Pathak, J. - (1.) THE Income-tax Appellate Tribunal has referred the following question under Section 256(1) of the Income-tax Act, 1961 : "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the Inspecting Assistant Commissioner's order imposing penalty under Section 274(2)/271(1)(c) was valid?"
(2.) THE assessee is a registered firm and derives income from a printing press. Until the assessment year 1962-63 its income was being assessed by applying rates of profit to the sales disclosed and not on the basis of its account books. For the first time, in assessment proceedings for the assessment year 1962-63, the Income-tax Officer scrutinised the account books and discovered various omissions and mistakes in the totals and also found that the balance-sheet had been incorrectly prepared. THE net increase in the excess of assets over liabilities came to Rs. 57,082 during the previous year. THE assessee explained that part of its records for the relevant year had been washed away by floods' and that the accounts were reconstructed from the material available to it. It admitted that the trial balance could not be reconciled. THE Income-tax Officer added the amount of Rs. 57,082 to the total income disclosed by the assessee, and that addition was maintained by the Appellate Assistant Commissioner and thereafter by the Income-tax Appellate Tribunal. The Income-tax Officer, being of opinion that the assessee had concealed the particulars of its income and had furnished inaccurate particulars of such income during the course of assessment proceedings, decided upon action for the levy of penalty. Finding that the minimum penalty imposable exceeded Rs, 1,000 he referred the proceeding for imposition of penalty to the Inspecting Assistant Commissioner under Section 274(2) of the Income-tax Act, 1961. The Inspecting Assistant Commissioner, after allowing the assessee an opportunity of being heard, imposed a penalty of Rs. 20,000. The assessee appealed to the Income-tax Appellate Tribunal. The Tribunal held that as the assessee had not disclosed the excess of Rs. 57,082 in its income it was a case for imposing penalty. But, having regard to the circumstances that a part of the assessee's records were washed away by floods and it was not possible to say with certainty that the excess represented the income of the assessee for the previous year only, the Tribunal reduced the amount of the penalty. On the question whether the procedure adopted in levying the penalty was in accordance with law, the Tribunal observed that the Income-tax Officer was right in first satisfying himself during the course of the assessment proceeding that the assessee had concealed the particulars of his income and on finding that the minimum penalty imposable exceeded Rs. 1,000 he was justified in referring the proceeding to the Inspecting Assistant Commissioner. It was not necessary, the Tribunal point out, that the Income-tax Officer should issue a notice under Section 274(1) for the purpose of satisfying himself that the assessee had been guilty of concealment before referring the case to the Inspecting Assistant Commissioner nor was it necessary that the satisfaction of the Inspecting Assistant Commissioner that the penalty should be levied must be arrived at during the course of the assessment proceeding. In the view that the amount of penalty should be reduced the appeal was partly allowed. Upon the question referred, two points arise for consideration. The first is whether the Tribunal was right in finding that the assessee had concealed particulars of its income and had furnished inaccurate particulars of such income. In the penalty order made by him, the Inspecting Assistant Commissioner pointed out that the total liability disclosed in the balance sheet was inflated by Rs. 10,000. The assessee had shown it at Rs. 1,08,259 whereas it should actually have been Rs. 98,259. An examination of the customer's ledger showed that the assessee had not accounted for the debit balance in the customer's accounts. The debit balances totalled Rs. 58,217.
(3.) DEDUCTING the opening debit balance amounting to Rs. 25,674 the balance of Rs. 32,543 represented the concealed income. In arriving at these figures the Inspecting Assistant Commissioner referred to the findings in the assessment case. Before the Inspecting Assistant Commissioner it was contended on behalf of the assessee that as the account books were defective it was possible that some of the undisclosed income related to earlier years. The plea was rejected for want of evidence. The Tribunal observed that the excess of assets over liabilities was apparent from the record, and in case the assessee claimed that the amounts received by it did not represent its income it should have disclosed those amounts in Part F of the return. The Tribunal held that the assessee had failed to disclose the excess of Rs. 57,082 in its income and, therefore, penalty was attracted.;