Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Penalty‑‑‑Concealment of income‑‑‑Addition of income on basis of estimate‑‑‑Addition reduced considerably by Tribunal‑‑‑Finding b) Tribunal in penalty proceedings that there was no concealment of income‑‑ Tribunal was justified in cancelling penalty‑‑‑No question of law arose‑‑ Indian Income Tax Act, 1961, Ss. 256 & 271(1)(c).

The assessee was a firm dealing in liquor. For the assessment year 1985‑86, the assessee had filed a return of income on September 12, 1985 declaring income of Rs.4,62,"70 on the total sales of Rs.3,17,12,712 which gave a gross profit at about 3.9 per cent. T`he Income‑tax Officer: found that certain expenses incurred were not supported by vouchers. He concluded under section 145(1) of the Income `Fax Act, 1961, that the sale pure of liquor in respect of the shops other than the shop at 1. was much less than the sale price of liquor at the L shop. He estimated the sales at Rs. 20 lakhs and the same was added to the trading account. This addition raised the gross profit rate to I l per cent. After disallowing some expenses the Income‑toy; Officer completed the assessment on Mareli 27, 1986 on an income of Rs.24.96,770. The assessee went in appeal before the Commissioner of Income‑tax. The Commissioner of Income‑tax (Appeals) confirmed the suppression of sales to the tune of Rs. 20 lakhs. The assessee took the matte: further in appeal before the tribunal. The Tribunal sustained an addition of one lakh of rupees only. 1n the meanwhile penalty had been imposed. The Commissioner of Income‑tax (Appeals) reduced the quantum of penalty. The Tribunal cancelled the penalty on the ground that the addition of Rs.l lakh was made on an estimate basis and the assessee's explanation was bona fide. On an application to direct reference:

Held, dismissing the application, that having regard to the admitted facts and the finding of fact as recorded by the Tribunal, there was nothing to show that there was concealment of income so as to attract penalty and the Tribunal in its discretion had only added Rs. 1 lakh on the basis of estimation and exercised its discretion. Under the circumstances. the finding recorded was purely a question of fact and no question of law arose

CIT v. Ashoka Marketing Ltd. (1976) 103 ITR 543 (SC); CIT v.Purushottamdas (1999) 236 ITR 573 (MP) and CIT (Addl.) v. Noor Mohd & Co. 1974 97 ITR 705 (Raj.) ref.

Sandeep Bhandawat for the Applicant.

Suresh Ojha and J.L.. Purohit for Respondent.

JUDGMENT

SHIVRAJ V. PATIL, C.J.‑‑‑Heard learned counsel for the parties.

This is an application lknder section 256(2) of the Income Tax Act, 1961 (for short "the Act" hereinafter), at the instance of the Revenue, for calling for a statement of case from the Tribunal on the following questions:

"(1) Whether, on the facts and in the circumstances of the case, the order of the Income‑tax Appellate Tribunal cancelling minimum penalty levied under section 271(1)(c) for concealment of income based on the addition of Rs. 1 lakh in the total income sustained by the Income‑tax Appellate Tribunal itself worked out on the basis of suppressed sale of liquor as noticed during search under section 132 of the Income Tax Act, 1961, was not perverse?

(2)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) for concealment of income? or in the alternative

(3)Whether, on the facts and in the circumstances of the case, the Tribunal was nut required to sustain the penalty levied under section 271(1)(c) fot furnishing inaccurate particulars of income in case it was not satisfied that the assessee had not concealed any particulars of its income?"

and to refer those questions for decision. The respondent firm is an assessee dealing in liquor in Uttar Pradesh. On March 23, 1985 when the authorised officer seized the cash found at Rs. 5,23,125 and certain documents for the assessment year 1985‑86, the assessee had filed a return of income on September 12, 1985, declaring income of Rs.4,62,770 on the total sales of Rs.3,17,12,712 which gave a gross profit at about 5.9 per cent. During the course of assessment proceedings, the Income Tax Officer. A Ward, Churu, on scrutinising the books of account found that the sales were not vouched and certain expenses incurred were not supported by vouchers. He concluded under section 145(1) of the Act that the sale price of liquor in respect of the shops other than the shop at Lohamandi was much less as compared to the sale price of liquor at the Loharnandi shop. He estimated the sales at Rs.20 lakhs and the same were added to the trading account. This addition raised the gross profit rate to f 1 per cent. Thus making an addition of Rs.20 lakhs and disallowing some expenses the Income‑tax Officer completed the assessment on March 27, 1986, on an income of Rs.24,96,770. The assessee went in appeal before the Commissioner of Income‑tax. The Commissioner of Income‑tax (Appeals) in the order, dated March 25, 1987, concluded that the accounts of the assessee were not reliable and confirmed the suppression of sales to the tune of Rs. 20 lakhs. The assessee took the matter further in appeal before the Tribunal. The Tribunal vide order, dated June 27, 1988 in I.T.A. No. 405/JP of 1987 sustained an addition of Rs. 1 lakh only. But in the meantime, the Inspecting Assistant Commis sioner levied penalty of Rs. 18,56,186 under section 271(1)(c) of the Act for concealment of income on the basis of the addition of Rs. 20 lakhs. The assessee filed appeal against this order under section 271(1)(c) before the Commissioner of Income‑tax (Appeals). The Commissioner of Income‑tax (Appeals) by order, dated December 20, 1988, reduced the quantum of penalty in proportion to the addition of Rs. 20 lakhs reduced to Rs. 1 lakh. While deciding the appeal the Commissioner of Income‑tax (Appeals) observed that the Income‑tax Appellate Tribunal sustained the addition of Rs. 1 lakh mainly on the consideration that the sale price charged at Lohamandi shop was higher than the price charged at other shops and the Lohamandi shop functioned only for 18 days during the year. Aggrieved by the order of the Commissioner of Income‑tax (Appeals) sustaining the minimum penalty the assessee filed an appeal before the Income‑tax Appellate Tribunal which by order, dated March 8, 1991 in I.T.A. No. 259/JP of 1989 cancelled the penalty sustained by the Commissioner of Income‑tax (Appeals) on the ground that the addition of Rs. 1 lakh was made on an estimate basis and the assessee's explanation was bona fide. Under these circumstances, the present application is made by the Revenue as already stated above."

Learned counsel for the Department urged that the fact that the Tribunal sustained addition of Rs. 1 lakh was sufficient for sustaining the penalty under section 271(1)(c) of the Act taking it as concealment of income. Per contra, learned counsel for the respondent assessee urged in support and justification of the order of the Tribunal. He contended that the addition of Rs. 1 lakh sustained by the Tribunal is not on the ground that there was concealment of income. On the other hand, it was only on the basis of estimation and best judgment assessment. Learned counsel further added that the Tribunal on consideration of the material available before it on the facts concluded that the explanation given by the assessee was bona fide and addition of Rs. 1 lakh only was justified. The Tribunal did not record a finding that there was concealment of income by the respondent assessee. Learned counsel in support of his submission relied on the decision of the apex Court in the case of CIT v. Ashoka Marketing Ltd. (1976) 103 ITR 543 and in particular drew our attention to para. 5 to contend that whether or not the assessee has concealed its income is a question to be decided on the facts of a case and where the decision that the income was not concealed was recorded by the Tribunal, no question of law arises for consideration. He cited the case of Additional CIT v. Noor Muhammad & Co. (1974) 97 ITR 705 (Raj.) in support of his contention that the question to be considered in this case is not a question of law. It is a mixed question of law and facts and the Tribunal on the facts concluded in favour of the assessee and added Rs. 1 lakh to the income and did not accept the case of the Revenue that it was a concealment. Based on the same judgment he further urged that the finding on question of fact is open to be attacked as erroneous in law only when there is no evidence to support it and it is not so in the case in hand. Yet, he cited another decision of the High Court of Madhya Pradesh in the case of CIT v. Purushotamdas (1999) 236 ITR 573, to take support that when the Tribunal in its discretion has passed the order and added only Rs. 1 lakh to the income and cancelled the penalty imposed, it is not open four the Revenue to question it under section 256(2) and ask for reference

We have considered the submission of learned counsel for the parties. Having regard to the admitted facts and the finding of fact as recorded by the Tribunal, there is nothing before us to show that there was concealment of income so as to attract penalty and the Tribunal in its discretion has only added Rs. 1 lakh on the basis of estimation and exercised its discretion. Under the circumstances the finding recorded is purely on a question of fact and no question of law arises for consideration. Hence, we do not find any merit in the application for reference. Accordingly, the reference application is rejected.

M.B.A./376/FCApplication rejected.