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Issues:
- Application under section 256(2) of the Income-tax Act, 1961 seeking a direction to the Tribunal to state the case and refer a proposed question. - Justification of canceling penalty under section 271(1)(c) by the Tribunal. Analysis: The judgment involves an application filed by the Commissioner of Income-tax under section 256(2) of the Income-tax Act, 1961, requesting the Tribunal to state the case and refer a proposed question regarding the cancellation of penalty under section 271(1)(c). The facts of the case reveal that the assessee, a registered firm, had advanced a sum of Rs. 50,000 to a sister concern and subsequently surrendered an amount of Rs. 65,000 as unexplained credit. The Income-tax Officer imposed a penalty under section 271(1)(c) for concealment of income, which was later canceled by the Tribunal. The Department challenged this decision through the application under consideration. During the hearing, arguments were presented by both parties. The counsel for the Department contended that the cancellation of the penalty was erroneous as it was a clear case of concealed income. On the other hand, the counsel for the assessee argued that the penalty cancellation was based on a proper evaluation of evidence and did not raise any legal question. The court noted that the assessee had surrendered the income when unable to explain the non-disclosure earlier. However, without delving into the specifics, the court decided to focus on whether the Tribunal's decision to cancel the penalty was justified. After considering the factual and legal aspects of the case, the court found merit in allowing the application under section 256(2) of the Act. Consequently, the court directed the Tribunal to state the case and refer the question of law for consideration. The judgment did not impose any costs but fixed the counsel fee for each side. The court also instructed to transmit a copy of the order to the Tribunal for further action.
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