R.K.Agrawal, J. - (1.) The Tribunal, New Delhi, has referred the following questions of law under Section 256(2) of the IT Act, 1961 (hereinafter referred to as 'the Act'), for opinion of this Court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that a 'reasonable opportunity' was provided to the assessee by the authorities below ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the onus to explain in regard to the alleged difference lay on the assessee and not on the Department ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in reversing the order of the CIT(A) by which he had cancelled the penalty levied under Section 271(1)(c) of the IT Act, 1961 ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty of Rs. 37,000 was validly imposed under Section 271(1)(c) of the IT Act, 1961 on the assessee ? 5. Whether the Tribunal was justified and correct in law in not considering that there was a similar brought forward opening balance in 1975-76 as in 1976-77 and thereby ignoring the correct fact, which vitiated the order of the Tribunal and rendered it illegal ?"
(2.) The reference relates to the asst. yr. 1975-76.
(3.) Briefly stated, the facts giving rise to the present reference are as follows : The applicant is an individual. Upto the asst. yr. 1974-75 it did not draw the balance sheet which was drawn for the first time for the asst. yr. 1976-77. While examining the accounts for the asst. yr. 1976-77, the ITO found that there were certain credits in the balance sheet of the applicant in the name of one M/s Jai Gopal Uma Shanker of Ahmedabad. On cross-checking with the said party, the ITO found that the applicant had shown the credit in the name of the said party more by Rs. 39,995. The ITO, therefore, wanted the applicant to show cause as to why the entire amount as aforesaid be not added to its total income for the asst. yr. 1976-77. The applicant, however, submitted before the ITO that the difference to the extent of Rs. 36,956 existed on the opening day of the accounting period corresponding to the asst. yr. 1976-77 and, therefore, the addition in respect of the asst. yr. 1976-77 should be confined to the balance of Rs. 3,040 only. The ITO accepted this contention and, therefore, in the asst. yr. 1976-77, the addition was confined only to Rs. 3,040. The ITO on the basis of the above information, initiated proceeding against the applicant under Section 147(1) read with Section 148 for the asst. yr. 1975-76 and asked it to explain the above discrepancy in the course of the reassessment proceedings. It was explained on behalf of the applicant that in the absence of the books of account for the asst. yr. 1975-76 and earlier years, which had been eaten away by white ants, it was not possible for it to explain how the difference arose and it was suggested that the difference might have been built up probably over the past several years and that, if at all, an addition was made, it should be spread over 4 years. This submission of the applicant was not accepted by the ITO who added the entire amount of Rs. 36,956 to the total income of the applicant for the asst. yr. 1975-76. The assessment was allowed to become final by the applicant. In the course of the assessment proceedings, the ITO had initiated penalty proceeding under Section 271(1)(c) requiring it to explain as to why penalty be not imposed for concealing the income to the extent of Rs. 36,956. On 11th March, 1983, the applicant submitted its reply to the notice under Section 271(1)(c) making out two points as below : "1. That the assessee had not received the assessment order and that, therefore, it was not possible to know for the assessee as to what additions have been made, and in any case whatever additions had been made would be contested in appeal and, that, therefore, there could be no basis for proceedings Under Section 271(1)(c) of the Act. It was also alleged by the assessee that notice under Section 271(1)(c) had not been served on the assessee at any earlier point of time. 2. That no part of income has been concealed and that the difference, if any, in the accounts of M/s Jai Gopal Uma Shanker, Ahmedabad, cannot be said to be confined in the year in question and the income has got to be established related to this year and any difference in stock-in-trade does not invite the levy of penalty. As such, these proceedings are liable to be cancelled...." The ITO after considering the above reply imposed the penalty.;