, declaring loss of Rs.1,95,575. However, in the meantime, a search was conducted on June 29, 1985, and on the basis of evidence collected in the search, an order under section 132(5) was passed making addition to the tune of Rs.10,56,012 on account of various unexplained investments. The Assessing Officer carried out further investigations and collected more information. Consequent upon the information, the assessee was asked by the Assessing Officer to furnish evidence on the points raised in the order under section 132(5). In consequence of these queries, the assessee filed revised returns of income on March 11, 1988, for the aforesaid assessment years offering additional income whereupon the Assessing Officer accepting the additional income as disclosed by the assessee made reassessment on March 25, 1988 as follows:

The Assessing Officer, however, also initiated penalty proceedings under section 271(1)(c) and imposed penalties, which as already stated above were quashed in appeals by the Tribunal.

As the order of the Tribunal passed in appeals was not acceptable to the Department, reference applications under section 256(1) were filed which too were rejected by the Tribunal. This gave rise to the present applications under section 256(2) of the Act.

We have heard Shri D.D. Vyas, learned counsel for the applicant/Department and Shri J.W. Mahajan, learned counsel for the non -applicant/assessee in all these four cases.

Shri Mahajan, learned counsel for the non-applicant/assessee has vehemently opposed the applications and contended that the finding of the Tribunal that the Department did not discharge the burden of proof that there was concealment of income by the assessee, is a finding of fact which does not give rise to any referable question of law. He has placed reliance on a Supreme Court decision in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT (1987) 168 ITR 705 and the decision of this Court in the case of Mohammad Shabbir v. CIT (1984) 148 ITR 111.

As against it, Shri D.D. Vyas, learned counsel for the applicant/Department has strenuously contended that it was not a case of voluntary disclosure by the assessee who filed revised returns only after detection of the concealment. He further submitted that the contumacious conduct on the part of the assessee in filing the initial returns, which, if accepted, would have resulted in evasion of tax, was not wiped out by his filing subsequent returns clearly born of an urge to avoid wrath of law. He also urged that the finding of the Tribunal is not supportable by evidence and is punctuated by perversity in any case. He placed reliance on the decision in the cases of S.R. Arulprakasam v. Smt. Prema Malini Vasan, ITO (1987) 163 ITR 487 (Mad) and Indian Cloth Depot v. CIT (1988) 173 ITR 330 (Ker).

At the first blush we thought that the decision of the Tribunal was based purely on correct appreciation of facts, but, on deeper probe in the face of search and revised returns, we deemed it proper to call for the question, hear the parties at length and then answer the question one way or the other. To avoid possible prejudice to both the sides, we refrain from expressing any opinion on the merits of the case at this stage. We are, however, satisfied that on the facts and in the peculiar circumstances of the case, the order of the Tribunal does give rise to the common question of law as noted above for our consideration and opinion.

Consequently, we call upon the Tribunal to state the cases and refer the aforesaid common question of law for the opinion of this Court in regard to the aforesaid appellate order in four appeals. The reference applications are accordingly allowed but with no order as to costs counsel's fee is, however, allowed at Rs.750 in each case, for each side, if certified.

A copy of this order be transmitted to the Tribunal for compliance as expeditiously as possible.

Retain this order in M.C.C. No.269 of 1993 and place its copy each in M.C.C. Nos.273 of 1993, 274 of 1993 and 275 of 1993.

M.B.A./3026/FC Applications allowed.