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TMI Blog1979 (7) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e reassessment proceedings it was brought to the notice of the assessee that he had received Rs. 60,751 as consultation and injection charges from the employees of the Posts and Telegraphs Dept. which he had failed to mention in his income-tax returns. The assessee contended before the assessing authority that the aforesaid amount was excessive and he could not have received more than Rs. 40,000 by way of gross receipts from the employees of the Posts and Telegraphs Dept. during the relevant year of assessment. As regards the income from other Central Govt. employees his case was that he had received income to the extent of Rs. 2,000 to Rs. 3000 only. The ITO made an assessment estimating the income of the assessee from the employees of the Posts and Telegraphs Dept. and from the other Central Govt. employees at Rs. 65,571, out of which he allowed expenses to the extent of Rs. 6,000. On appeal, the AAC enhanced the amount of expenditure to Rs. 12,000 and also reduced the amount to Rs. 2,500 in place of Rs. 5,000 towards the income from the employees other than the Posts and Telegraphs Dept. The assessee as well as the Department, both filed appeals before the Income-tax Appellate T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood in any case concluded by the order of the Tribunal in quantum proceedings, and that the same could not be allowed to be re-agitated in the penalty proceedings. It was also urged that the assessee had never requested the ITO or any other authority during the course of assessment proceedings or even in the penalty proceedings that the original bills and vouchers be shown to him on the basis of which the figure of Rs. 60,571 had been arrived at. On the other hand, when the assessee was confronted with the figure of Rs. 60,571 he merely stated that the aforesaid figures appear to be excessive to him and admitted that according to him he should not have received more than Rs. 40,000 from the Posts and Telegraphs Dept. In spite of the best efforts of the IAC for getting the original bills, the PostmasterGeneral informed that the bills in question had been weeded out as the time-limit for their retention had expired. The Appellate Tribunal held that the assessee had not disclosed truly and fully all the material facts which were necessary for his assessment and action under s. 147 of the Act was, therefore, valid. The Tribunal further held that turning to the merits of the case and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the return, the penalty at the minimum would be Rs. 3,000 and the maximum, Rs. 22,500. The Commissioner of Income-tax, Rajasthan-I, Jaipur Circle, Jaipur, submitted an application under s. 256(1) of the Act asking the Tribunal to state the following case and to refer the same for being decided by the hon'ble High Court. " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal misdirected itself by ignoring material evidence on record in computing the amount of concealed income at rupees 5,000 as against Rs. 25,071 computed by the Inspecting Assistant Commissioner and thus in reducing the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, to a sum of Rs. 7,500 only ? " The Tribunal, vide its order dated August 22, 1977, held that no question of law arose for stating a case and for referring the same for being decided by the hon'ble High Court, dismissed the reference application. Under the above facts and circumstances, the Commissioner has filed the present application under s. 256(2) of the Act. Mr. Mehta, learned counsel for the Revenue, has argued that the Tribunal has committed an error of law in not relying u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." This Explanation was in force at the date when the default which attracted penalty was committed. It was an admitted case that the total income returned by the assessee was less than 80% of the total income as assessed and thus the burden lay upon the assessee to prove that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. The Tribunal committed an error of law in not applying the above Explanation in the case and wrongly gave a benefit of doubt to the assessee. Reliance is placed on the following observations of their Lordships of the Supreme Court in Addl. CIT v. Swastic Mineral Corporation [1979] 118 ITR 583 (SC) at p. 584: " The Tribunal has set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department nowhere in the penalty proceedings placed reliance on the Explanation to s. 271 of the Act and as such reliance cannot be placed by the Department on the Explanation in the reference proceedings. In the alternative, it is submitted that in case this court is inclined to call for any reference, in that case the assessee is also entitled to pray to call for reference the following questions of law : " 1. Whether the learned Income-tax Appellate Tribunal was correct in law in holding that the penalty should be imposed on the assessee by computing on the basis of the law as obtained on the date of the assessment order and not on the basis of the law as obtained on the date of furnishing of return, i.e., May 21, 1966 ? 2. Whether the learned Tribunal was correct in law in holding that the reassessment proceedings were validly initiated under section 147 of the Act and the learned Income-tax Officer had jurisdiction to frame the assessment order dated March 6, 1971 ? " Reliance in this connection is placed on the following observations in Educational and Civil List Reserve Fund No. 1 v. CIT [1964] 51 ITR 112, 119 (Raj): " But before we deal with this question, we would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO was able to establish that the income of the assessee from private practice from the employees of the Posts and Telegraphs Dept. could not be less than Rs. 60,571. It is no doubt true that this finding cannot be the sole basis in the penalty proceedings but at the same time it is a relevant consideration and cannot be totally ignored. The only ground given by the Tribunal on which the figure of Rs. 60,571 has not been taken to be correct in the course of penalty proceedings is that the said figure could not be made available to the assessee by the IAC for the reason that the original bills which added up to the amount of Rs. 60,571 had been weeded out and a benefit of doubt with regard to the correctness or otherwise of the sum of Rs. 60,571 was given to the assessee. We think that merely because the original bills had been admittedly weeded out and could not be produced to support the amount of Rs. 60,571 it cannot be taken to mean that the other records produced in support of the above figure should be excluded from consideration. It was necessary for the assessee to raise some doubt in showing that records of the Posts and Telegraphs Dept. showing an amount of Rs. 60,571 paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 computed by the IAC and thus in reducing the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, to a sum of Rs. 7,500 ?" The next point for consideration is as to whether the assessee is also entitled to get any questions of law to be referred by the Tribunal. As already held by this court in Educational and Civil List Reserve Fund No. 1 v. CIT [1964] 51 ITR 112 (Raj), with which we also agree, if a reference is called, both parties are entitled to suggest questions for reference provided the same arise out of the order of the Tribunal. The controversy in this regard is whether the penalty on the assessee should be reduced by computing on the basis of the law as obtained on the date of the assessment order or on the basis of the law as obtained on the date of furnishing of the return. In our view this question does arise from the order of the Appellate Tribunal and requires a final determination by this court. Thus, the following question is also framed for being determined by this court: " Whether the learned Income-tax Appellate Tribunal was correct in law in holding that the penalty should be imposed on the assessee by computing on the basis of the law a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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