NANDLAL JAISWAL & CO. VS COMMISSIONER OF INCOME-TAX, 2000 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 759 (1996)

(a) Income-tax---

----Penalty---Concealment of income---Finding that there had been concealment of income---Reference to wrong provisions of law was not relevant---Imposition of penalty valid---Indian Income Tax Act, 1961, S.271(1)(c).

(b) Income-tax---

----General principles---Reference to wrong provision of law would not vitiate proceedings.

The assessee-firm derived its income from truck plying, flour mill and timber business. The assessee failed to comply with the terms of the notices under sections 143 (2) and 142(1) of the Income Tax Act, 1961. Therefore, the assessment was completed under section 144 of the Act, determining the total income at Rs.63,160 as against the returned income of Rs.16,000. Registration was, therefore, refused. Since the income returned was less than 80 percent. of the assessed income, penalty under section 271(1)(c) of the Act was also separately imposed. The levy of penalty was upheld by the Tribunal. On a reference, it was contended that the Income-tax Officer has referred to section 271(1)(c) prior to its amendment, that the provision had been deleted and hence the Income-tax Officer should not have proceeded in the matter and imposed the penalty under section 271(1)(c) of the Act:

Held, that the Income-tax Officer might have made a reference to an unamended provision on the basis of facts which were relevant but the Tribunal had found that the penalty was justified with reference to the existing provision. Simply by referring to a wrong provision of law which was non-existent, it could not be said that penalty could not be imposed under the existing provision. In the present case, penalty could be levied under section 271(1)(c) of the Act.

G. N. Purohit for the Assessee.

Abhay Sapre for the Commissioner.

JUDGMENT

A. K. MATHUR, C. J.--This is a reference under section 256(1) of the Income Tax Act, 1961, and the following question of law has been referred by the Tribunal for answer by this Court:

"Whether the Tribunal, in the facts and under the circumstances of the case, was justified in restoring the penalty?"

The assessee-firm derived its income from truck plying, flour mill and timber business. The assessee failed to comply with the terms of the notices under sections 143(2) and 142(1) of the Act. Therefore, the assessment was completed under section 144 of the Act, determining the total income at Rs.63,160 as against the returned income of Rs.16,000. The income from truck plying was estimated at Rs.25,000 and income from timber business was also estimated at Rs:33,710. The net income from flour mill was estimated at Rs.4,000. As no books of account were produced, genuineness of the shares could not be verified. Registration was, therefore refused. Since the assessed income was more than 80 percent. Penalty under section 271(1)(c) of the Act was also separately imposed.

Aggrieved by this order of penalty, the assessee approached the Appellate Assistant Commissioner on appeal and the Appellate Assistant Commissioner directed grant of registration to the firm and reduced the total income by Rs.8,750, Rs.3,750 out of timber business and Rs.5,000 out of truck plying income. However, the assessee did not file second appeal before the appellate authority.

In response to the penalty notice under section 271(1)(c), the assessee filed a written reply. The assessee's only argument was that the addition was on account of estimate of sales and gross profit rate. The assessee, therefore, prayed for dropping of the penalty proceedings. The Income-tax Officer rejected the contention and imposed the penalty under section 271(1)(c) treating more than 80 per cent of the income assessed and levying the penalty. Thereafter, the matter was taken in appeal before the Appellate Assistant Commissioner who reversed the finding of the Income?tax Officer. The Revenue then filed an appeal before the Tribunal which found that the penalty of Rs.15,050 under section 271(1)(c) of the Act was justified. Hence, the assessee approached the Tribunal for making a reference and accordingly the aforesaid question has been referred for answer by this Court.

We have heard learned counsel for the parties and perused the record. The question which has been referred is essentially a question of fact and no question of law arises in this case. However, Shri Purohit, learned counsel for the assessee, urged that the Income-tax Officer has referred to an unamended provision, treating it that the assessed income was 80 percent. of the returned income; that the provision was deleted long back and, therefore, the Income-tax Officer should not have proceeded in the matter and imposed the penalty of Rs.15,050 under section 271(1)(c) of the Act. The Income-tax Officer might have made a reference to an unamended provision on the basis of facts which were relevant and the Tribunal has found that the penalty was justified with reference to the existing provision. We are of opinion that simply by referring to a wrong provision of law which is non-existent, it could not be said that penalty could not be imposed under the existing provision. In the present case, penalty could be levied under section 271(1)(c) of the Act. The Tribunal was justified in upholding the penalty and restoring the order of the Income-tax Officer.

Hence, the question is answered in favour of the Revenue and against the assessee.

M.B.A./3249/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.