- (1.) ON an application under S. 256(1) of the IT Act, 1961, the Tribunal has referred, the following question, set out at pp. 11 and 12 of the paper books, for our opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that prima facie evidence of non-disclosure of income does not absolve the Department from the responsibility of proving mens rea and it is not sufficient to levy penalty under S. 271(1)(c) of the IT Act, 1961 ?"
(2.) THE relevant assessment year is 1984-85. The assessee-firm consists of two partners and it is carrying on business in iron and steel sheets. On 30th March, 1984, the search and seizure was carried out in the business and residential premises of the partners and certain books and loose papers had been seized at the time of search. Apart from the papers and other materials, the relevant part of the seized material is 3 loose sheets of papers found at the residence of Sri Satyanarayan Gupta, partner of the assessee-firm. The residence from where papers were seized is shared by one of the partners Sri Satyanarayan Gupta and his son Sri K.L. Kanoi. Sri Kanoi in his statement had admitted that the profit worked out in the seized papers related to the business of the assessee-firm and he has also admitted that he inscribed these loose sheets. Though the total income from clandestine business assessed is Rs. 17,27,006. But for the purpose of penalty the amount added on the basis of admission of the son of one of the partners of the assessee-firm is relevant. The AO has made an addition of Rs. 4,60,980 by treating it as the profit earned by the firm outside the books of accounts. Penalty thereon imposed Rs. 2,11,740 being 200 per cent of the tax evaded. In appeal before the Tribunal, the Tribunal has reduced the addition to Rs. 1,81,876. In appeal before the CIT(A), CIT(A) though confirmed the penalty, but directed the AO to recalculate the penalty on the basis of addition of Rs. 1,81,876 sustained by Tribunal. In appeal before the Tribunal, the Tribunal has cancelled the penalty on the ground that on mere addition in the income during the course of assessment, penalty under S. 271(1)(c) cannot be imposed. Tribunal has placed reliance on the decision of Giridhari Lal Soni vs. CIT (1990) 82 CTR (Cal) 73 : (1989) 179 ITR 111 (Cal) : TC 50R.638. None appeared for the assessee. Heard learned counsel for the Revenue. Learned counsel for the Revenue Mr. Agarwal submits that the decision on which the Tribunal has placed reliance has no application in this case. In that case the assessment year involved was 1968-69 i.e. prior to the amendment in the Explanation to S. 271(1)(c) in the year 1975, which has come into force w.e.f. 1st April, 1976. He submits that after that amendment, for the purpose of penalty under S. 271(1) (c), once it is found that there is a concealed income by the assessee, that concealed income shall be deemed to be concealed income for the purpose of penalty under S. 271(1)(c) of the Act. After that amendment in the Explanation when there was addition on the admission of one of the partners or person who keeps the account the addition will be deemed income for the purpose of penalty. The Tribunal has wrongly cancelled the penalty imposed by the AO.
(3.) WHILE sustaining the penalty by the CIT(A) in para 3 of its order, the part of the order of Tribunal in the quantum appeal has been reproduced. For ready reference that read as under : "Copies of the three sheets which contended the trial balance and the P&L a/c have been filed and it is correct that there is a regular P&L a/c giving the credit side of the account at Rs. 7,643 whereas the debit side of the P&L a/c was at Rs. 5,83,552. The profit being the difference of the two was calculated at Rs. 1,81,876 but no basis is available for the profit of Rs. 94,043 which has been added to the said profit. Sri K.L. Kanoi was the author and he was never been questioned. Moreover, these papers were seized from the residence of Sri K.L. Kanoi and Sri Satya Narayan Gupta, and, therefore, it can be presumed that the profit of Rs. 94,043 related to Sri K.L. Kanoi. Under the said circumstances the addition maintained by the CIT(A) is restricted to Rs. 1,81,876." In para 8 while concluding the order Tribunal has referred the decision of this Court in the case of Giridhari Lal Soni (supra) and cancelled the penalty sustained by the CIT(A).;