F.C. Rustagi, Judicial Member -
(1.) THE only ground raised by the revenuein this appeal in the case of Panipat Co-operative Sugar Mills Ltd., pertaining to the assessment year 1974-75, disputes the action of the Commissioner (Appeals) in reducing the penalty of Rs. 11,71,550 to a figure of Rs. 17,666, which runs as under :
On the facts and in the circumstances of the case, the CIT(A) has erred in reducing the penalty levied under Section 271(1)(c) from Rs. 11,71,550 to Rs. 17,666.
(2.) It will be of immense help in case the matter pertaining to quantum of the assessment which travelled up to the stage of the Tribunal, is briefly discussed. The assessee derived income from running of a sugar mill and of a distillery. In the course of the assessment proceedings, the ITO made the following four additions :
i. Income from sale of sugar of the sugar unit amounting to Rs. 11,45,229 which was included in the sum of Rs. 14,56,202 shown as liability in the balance-sheet of the sugar unit under the head 'Contingent liabilities' ;
ii. Income from residential quarters of the assessee amounting to Rs. 17,666 which was included in the sum of Rs. 34,341 shown as liability in the balance-sheet of the sugar unit under the head 'Residential income reserve';
iii. An amount of Rs. 5,061 transferred from sales to an account called as 'Mollasses Tank Fund Account' and shown as a liability in the balance-sheet of the sugar unit ;
iv. An amount of Rs. 3,604 transferred from sales to an account called as 'Mollasses Tank Fund' and shown as a liability in the balance-sheet of distillery unit under the head 'Provision for storage of Mollasses tank'.
It was on account of these four additions that the IAC levied a penalty of Rs. 11,71,550 under Section 271 (1)(c) of the Income-tax Act, 1961 ('the Act'). We are not encumbering this order with the facts pertaining to the four additions, as the same are detailed in the order of the IAC levying penalty but, in short, would mention that the addition of Rs. 11,45,229 came to be deleted by the Tribunal in the second appeal filed at the instance of the assessee. Regarding addition of Rs. 17,666, it may be mentioned that it was offered for taxation by the assessee itself when the entry pertaining to the said amount carrying it to the balance-sheet was required to be explained by the ITO but this became final right at the stage of the IAC himself. The two additions-those of Rs. 5,051 and of Rs. 3,604 -were disputed by the assessee up to the first appeal but after having a finding against itself from the Commissioner (Appeals), the assessee accepted the same and did not pursue the matter before the Tribunal.
When the IAC (Assessment) levied a penalty of Rs. 11,71,550 on account of the four additions vide order dated 18-3-1980, the assessee disputed the matter before the Commissioner (Appeals) who vide his order dated 28-8-1980 sustained the penalty only of Rs. 17,666, i.e., on account of addition in respect of income from residential unit which was offered by the assessee for tax in the form of revised return though as a consequence of enquiry made by the IAC (Assessment) in that regard in the assessment proceedings. The Commissioner (Appeals) while reducing the penalty regarding addition of Rs. 11,45,229, observed that the revenue has no case in respect of the said addition for penalty purpose as the same has been deleted by the Tribunal. In respect of additions of Rs. 5,051 and Rs. 3,604 in respect of Mollasses Tank Fund account in the sugar unit and distillery unit respectively, the Commissioner (Appeals) observed that the assessee had credited these two sums in compliance with a notification of the Haryana Government. He accepted the contention of the assessee that it had transferred the sums from the Mollasses account to the separate funds so that credits in those funds could be utilised in erection of adequate storage facilities of mollasses as envisaged in the notification of the Haryana Government and, therefore, according to him, the assessee did not attempt consciously to defraud the revenue in respect of these items. In respect of the addition of Rs. 17,666, the Commissioner (Appeals) sustained the penalty because, according to him, the assessee not only offered the said addition in response to a query but a similar sum of Rs. 16,676 was included in the assessee's total income for the assessment year 1973-74 order of which was served on the assessee on 10-3-1976 and in spite of this fact, in the course of revising the return for the first time on 21-9-1976 the assessee did not offer the said addition when it first revised the return.
(3.) IT is this action of the Commissioner (Appeals) which is contested by the revenue. The learned departmental representative, Mrs. Sudha Sharma, after reading out the order of the IAC (Assessment) levying the penalty, which gives all the details about the four additions, was fair enough to admit the deletion of addition of Rs. 11,45,229 by the Tribunal and also submitted that even revenue's reference application under Section 256(1) of the Act, in that regard, has been rejected.;