COMMISSIONER OF INCOME-TAX VS MOHANLAL RADHAKRISHNA, 1999 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 357 (1996)

Income-tax---

----Reference---Penalty---Concealment of income ----Assessee surrendering income because of inability to explain its source---Tribunal whether justified in holding that there was no concealment and cancelling penalty---Question of law---Indian Income Tax Act, 1961, Ss.256 & 271(1)(c).

The assessee was a registered firm. The Income-tax Officer noticed that it had advanced a sum of Rs.50,000 to a sister concern on October 28, 1983, and that there was a credit entry of Rs.15,000 in its cash book on May 16, 1983. The assessee was asked to prove the source of these amounts in the assessment year 1984-85. The assessee surrendered the amount of Rs.65,000 with a request that no penalty should be imposed on it. This proposal was not accepted by the Income-tax Officer and the assessee was asked to explain after collection of evidence. The assessee surrendered the amount as unexplained credit of Rs.65,000. Treating this as concealment of income, penalty was imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal cancelled the penalty. On an application to direct reference:

Held, that the question whether the Tribunal was justified in holding that there was no concealment of income and in cancelling the penalty imposed under section 271(1)(c) was a question of law.

D.D. Vyas for the Commissioner.

V.K. Jain for the Assessee.

JUDGMENT

A.R. TIWARI, J.---The applicant (Commissioner of Income-tax, Bhopal has filed this application under section 356(2) of the Income Tax Act, 1961 (for short "the Act"), seeking a direction to the Tribunal to state the case and refer the proposed question, extracted below, arising out of the order, dated May 15, 1992, passed in I.T.A. No.87/Ind of 1990, after rejection of the application, presented under section 256(1) of the Act and registered as R.A.No.137/Ind of 1992 for the assessment year 1984-85 on November 30, 1992:

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

Briefly stated the facts of the case are that the assessee is a registered firm. The Income-tax Officer noticed that the sum of Rs.50,000 was advanced on October 28, 1983, to a sister concern, Suman Oil Mills, vide entry on Rokad Panna 122. This amount was also found credited in the account held in the Bank of India and was drawn on the same date. A credit of Rs.15,000 appeared in the cash book of the firm on May 16, 1983, but the entry in the pass book appeared on March, 6, 1982. The amount was appropriated earlier and not in the accounting year relevant to the assessment year under consideration. The assessee was asked to prove the availability of the above amount credited in the cash book. The firm was also asked to prove the source of the amount. The assessee submitted a letter on March 10, 1985, to surrender the amount of Rs.65,000 with the condition that no penalty should be imposed under section 271(1)(c) of the Act. The above proposal was not accepted by the Income-tax Officer and the assessee was asked to explain after collection of evidence. The assessee surrendered the amount as unexplained credit of Rs.65,000. Treating this as concealment of income, penalty was imposed under section 271(1)(c) of the Act. Eventually, the penalty was cancelled by the Tribunal. Dissatisfied, the Department field the application under section 256(1) of the Act which was rejected. Thereafter, the Department has filed this application under section 256(2) of the Act.

We have heard Shri D.D. Vyas, learned counsel for the applicant/Department, and Shri V.K. Jain, learned counsel for the non -applicant/assessee.

Shri Vyas submitted that evidently it was a case of concealed income to the extent of Rs.65,000 and as such the penalty was wrongly cancelled. He further submitted that the conclusion culminating in cancellation of penalty is perverse and perversity gives rise to a question of law. Shri Jain on the other hand, submitted ,that the penalty was cancelled on proper appreciation of the evidence and that the proposed question was not one of law.

It emerges from the record that the assessee surrendered the income of Rs.65,000 when it found it difficult to explain the non-disclosure earlier. However, as we are issuing the direction, as prayed, we do not find it proper to go into the details of the matter and express any opinion at this stage.

On the basis of the factual position it remains to be seen whether the Tribunal was justified in holding that there was no concealment of income and in cancelling the penalty imposed under section 271(1)(c) of the Act.

Taking into account the factual matrix and legal position, we find that this application under section 256(2) of the Act deserves to be allowed. .

Accordingly, we allow this application and call upon the Tribunal to state the case and refer the aforesaid question of law for our consideration and opinion as expeditiously as possible.

We, however, make no order as to costs.

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

Transmit a copy of this order to the Tribunal.

M . B. A. / 1778/FCOrder accordingly