D.K. Seth, J. - (1.) The quantum proceeding was held against the assessee. The facts revealed that upon a search under Section 132 of the IT Act, 1961, a duplicate accounts book was found where the opening balance shown exceeded the figure of the closing balance of the previous year disclosed in the return. This amount was added in the income of the assessee for the previous year. By reason of the Expln. 1 to Section 271(1)(c), such addition would amount to concealment by fiction. Therefore, the mischief of Section 271(1)(c) of the IT Act, 1961, is attracted in this case. That was how this matter was dealt with by the IT authorities upon the Tribunal, against which this reference has been sought for.
(2.) Mr. J.P. Khaitan, learned counsel for the assessee, has pressed three contentions for our consideration. First, the amount shown in the opening balance of the next previous year can be treated to be an income for the next previous year. Though it could be treated as income of the earlier previous year by reason of the addition, yet the finding with regard to the quantum proceedings will not conclusively determine the case for the purpose of penalty proceedings. The Court cannot rely on the finding in the quantum proceedings as a factor for imposing penalty. It requires to be decided independent thereof. It, therefore, seems that two views are possible viz.; the income could be that of the following previous year or it could also be that of the relevant previous year. When two views are possible, then penalty cannot be imposed on account of concealment in respect of the relevant previous year when the account could be disclosed in the following previous year. Secondly, that this amount was claimed to be the amount at the hands of the partners as it was shown in the capital accounts of the partners. At the same time, the partners in their revised returns had shown this amount in their account. Such returns have since been accepted by the Revenue. Therefore, the income did not belong to the assessee but to the partners. Though on identical grounds yet the decision in the quantum proceeding cannot be treated to have reached finality for the purpose of penalty proceedings. The question has to be determined independent of the said finding and decided accordingly. Again he submits when it cannot be conclusively determined that whether this amount is an income of the assessee or at the hands of the partners included in their capital account. Therefore, when two views are possible, no penalty could be imposed. Thirdly, this amount admittedly has been added as income of the assessee for the previous year. At the same time, this was shown in the return filed by the partners as their income and such returns have since been accepted. The Department itself had treated the same amount once as income of the assessee and again as income at the hands of the partners. Unless the amount is owned by the assessee in view of Section 69A, there cannot be any question of concealment. When the Department itself had accepted the same in both ways, there cannot be any conclusive proof that this amount was owned by the assessee. Therefore, no penalty can be imposed in such a case.
(3.) Mr. Khaitan has led us through the order imposing penalty as well as the decisions cited by him viz., CIT v. Ashok Timber Industries to support his first contention and National Textile v. CIT, (2001) 249 ITR 125 (Guj) and CIT v. P.K. Narayanan, (ITR 901999) 238 5 (Ker) to substantiate the other two contentions. He has referred to Section 69A and Section 271(1)(c) and Expln. 1 thereunder.;