C.S.P.SINGH, J. - (1.) THE Tribunal, Allahabad Bench, Allahabad, has referred the following question for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty proceedings by the AAC were valid under the IT Act, 1961 ?"
(2.) THE dispute relates to the asst. year 1963 -64. The assessee carries on retail timber business. The ITO made an addition in the trading account to the tune of Rs. 5,432, on the ground that there was no stock register and quantitative tallies and that the result shown by the assessee was lower as compared to the rates applied by the Department in earlier years. The ITO found a deposit of Rs. 12,162, being a credit to the assessee's account. This amount was also added and the explanation given by the assessee that the same represented the moneys received from the sale proceeds of ornaments was not accepted. The assessee, thereafter, filed an appeal before the AAC and he upheld both the additions. The ITO although he had made additions to the returned income, did not initiate any penalty proceedings under S. 271(1)(c) of the IT Act, 1961. The AAC, while disposing of the quantum appeal, directed that notice should be issued to the assessee to show cause as to why penalty proceedings under S. 271(1)(c) of the IT Act, 1961, should not be imposed. The AAC, after hearing the assessee under S. 274(2) of the Act, held that there was no doubt that the assessee had concealed the correct particulars of his income and, therefore, imposed a penalty of Rs. 4,500. The assessee appealed to the Tribunal and the Tribunal held that the explanation given by the assessee in respect of the concealed income was false, but reduced the quantum from Rs. 4,500 to Rs. 2,000. After the appeal was disposed of, an application was filed for a rehearing of the case, and the Tribunal reopened the case. It was contended that, in view of S. 275 of the IT Act, 1961, it was necessary that a requisite notice under S. 271(1)(c) of the Act should either be issued or served on the assessee before the end of the proceedings and, consequently, the AAC could not himself impose any penalty on account of concealment not detected by him. The fact as to whether a notice had been issued under S. 271(1)(c) of the IT Act before the completion of proceedings was not clear to the Court and the Tribunal disposed of the contention raised by the assessee on the basis that no such notice had been issued simultaneously with the passing of the above order or some time thereafter. In respect of the contention that the AAC had no jurisdiction to impose a penalty in respect of concealment detected by the ITO, the Tribunal held that the AAC was fully competent to initiate the penalty proceedings and in support of this contention, reliance has been placed upon a decision of the Supreme Court in Kamlapat Motilal vs. CIT (1962) 45 ITR 266 (SC).
(3.) IN respect of the second contention, it took the view that S. 271(1)(c) of the Act did not require that the show cause notice should be issued or served before the end of the proceedings in case penalty proceedings were initiated. It did not accept the argument raised on behalf of the assessee that S. 275 of the Act makes it incumbent upon the authority initiating the penalty proceedings to do so before the close of the proceedings.;