COMMISSIONER OF INCOME-TAX WEST BENGAL VI CALCUTTA Versus KALICHARAN AGARWALLA & CO.
ORDER
SUHAS CHANDRA SEN, J .‑‑ The Tribunal has referred the following questions of law under section 256(2) of the I.‑T. Act, 1961:
"(1) Whether on the facts and in the circumstances of the case the Tribunal had any evidence to hold that the penalty under section 271(1)(c) of the I. T. Act. 1861 was imposed by the Inspecting Assistant Commissioner on altogether different change than that on which the Income‑tax officer had initiated the penalty proceedings and whether such finding was otherwise unreasonable or perverse.
(2) Without prejudice to question No (1) whether on the facts and in the circumstances of the case and in view of the fact that the: assessee had disclosed on incorrect figure of closing stock while filing the original return of income and on a correct interpretation of the explanation to section 271(1)(c) of the I.T. Act, 1961, there was any onus on the department to prove that the assessee had concealed its income or had furnished inaccurate particulars of such income.
(3) Whether on the facts and in the circumstances of the case and in view of the Tribunal's finding while disposing of the assessee's appeal against the assessment order that the I.T.O. had detected certain unaccounted for purchases and sales, the Tribunal misdirected itself in law in holding that the Inspecting Assistant Commissioner was not justified in imposing a penalty under section 271(1)(c) of the I.‑T. Act, 1961."
2. The relevant facts as set out in the statement of case are as under:‑
During the course of assessment proceedings, the I.‑T.O. found that purchases and sales of rice were duly vouched according to the assessee's books. However, in order to verify some of the transactions he issued notice under section 131 of the 1961, Act on Messrs Satyanarayan Rice Mills with whom the assessee had dealings. On examination of the books of Messrs Satyanarayan Rice Mills, the I. T.O. found that the assessee had purchased rice worth Rs.6,207.50 on 1st January, 1963. Rs.4,420 80 on 6th January, 1963, Rs.4,144.30 on 15th January, 1963 and Rs.4,929.18 on 25th February, 1963 on credit but the same were not disclosed in the assessee's, books. The assessee's representative was also present when the books of Messrs Satyanarayan Rice Mills were examined by the I.T.O. Therefore, the I.T.O. concluded that the assessee had suppressed certain purchases and sales of rice. The I.T.O. also held that the G.P. at 2% shown by the assessee was low. Accordingly, in his assessment order, dated 30th October, 1965, the I.T.O. estimated the sales of Rs.19,50,000 In place of Rs.19,11,004 disclosed by a the assessee. Again the I.T.O. adopted gross profit rate at 3.3% as against 29 disclosed by the assessee and made an addition of Rs.65,250 to the trading results of the assessee. Simultaneously, he initiated penalty proceedings under section 271(1)(c) of the I.T. Act, 1961 and referred the matter to the Inspecting Assistant Commissioner as the minimum penalty imposable exceeded Rs.1.000.
3. The Inspecting Assistant Commissioner in his order, dated 23 rd October, 1970 stated that in its original return filed on 16th June, 1966 the assessee had shown loos of Rs.567 under the head 'business'. Subsequently, on 7th September, 1967, the assessee filed revised return showing income of Rs.29,443 under the head 'business'. The assessee's explanation about the discrepancy was that some mistakes had crept in, in totalling the value of the closing stock, when the original return was filed. The original closing stock figure was taken at Rs.30,827 instead of Rs.60,827 which was subsequently taken while filing the revised return. On these facts' the Inspecting Assistant Commissioner concluded that the assessee had suppressed the gross profit by Rs.30,000. In this connection the Inspecting Assistant Commissioner observed that 'in fact, it is a clear case of deliberate attempt on the part of the assessee to suppress the profit of the business to the tune of Rs.30,000 in the original return for which he is liable to penalty under section 271(i)(c) of the Act'. Accordingly, he imposed a penalty of Rs.11,760 on the assessee under section 271(1)(c) of the Act.
4. The assessee appealed to the Tribunal. The Tribunal on a review of the facts and also the findings of the I.T.O. and the Inspecting Assistant Commissioner cancelled the order of penalty. The Tribunal observed:‑
"We have carefully considered the rival submissions of the parties and are of the view that the assessee must succeed in this appeal. The I.A.C.'s imposing penalty on an altogether different charge is not permissible in view of the Gujrat High Court decision in the case of Lakdhir Lalki (85 I T R 77), (1972 Tax LR 31.6). The addition made by the I.T.O. by invoking provisions of section '145 of the 1961 Act, by itself, does not prove that the assessee had concealed income. The difference between the income returned and the income assessed is due to honest belief of the parties as to what should be the gross income in the rice business and nothing else. This, by itself, is not sufficient to establish the charge of concealment of income or furnishing inaccurate particulars thereof as envisaged in section 271(1)(c) of the 1961, Act. In this view of the matter, we cancel the order of the I. A. C. made under section 271(1)(c) of the 1961 Act."
5. Mr. Dhar, appearing on behalf of the Revenue, has argued a number of points of law before us. Nobody has appeared on behalf of the assessee. But we are of the opinion that in view of the findings of fact made by the Tribunal it is not necessary to go into the questions of law raised in this reference at all. The Tribunal has held that sufficient facts had riot been brought of record to establish to charge of concealment of income or of furnishing inaccurate particulars as envisaged in section 271(1)(c) of the 1961, Act. The Tribunal has pointed out that the addition that was made by the income‑tax Officer was by invoking the provisions of section 145 of the 1961 Act and that this did not prove that the assessee had concealed its income. The Tribunal further found that the difference between the income returned and the income assessed way due to honest belief of the assessee as to what should be the gross income in the rice business arid nothing else. The Tribunal did not apply any legal principle in coming to the conclusion that there was no concealment of income in this case it is for the Revenue to establish a case of penalty by producing sufficient evidence. The Tribunal has considered the evidence on record and has come to the conclusion that the income that was returned by the assessee was due to its honest belief as to what should be its gross income to the rice business and nothing else. In our opinion, the question raised in this reference really do not bring out the controversy between the, parties. The finding of the Tribunal that the income that was returned was due to honest belief was not really challenged. When no question has been raised on this aspect of the matter and so long as this finding stands, it is very difficult to find fault with the order of the Tribunal. In that view of the matter, the questions that have been raised have really become academic and we decline to answer the questions.
6. In the facts of this case there will be no order as to costs.
M. B. A. Reference answered accordingly.