AJIT K.SENGUPTA, J. - (1.) AT the instance of the CIT, the following questions of law have been referred to this Court under s. 256(2) of the IT Act, 1961, for the asst. yr. 1974-75 : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the penalty order passed by the IAC cannot be sustained on the sole ground that the Tribunal has deleted the addition of Rs. 4 lakhs made by the ITO in the quantum appeal, which order has not been accepted by the Department ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in cancelling the order of penalty passed by the IAC under S. 271(1)(c) of the IT Act, 1961 ?"
(2.) THE , facts, shortly, are that the assessee was carrying on the business of purchasing raw jute from East Pakistan and manufacturing and selling of jute goods, and it had purchased jute worth Rs. 4 lakhs from Madaripur Trading Co. Ltd. which, in its turn, had purchased the same from Sarsabari Jute Trading Co. Ltd. Firstly, Madaripur Trading Co. Ltd. paid Rs. 4 lakhs to Sarsabari Jute Trading Co. Ltd. and then the assessee reimbursed Madaripur Trading Co. Ltd. on October 30, 1950, in the following manner : " Rs. 4 lakhs were sent to one Shri Shaligram Chowdhury of Bombay by telegraphic transfer on October 30, 1950 through Hindusthan Mercantile Bank. The said Shaligram Chowdhury, in his turn, paid over Rs. 4 lakhs to G. Yafi and Sons of Bombay which, in turn, paid the said amount to Madaripur Trading Co. Ltd. in cash." According to the ITO, as the payment of Rs. 4 lakhs in cash to Madaripur Trading Co. Ltd. was recorded on October 31, 1950, in the books of account of the assessee, while the telegraphic transfer of Rs. 4 lakhs to Shaligram Chowdhury was sent on October 30, 1950, there were two transactions of Rs. 4 lakhs each and as the transaction regarding remittance of money to Shaligram Chowdhury was not recorded in the assessee's books of account, the same had escaped assessment, when the assessment was originally framed on January 31, 1956. The ITO, therefore, reopened the assessment under S. 147(a) of the Act, with a view to include Rs. 4 lakhs which was remitted to Shaligram Chowdhury, in the total income of the assessee. For the reasons stated in his assessment order dated September 25, 1969, the ITO rejected the assessee's explanation regarding the mode of payment of Rs. 4 lakhs to Madaripur Trading Co. Ltd. and, accordingly, he treated Rs. 4 lakhs as the assessee's income from undisclosed sources. Simultaneously, he initiated proceedings under S. 271 ( 1 ) (c) of the Act and referred the matter to the IAC as the minimum penalty imposable under that section exceeded Rs. 1,000. Thereafter, the IAC, vide his order dated September 23, 1971, imposed penalty of Rs. 4,50,000 under S. 271(1)(c) of the Act. Against the addition of Rs. 4 lakhs to the total income of the assessee, the assessee had preferred an appeal before the AAC who confirmed the action of the ITO, vide his order dated June 25, 1974.
(3.) BEING aggrieved by the orders of the IAC as well as the AAC, the assessee preferred appeals before the Tribunal. The Tribunal, in its order dated December 13, 1974, in the quantum appeal, came to the conclusion that there was, in fact, only one transaction of Rs. 4 lakhs on October 30, 1950, which was accounted for by the assessee in its books of account and not two transactions as alleged by the Revenue. The Tribunal, therefore, deleted the addition of Rs. 4 lakhs made by the ITO as the assessee's income from undisclosed sources.;