Sabyasachi Mukharji, J. - (1.) In this reference under Section 66(2) of the Indian I.T. Act, 1922, as directed by this court, the following question has been referred to us : "In the facts and circumstances of the case, was the Tribunal justified in drawing the inference that no concealment was established in respect of the sum of Rs. 1,73,678 and that no penalty was justified ?"
(2.) It appears that this reference relates to the assessment orders for the assessment year 1948-49 and is arising out of the penalty under Section 28(1)(c) of the Indian I.T. Act, 1922. The assessee is a company and it was carrying on business in the manufacture of jute goods. During the relevant previous year it purchased a substantial quantity of jute at its Bhairab Agency. The ITO found that the average purchase rate at such agency was Rs. 30.5 annas per maund as against the average market price of Rs. 29-7-3 pies per maund. In proof of the purchases the assessee produced only a register that was maintained at Bhairab, but bills and vouchers were not produced. The ITO held that the assessee had inflated the purchases of jute at Bhairab and for such inflation he added a sum of Rs. 1,73,678 in the assessment. The AAC, on appeal, deleted the addition. But this was restored by the Tribunal in second appeal. Holding that the assessee had deliberately inflated the purchases of raw jute at Bhairab Agency in order to reduce its tax liability and that the assessee had concealed the particulars of its income or deliberately furnished inaccurate particulars of its income, the ITO imposed a penalty of Rs. 70,000 under Section 28(1)(c) of the Indian I.T. Act, 1922.
(3.) The assessee thereafter appealed to the AAC. The AAC observed that it was possible for a person to conceal the particulars of his income and deliberately furnish inaccurate particulars thereof by suppressing evidence that was in his possession and could be produced and also by maintaining a so-called record of purchases which was merely a compilation enabling him to claim a higher amount towards purchase price than the amount actually paid by him and he upheld the order of penalty imposed by the ITO.;