R.K.AGRAWAL,J. - (1.) THE Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion of this Court: (1) Whether on the facts and circumstances of the case the Tribunal was justified in sustaining the penalty under Section 271(1)(c) for the addition of Rs. 19,000/ -? (2) Whether in view of the fact that the matter related to the addition of Rs. 5,000/ - was set aside the Tribunal was justified in sustaining the penalty under Section 271(1)(c)? (3) Whether the finding of the Tribunal was based on the material placed before it? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in treating the unexplained amount as concealed income and consequently in sustaining the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 ?
(2.) BRIEFLY stated the facts giving rise of the present reference are as follows: The applicant is a partnership firm carrying on business of Sarrafa and money lending/pawning. In the course of business of money lending, the applicant advanced loans to various parties and took deposits from various persons. During the Assessment Year 1980 -81 the applicant had taken certain deposits. Except for a deposit of Rs. 19,000/ - in the name of one Bahadur Lal all other deposits were accepted by the Assessing Authority in the course of regular assessment proceedings. He, however, had added a sum of Rs. 19,000/ - under Section 68 of the Act on account of unexplained cash credit. The addition was confirmed by the Commissioner of Income Tax(Appeals) as also by the Tribunal in appeal filed against the regular assessment order. The Income Tax Officer initiated penalty proceedings 'under Section 271(1)(c) of the Act in the course of assessment itself. He imposed a sum of Rs. 17,280/ - as penalty. Feeling aggrieved the applicant preferred an appeal before the Commissioner of Income Tax (Appeals) Lucknow. The appeal was dismissed. Still feeling aggrieved the applicant preferred a second appeal before the Income Tax Appellate Tribunal, Allahabad. The Tribunal while partly allowing the appeal had upheld the order of penalty so far as it related to the addition of Rs. 19,000/ - towards unexplained cash credit. It, however, remanded the matter in respect of the charge of concealment of income on account of transactions in silver ornaments on the ground that quantum of addition on this account has not yet become final and it would depend after ascertaining as to what was the correct amount of concealed income on account of transactions outside the books of account. We have heard Sri Krishna Agarwal, learned Counsel for the applicant and Sri R.K. Upadhyaya, learned standing counsel appearing for the Revenue.
(3.) LEARNED Counsel for the applicant submitted that the creditor had come forward and had owned up the lending of the said amount to the applicant and, therefore, it cannot be treated as income of the applicant or in any event the applicant cannot be considered to have concealed part of income for that amount. He further submitted that mere non acceptance of the explanation, offered by the applicant, would not lead to the conclusion that it had concealed the income of Rs. 19,000/ - in the regular assessment proceedings. According to him the Tribunal as also the authorities below have acted illegally and contrary to law in upholding the penalty under Section 271(1)(c) of the Act. In support of his various pleas, he has relied upon the following decisions: 1. Commissioner of Income Tax v. V. Ramaswamy Naidu : [1994]208ITR377(Mad) ; 2. National Textiles v. Commissioner of Income Tax (2001) 249 ITR 125; 3. Shivlal Tak v. Commissioner of Income Tax (2001) 251 ITR 373; 4. K.C. Builders and Anr. v. The Assistant Commissioner of Income Tax : [2004]265ITR562(SC) ;;