R .K.AGRAWAL,J. - (1.) The Tribunal, Allahabad, has referred the following questions of law under s. 256(2) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court : "1. Whether, on the facts and in the circumstances of the case, the penalty under s. 28(1)(c) has rightly been cancelled by the Tribunal ?
(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal is justified in ignoring the reasonable cause for inordinate delay in imposing penalty under s. 28(1)(c) and in holding that the case of the assessee falls within the purview of the decisions of the Hon'ble High Court in the case of Ram Kishan Baldeo Prasad vs. CIT (1967) 65 ITR 491 (All) and in the case of Bisheshwar Lal vs. ITO (1970) 75 ITR 698 (All) - 2. Briefly stated the facts giving rise to the present reference are as follows : The reference relates to the asst. yr. 1947 -48. The ITO completed the assessment for the aforementioned assessment status of the respondent was taken as HUF. The addition of Rs. 1,20,000 was added to the total income. The ITO initiated the proceedings under s. 28(1)(c) under the Act of 1922. He imposed a sum of Rs. 50,000 as penalty vide order the ground that there was an inordinate delay in the imposition of penalty inasmuch as the assessment was made on appeal before the Tribunal, Allahabad. The two Members differed in their views. The AM was of the view that the order cancelling the order passed by the AAC has to be restored whereas the JM, disagreeing with the conclusion of the AM, held that the proceedings have been unduly delayed by the ITO for about 20 years and, therefore, the respondent - assessee was entitled to claim cancellation of the penalty imposed. As there was difference of opinion, the matter was referred to the Third Member. The Third Member dealt with the different aspects of the matter and agreed with the view expressed by the JM to the effect that for the inordinate delay there was no explanation and, therefore, the penalty has rightly been cancelled. The Tribunal has passed the order in conformity with the opinion expressed by the Third Member and had upheld the order passed by the AAC cancelling the penalty.
(3.) WE have heard Sri Shambhoo Chopra, learned standing counsel appearing for the Revenue, and Sri V.K. Upadhyay, learned counsel appearing for the respondent. The learned counsel for the Revenue submitted that there was sufficient explanation for the inordinate delay in imposition of penalty and, therefore, it could not have been cancelled only on the ground of the order having been passed after more than 20 years. According to him, this was a case where the total income itself and the tax thereon were the subject -matter of multifarious proceeding by way of appeal to the AAC, to the Tribunal, revision before the CIT and various rectifications arising out of the appellate orders in the case of the company of which the respondent was a shareholder and change in the total income and consequently the respondent's share therefrom the various firms of which the respondent was a partner, as a result of the appellate orders in the case of the company and firms. He further submitted that penalty under s. 28(1)(c) of the Act of 1922 depended on the amount of income -tax and super -tax which would have been avoided if the income as returned had been accepted as the correct income and this figure could not be determined till the total income and the tax thereon was finally worked out. He further submitted that the last order was imposition of the penalty cannot be said to be without reasonable cause. He, therefore, submitted that no adverse inference can be drawn on account of the mere so -called inordinate delay in the imposition of the penalty.;