1995 (3) TMI 66 - HC - Income Tax

Summary

Issues:
- Application under section 256(1) of the Income-tax Act, 1961 for penalty under section 271(1)(c)
- Tribunal's dismissal of the application and subsequent petition under section 256(2)
- Assessment of income, addition to income, and penalty imposition
- Tribunal's conclusion on penalty levy and refusal to refer question of law to High Court
- Jurisdiction of High Court under section 256 and review of Tribunal's decision

Analysis:
The judgment concerns an application under section 256(1) of the Income-tax Act, 1961, for the levy of a penalty under section 271(1)(c). The Commissioner of Income-tax sought a reference to the High Court regarding the correctness of the Tribunal's decision on the penalty issue. The Tribunal dismissed the application, prompting the Commissioner to file a petition under section 256(2) challenging the Tribunal's decision. The crux of the matter revolved around the non-inclusion of certain amounts in the assessee's income statement due to lack of information from Liberty Footwear, the party making the payments. The Tribunal, after a detailed examination, concluded that no penalty was leviable based on the facts of the case, emphasizing the bona fides of the assessee's explanations and the Assessing Officer's acceptance of the same.

The Tribunal's decision not to refer a question of law to the High Court was challenged by the Commissioner, arguing that the Tribunal erred in considering irrelevant matters and wrongly assessing the bona fides of the assessee. The High Court clarified the jurisdiction under section 256, highlighting that while the Tribunal's factual findings are final, questions of law can be referred to the High Court. In this case, the Tribunal's findings were based on admissible evidence and did not involve questions of law necessitating a reference.

The Commissioner contended that the assessee's actions, including not claiming deductions for certain amounts, did not establish bona fides. However, the High Court upheld the Tribunal's decision, noting the sequence of events where the assessee promptly adjusted the income upon receiving the necessary information from Liberty Footwear. The Court found the Tribunal's inference on the assessee's lack of wilful neglect or fraud to be based on relevant material and not erroneous.

Additionally, the Commissioner's arguments regarding the Tribunal's consideration of irrelevant matters and acceptance of the assessee's explanation were refuted by the High Court. The Court cited precedents to distinguish the present case from previous judgments and reiterated that no statable question of law arose from the Tribunal's decision. Ultimately, the High Court dismissed the petition, affirming the Tribunal's decision and finding no error in its order.