R.K. Gulati, J. - (1.) AT the instance of the assessee, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following two questions of law for the opinion of this court, by its common statement of the case in respect of three consecutive assessment years 1972-73 to 1974-75 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in relying upon the statement dated October 18, 1974, of Smt. Joya Varshney for the assessment years 1972-73, 1973-74 and 1974-75 ? 2. Whether; on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming penalties for the assessment years 1972-73, 1973-74 and 1974-75 under Section 271(1)(c) of the Income-tax Act, 1961 ?"
(2.) SUSHIL Kumar Sarad Kumar in the years under consideration was a proprietary concern of one SUSHIL Kumar Varshney (hereinafter referred to as "the assessee") and was assessed to tax in the status of an individual. On October 18, 1974, the business and residential premises of the assessee and that of Smt. Joya Varshney were subjected to search under Section 132 of the Income-tax Act, 1961 (for short "the Act"). It was discovered that the assessee maintained two wives, namely, Smt. Praful Lata Varshney and Smt. Joya Varshney. The first wife was living in an ancestral, house with five children whereas the second wife was living in a separate house with her two children. In the income-tax returns, the assessee declared respectively a total income of Rs. 22,790, Rs. 24,095 and Rs. 44,096 for three years under consideration. However, the assessments were completed on the income of Rs. 40,850 for the assessment year 1972-73, Rs. 45,500 for the assessment year 1973-74 and Rs. 63,050 for the assessment year 1974-75. The additions made in each of the three assessment years included an addition under the head income from "undisclosed sources" to cover up the difference for domestic expenses as estimated by the Revenue and that disclosed by the assessee in his account books. It may be observed that the assessee had shown withdrawals of Rs. 6,521, Rs. 8,275 and Rs. 9,043, for domestic and personal expenses for three years and finally, in appeal on the quantum side the Income-tax Appellate Tribunal upheld the estimated domestic expenses at Rs. 15,000 for the assessment year 1972-73, Rs. 18,000 for the assessment year 1973-74 and Rs. 20,000 for the assessment year 1974-75, resulting in final additions on account of domestic expenses of Rs. 8,479, Rs. 9,725 and Rs. 10,987. While completing the assessments, the Income-tax Officer simultaneously initiated penalty proceedings, under Section 271(1)(c) of the Act on being satisfied that the assessee had concealed his income or had furnished inaccurate particulars of income in each of the three years under consideration. Now, Section 271(1)(c) of the Act authorises the relevant income-tax authority if it is satisfied in the course of any proceedings under the Act, to levy a penalty on the ground, inter alia, that a person has concealed the particulars of his income or furnished inaccurate particulars of such income.
(3.) IN the search and seizure proceedings aforesaid a statement of Smt. Joya Varshney was recorded under Section 132(4) of the Act wherein she, inter alia, stated that she was receiving Rs. 500 per month from her husband for domestic and personal expenses. The impugned penalty orders which were made in due course under Section 271(1)(c) for the three years under consideration recite that in the search operation it transpired that the assessee maintained a good standard of living and had a car and a scooter. The residential premises were found fitted with coolers and refrigerators. The children were studying in public schools ; the assessee was feeding a number of insurance policies and paid insurance premium to the tune of Rs. 11,000 to Rs. 13,000 each year. Further, the withdrawals for household expenses which were to the tune of Rs. 6,521, Rs. 8,375 and Rs. 9,043 respectively, for the three years under consideration recorded in the account books by any stretch of imagination were wholly inadequate considering the size of the family, the standard of living and other factors. Eventually, the INcome-tax Officer inflicted varying amounts of penalty upon the assessee for each year under Section 271(1)(c) of the Act with the following remarks : "It has been established that he deliberately showed nominal withdrawals for meeting domestic expenses while he definitely utilised income from undisclosed sources for meeting the total personal expenditure during the year as determined by the Appellate Tribunal. IN the instant case, it has been proved by the material gathered against the assessee that he was spending much more on domestic and personal expenses than the expenditure reflected from the account books, The provisions of Section 271(1)(c) are, therefore, clearly attracted . . ." The penalty orders were concurrently upheld, first by the Appellate Assistant Commissioner of Income-tax and thereafter in second appeal by the Income-tax Appellate Tribunal.;