Sabyasachi Mukharji, J. - (1.) As directed by this court under Section 256(2) of the I.T. Act, 1961, the following question has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that the credit of amount of Rs. 2,45,000 under 'Disclosure Capital Account' in place of various loan amounts in its books of accounts in a later year amounted to an admission of concealed income on the part of the assessee, as envisaged under the provisions of Section 271(1)(c) of the Income-tax Act, 1961 ?"
(2.) This reference arises out of the assessment for the assessment year 1957-58. The original assessment was completed on a total income of Rs. 86,267 against the income of Rs. 57,318 returned by the assessee. This was reduced in appeal to Rs. 73,477. Subsequently some time in 1965 the assessee filed a petition under Section 271(4A) of the I.T. Act, 1961, before the Commissioner of Income-tax surrendering the hundi loans, peak credit of which was computed at Rs. 2,45,000 with a request to spread it over a period of 10 years and it was prayed therein that no penal proceedings might be taken against the assessee-firm. Inasmuch as the effect of that petition is relevant for the purpose of answering the question involved in this reference it may be material to refer to the relevant portion of the said petition. The said petition stated, inter alia, as follows : "2. That to meet the exigencies of the business your petitioner had to borrow money from the market and mostly through hundiwallas since the accounting year 2009 onwards..... 6. That since the accounting year 2009 to 2021 D.G. there were various credits in the names of hundiwallas which were taken or paid either by cheque or in cash. 7. That your petitioner-firm asserts that apart from transactions of cash and cheques through hundiwallas it had various hundi transactions which were discounted by banks and supported by evidence. 8. That your petitioner is annexing herewith two lists marked with letters "A" and "B". The list "A" comprises of all hundi transactions and the list "B" contains hundis discounted by banks which are fully supported. 9. That in respect of the accounting year 2009 D.G. the total credits in the books of account were Rs. 25,000. 10. That in respect of 2010 D.G. the total peak credits in the books of account were Rs. 1,15,000 out of which Rs. 70,000 comprised of cash and cheques and the balance of Rs. 45,000 consisted of hundis discounted by banks. 11. That in respect of 2011 D.G. the total peak credits in the books of account were Rs. 15,000. 12. That in respect of 2012 D.G. the total peak credits passed through hundis in the books of account of the firm were Rs. 95,000 (cheques and cash). 13. That in the year 2013 D.G. the total peak credits in the books of account were Rs. 1,15,000 out of which bank transactions amounted to Rs. 55,000 and the balance sum of Rs. 90,000 consisted of cheque and cash..... 18. That the peak credits for 2018 D.G. amounted to Rs. 4,90,000 out of which transactions in the names of hundiwallas by Hasumati Patel were Rs. 2,00,000 and cash and cheques passed through other hundiwallas were Rs. 2,45,000 and the balance sum of Rs. 45,000 represents bank transactions..... 22. That from the statements filed it will appear that the highest peak credits are Rs. 2,45,000 in the year 2018 D.G. and as the said amount was not assessed to tax the same may be spread over a period of ten years and assessed accordingly. 23. That out of the said amount a sum of Rs. 1,12,500 was added to the income of your petitioner-firm in respect of the assessment year 1960-61 (accounting year 2015 D.G.) and appeal against the same is pending." 2. In those circumstances the assessee prayed as follows ; "In the circumstances, it is humbly prayed that your honour would be kind enough to consider the facts mentioned above and in your kindness would be pleased to distribute the said sum of Rs. 2,45,000 over a period of ten years including the sum of Rs. 1,12,500 and it is further prayed that no penal proceedings may be taken against your petitioner-firm."
(3.) Relying on this evidence the ITO initiated proceedings Under Section 147(a) of the I.T. Act, 1961, and a notice Under Section 148 was duly served on the assessee-firm on the 26th March, 1966. No return was submitted in response to the said notice, nor was there any compliance with the notice under s. 142(1) of the Act. In the premises the ITO completed the assessment for the assessment year 1957-58, relevant to the accounting year 2012-13, Gujarati Dewali, ex parte under Section 1144 on a total income of Rs. 1,68,477 inclusive of Rs. 95,000, the peak credit of hundi loans as per the disclosure statement. Consequently penalty proceeding under Section 271(1)(c) was initiated and was transferred to the IAC, Range-V, Calcutta, for finalisation by him as the maximum penalty imposable would exceed Rs. 1,000, In the course of the penalty proceedings it was submitted on behalf of the assessee that since the addition of Rs. 95,000 was made on the basis of the assessee's disclosure petition it should be held that the assessee-firm had not concealed the particulars of its income. Relying upon this petition the IAC, however, held that the assessee-firm made a voluntary admission of the fact that "the credits in various hundi loan accounts were not genuine and they represented the assessee's own undisclosed income". Consequently penalty of Rs. 16,500 was imposed and the statutory minimum was worked out at Rs. 16,174.;