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TMI Blog1973 (4) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... re, one reference has been made by the Tribunal to this court. The reference has been made by the Tribunal at the instance of the Additional Commissioner of Income-tax, Patiala, and arises out of the order of the Tribunal dated June 11, 1971, passed in I.T.As Nos. 459 and 460 of 1969-70. The facts giving rise to this reference may be summarized as follows. The assessee, Messrs. Sadiq Ali Bros., is a registered firm with its headquarters at Srinagar and branch at Bombay and deals in Kashmir Arts goods. The firm consists of nine partners. The assessment relates to the accounting years ending March 31, 1964, and March 31, 1965, i.e., assessment years 1964-65 and 1965-66. For these years the assessee filed its return declaring income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the order of the Inspecting Assistant Commissioner, the assessee filed an appeal before the Tribunal for deleting the penalties levied by the Commissioner. The contention of the assessee before the Tribunal was that it was a case of an agreed addition resulting from unproved deposits and no culpable or wilful negligence on the part of the assessee was involved and, therefore, the penalties were not exigible under the provisions of the Act. This contention appears to have found favour with the Tribunal who observed as follows : " After carefully looking at the facts and the terms of the letters and notings on the order sheet, we are of the opinion that it is a case of unproved cash deposits where the rule laid down by the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate concealment on the part of the assessee. We are inclined to agree with the contention raised by the learned counsel for the assessee. Section 271(1) of the Act runs thus : "If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be............ " From a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali, wherein their Lordships observed as follows : " It is true that penalty proceedings under section 28 are included in the expression 'assessment' and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. " Although this decision was given with respect to the interpretation of section 28 of the old Act, yet the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Supreme Court in Anwar Ali's case, for the Income-tax Officer to find on evidence that the amount of Rs. 12,000 represented the income of the assessee. Therefore, we are clearly of the view that the requirements of section 271(1)(c) have not been satisfied so as to bring the case of the assessee within the same. " To the same effect is another decision of the Supreme Court in Commissioner of Income-tax v. Bharat Engineering and Construction Co. wherein their Lordships of the Supreme Court refused to hold that the assessee would be liable to pay penalty merely because his explanation regarding cash deposits was false. In this connection their Lordships observed as follows : "Hence, it is reasonable to assume that those cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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