(1.) IT Ref. 160/1999 and 161/1999 arise out of ITA Nos. 879 and 880/Coch/1991 on the file of Tribunal, Cochin Bench. Assessment years concerned are 1979 -80 and 1980 -81. The following questions of law arise for consideration :
'1. Whether the Tribunal was right in law in sustaining the penalty levied under Section 271(1)(c) of the IT Act ? 2. Whether the Tribunal was right in law in holding that there was concealment ? 3. Whether, in the facts and circumstances of the case, the offer of additional income being made to purchase peace with the Department, the Tribunal was right in law in holding that there was concealment ? 4. The additions made in the assessment being only income from other sources by way of investments, whether the Tribunal was right in law in holding that there was concealment without considering the ingredients of Expln. 1 to Section 271(1)(c) of the IT Act? 5. Whether the Tribunal was right in holding that there is concealment of such income without specifying under what clause of Expln. 1 to Section 271(1)(c) the case of the assessee fell ? 6. Whether the Tribunal was right in law in holding that there was no true and full disclosure of income falling within the provisions of Expln. 2 to Section 273A of the IT Act?''
Primary question to be answered is question No. 4. Assessee is an individual deriving income from the business of manufacture of cycle gear. For the asst. yr. 1979 -80 the assessee had filed the return of income originally on 5th Oct., 1979, showing a loss of Rs. 8,510. Assessment was completed under Section 143(1)(a) accepting the loss as shown by the assessee. Assessment was later reopened under Section 147(a) and in the proceedings dt. 20th Nov., 1981, the total income was determined at Rs. 41,071. Search was conducted in the assessee's residence on 5th March, 1985. Thereafter, the assessee made a disclosure under Section 273A with regard to a sum of Rs. 40,000 as unexplained investment in two vans. Later, the assessee filed another return on 21st May, 1985, offering additional amount of Rs. 19,337 as income on account of investment in an immovable property. In that return the total income computed was at Rs. 58,618 including the sum of Rs. 40,000 offered under Section 273A and the sum of Rs. 19,337 as investment in the immovable property.
(2.) THE AO issued notice under Section 147(a) to reopen the assessment with the approval of the CIT. Reassessment was completed on an income of Rs. 1,64,910 which included Rs. 55,000 added as income from other sources. For the asst. yr. 1980 -81 the assesses had filed the original return on 18th Aug., 1980, admitting a total income of Rs. 42,653. The assessment was completed on a total income of Rs. 88,450. On a search conducted assesses made a disclosure under Section 273A on a sum of Rs. 74,500 as investment in a vehicle. Later, she filed a revised return on 21st May, 1985, offering a further sum of Rs. 13,231 as income on account of investment in immovable property. In the revised return the total income declared was Rs. 1,76,181. For this year also the AO issued notice under Section 147(a) with the approval of the CIT for reopening the assessment. The reassessment was completed on a total sum of Rs. 2,55,680 which included Rs. 78,000 added as income from other sources. The AO initiated penalty proceedings under Section 271(1)(c) and levied a penalty of Rs. 74,934 for the asst. yr. 1979 -80 and Rs. 1,18,723 for the asst. yr. 1980 -81. The CIT(A) concurred with the AO that penalty was leviable on account of the concealment of income by the assessee. But the appellate authority felt that for the asst. yr. 1979 -80 in computing the penalty the addition of Rs. 55,000 as income from other sources was to be excluded. For the asst. yr. 1980 -81 the direction given by the CIT(A) was to exclude the sum of Rs. 78,000 for the purpose of computing the penalty. Assessee took up the matter in appeal before the Tribunal and contended that the CIT(A) was not justified in upholding the penalty. The Tribunal upheld the penalty, but made an observation that the assessee could seek other remedy by way of reduction or waiver before the CIT. The assessee is aggrieved by those orders and hence these revisions.
Counsel appearing for the applicant Sri C. Kochunni Nair laid considerable stress on proviso to Expln. 1 to Section 273(1)(c) and contended that the question referred should be considered under the said provisions especially since ITO had declined to give relief under Section 273A. According to the counsel, the assessee is saved by the proviso to the Explanation and, therefore, the Explanation does not at all apply so also the main provision of Section 271(1)(c). Counsel submitted the Tribunal dealt with only the argument that Section 271(1)(c) concealment should be read with Section 273A. Counsel submitted question has to be examined in the light of the Explanation to the proviso.
(3.) COUNSEL appearing for the Revenue submitted that the assessee had not disclosed the income by way of investment in vehicles and landed properties. Only after search was conducted the assessee first made the declaration under Section 273A. Counsel further submitted that even without the aid of the Explanation the main provision of Section 271(1)(c) would be sufficient to justify the penalty. Counsel also placed reliance on various decisions such as Niranjan and Co. (P) Ltd. v. CIT : 159ITR153(SC) , N. Sundareswaran v. CIT : 84ITR173(Ker) , Western Automobiles v. CIT : 112ITR1048(Bom) , CIT v. A. Sreenivasa Pai : 242ITR29(Ker) , CIT v. K.P. Madhushudhanan : 246ITR218(Ker) , CIT v. Kishorekumar Shamji : 244ITR702(Ker) . etc.;