R.R.Rastogi, J. - (1.) In compliance with the direction of this court, at the instance of the Additional Commissioner of Income-tax, Kanpur, the Income-tax Appellate Tribunal, Delhi Bench 'A' (hereafter "the Tribunal") has drawn up a statement of the case and referred the following questions for the opinion of this court: "1. Having regard to the circumstances in which the Tribunal itself in the quantum appeal had confirmed an addition of Rs. 30,000 for unexplained investment in property, whether the Income-tax Appellate Tribunal was right in holding that the assessee could not be deemed to have concealed the particulars of its income in terms of the Explanation to Section 271(1)?
(2.) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in cancelling the penalty imposed upon the assessee in terms of the Explanation, to Section 271(1)(c) of the Income-tax Act, 1961 ?" 2. The assessee, Mangahen Mohanlal, a HUF, was engaged in the business of manufacture and sale of Boora and Batasa. It had also income from sale of controlled sugar. For the assessment year 1967-68, the assessee disclosed its income at Rs. 10,737. During the course of assessment proceedings the ITO found that in the relevant previous year the assessee had constructed four flats in the town of Mathura, the cost whereof was shown at Rs. 6,000. According to the assessee considerable old material was available to it and it utilised the same in the new construction and, therefore, the cost was not much. The ITO did not accept that contention and estimated the cost of construction at Rs. 30,000 and thus added back a sum of Rs. 24,000 as the assessee's income from undisclosed sources. Further, the ITO found that during this year the assessee had purchased two shops on July 20, 1976, for a sum of Rs. 18,000. They were purchased in the names of Brij Mohan and Banwari Lal, the two sons of Mangalsen, karta of the family. In regard to this transaction the assessee's contention was that the shops had been purchased by Brij Mohan and Banwari Lal themselves and the assessee had nothing to do with the same. That contention as well did not find favour with the ITO, He held that the two shops had been purchased by the assessee itself in the names of the two sons of the karta and hence this amount of Rs. 18,000 was added in the assessee's income as unexplained investment. Thus, the total income was determined at Rs. 63,420 as against the returned income of Rs. 10,737. Since the difference between the returned income and the income assessed was more than 20%, he initiated penalty proceedings under Section 271(1)(c) read with the Explanation thereto and referred the case to the IAC under Section 274(2)
(3.) Pursuant to the notice the assessee submitted a written statement in which it was stated that there was no evidence on record to show that the assessee had concealed the particulars of its income or had deliberately furnished inaccurate particulars of the same and as such, the notice was not warranted, that the ITO had estimated the business income at Rs. 20,000 as against Rs. 9,000 disclosed by the assessee which on appeal had been reduced to Rs. 11,000 and on that account no question of penalty arose. As regards the purchase of two shops it was urged that they had been separately purchased by the karta's sons, Brij Mohan and Banwari Lal, for Rs. 9,000 each. Their names had been recorded in the municipal records and they were realizing rent from the tenants. As for the source of consideration it was stated that Banwari Lal had borrowed Rs. 3,000 from his maternal uncle, Babu Lal, and the remaining amount came from his past savings. Similarly, Brij Mohan had taken a loan of Rs. 3,000 from his father-in-law, Laxman Das, and another sum of Rs. 3,000 from his maternal uncle, Babu Lal, and the remaining amount came out of his past savings. It was stated that all these persons had been examined before the ITO and they had filed their confirmation letters. As for the cost of constniction of four flats it was stated that mostly old materials were used and further the mortar used was of cheap material and, therefore, the cost was much less.;