- (1.) IN compliance with this court's order dated July 11, 1978, passed in ITA No. 376 of 1978 under Section 256(2) of the INcome-tax Act, 1961, the Appellate Tribunal, Allahabad, has referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not liable to the imposition of penalty even though the Explanation to Clause (c) of Section 271(1) of the INcome-tax Act was attracted ?"
(2.) THE aforesaid question arises out of the Tribunal's order dated March 23, 1977, passed in ITA No. 3 (All) of 1976-77 for the assessment year 1969-70. We have heard Sri Shambhu Chopra, learned standing counsel for the Commissioner. No one has appeared for the respondent. The facts are that the assessee's wife purchased a house and made some investments in its reconstruction, The Assessing Officer took the view that the wife was a benamidar for the assessee-respondent and in fact the investments were made by the assessee-respondent. Therefore, certain additions were made to the income of the assessee on account of the said unexplained investments which were confirmed in appeals up to the Appellate Tribunal. The Assessing Officer then initiated proceedings for the levy of penalty under Section 271(l)(c) and by an order dated September 6, 1975, levied a penalty of Rs. 11,438. The said penalty was cancelled by the Appellate Assistant Commissioner who found that no concealment on the part of the assessee was made out. According to the Appellate Assistant Commissioner, no material had been brought on record to show that the amount invested in the reconstruction came out of the appellant's income arid that penalty could not be levied merely because the investments made by the appellant's wife were not found satisfactory by the Commissioner. The Assessing" Officer then appealed to the Tribunal which concurred with the view taken by the Appellate Assistant Commissioner. The Tribunal also found that except disbelieving the assessee's explanation and by coming to a different conclusion on the basis of circumstantial evidence, the penalty could not be levied. The Revenue now seeks to place reliance on Explanation 1 to Section 271(1) which reads as under : "Explanation--Where in respect of any facts material to the computation of the total income of any person under this Act,-- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed : Provided that nothing contained in this Explanation shall apply to a case referred to in Clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him."
(3.) A perusal of the orders of the authorities below would show that this Explanation, was not invoked by the Assessing Officer for levying the penalty. The question as such, therefore, does not arise out of the order of the Tribunal. In any case the proviso to Explanation 1 could be attracted in case the Revenue had placed reliance on the Explanation. Further, the levy of penalty is discretionary and, therefore, in the circumstances of the case, we do not find any illegality in the Tribunal's order.;