9911796707
TMI Blog1982 (8) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... pen Mehta, as per profit and loss account, was Rs. 10,340 and that of Shri Mukesh Mehta, Rs. 12,574. The ITO on the basis of evidence came to conclusion that these school-going minor children could not appreciate the technicalities and intricacies of business, particularly the share dealing and share speculation. He, accordingly, added these two amounts in the hands of the assessee and also initiated penalty proceedings under s. 271(1)(c) of the Act. Since, however, the minimum penalty imposable exceeded the prescribed limit, he referred the matter to the IAC for the imposition of penalty. The IAC issued a show-cause notice but the assessee pleaded that since there was no mens rea in not showing the income in the hands of the assessee, there was no question of levying the penalty. The IAC, however, did not agree with the assessee and levied a penalty of Rs. 25,000. Aggrieved by this order, the assessee filed an appeal before the Income-tax Appellate Tribunal. It was contended that in view of the judgment of the Supreme Court in ClT v. Anwar Ali [1970] 76 IfR 696 and the judgment of the Madras High Court in N. Annamalai v. CIT [1969] 73 ITR 809, no penalty could be levied on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed an order of penalty on reference of the matter by the ITO. It has been argued that the ITO could, after 1st April, 1971, refer the case to the IAC only if the amount of concealment exceeded Rs. 25,000. It has been argued that in this case it will be clear from the dates given above that the initiation of proceedings for the imposition of penalty must have taken place after 31st March, 1971, when the change in law took place. It is contended that in view of the changed law and the amendment to s. 271(1)(c), the entire proceedings for imposition of penalty by the IAC was misconceived and, therefore, the order of the Tribunal should be set aside. Reliance has also been placed on the case of CIT v. Mela Ram Jagdish Raj Co. [1981] 132 ITR 897 (P H), for the proposition that if the concealment was below Rs. 25,000, penalty could not be imposed by the IAC after the amendment of s. 271(1)(c) read with s. 274(2). It has also been argued that even though this point was not canvassed before the Tribunal, the question that was now sought to be raised is only an aspect of the question that has been referred to this court. The question is broad enough for the assessee to urge this po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceedings. Section 274(2) at the material time stood as under: " 274(2). Notwithstanding anything contained in clause (iii) of subsection (1) of section 271, if in a case falling under clause (c) of that subsection, the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose have all the powers conferred under this chapter for the imposition of penalty." In this case the ITO had added back more than Rs. 29,000 to the income disclosed by the assessee in his return. On the face of the records it does not appear that the ITO did not have jurisdiction to refer the case to the IAC or that the IAC did not have jurisdiction to go into the question of penalty in this case. It was for the assessee to raise his contention before the IAC that the ITO had a concealment of less than Rs. 25,000 in his mind when his case was referred to the IAC. That contention, however, was not raised either before the IAC or befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her by applying the break-up method ; the assessee pleaded for adopting only the profit-earning method, since, in their submission, that was the only method which could be applied for the valuation of the shares of a going concern. The Tribunal accepted the contention of the assessee and valued the shares by applying the profit-earning method. An application was made for referring a question of law to the High Court by the Revenue. The application, however, was rejected by the High Court. There was a further appeal to the Supreme Court where it was argued that the articles of association of the company in question contained a restrictive provision as to the alienation of shares, and, therefore, r. 10, sub-r. 2 of the G.T. Rules should have been followed. It was argued that the break-up method was the primary method to be applied for arriving at the valuation of the shares and, in the circumstances, the Tribunal was wrong in determining the value of the shares by applying the profit-earning method. The Supreme Court rejected the said argument and observed as follows (p. 48 of 122 ITR): "Now, it is difficult to see how the question whether the valuation of the shares should have be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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