Suhas Chandra Sen, J. - (1.) Two questions of law have been referred to this court under Section 256(2) of the Income-tax Act, 1961 : "(a) Was the Tribunal justified, legally or otherwise, in disposing of the appeal by ignoring the contention of the applicant that no proper opportunity of being heard in the matter of penalty proceedings was allowed by the Inspecting Assistant Commissioner ? (b) Is not the order of the Tribunal confirming the levy of penalty vitiated and/or liable to be set aside ?"
(2.) The assessment year involved is the assessment year 1968-69 for which the previous year ended on October 31, 1967. The facts of the case found by the Tribunal have been stated as under : The assessee filed his return on June 3, 1968, declaring a total income of Rs. 23,576. During the course of assessment proceedings, the Income-tax Officer enquired of the assessee the nature and source of Rs. 25,000 being a loan alleged to have been taken by the assessee in the name of Eastern Industries Corporation. The Income-tax Officer treated Rs. 25,000 as the assessee's income from business in his order of March 14, 1972, the relevant portion of which reads as under : "Sri N. C. Khasnabia, Advocate, appears and submits that it would not be possible for them to satisfy the cash credit amounting to Rs. 25,000 in the name of Eastern Industries Corporation and hence he volunteers on behalf of the assessee that the said amount of Rs. 25,000 be treated as the assessee's income from business. As regards other cash credits .... (Sd.) Income-tax Officer Agreed. (Sd.) Khasnabia."
(3.) The Income-tax Officer framed the assessment on a total income of Rs. 76,718. Simultaneously, he initiated penalty proceedings under Section 271(1)(c) of the Act and referred the matter to the Inspecting Assistant Commissioner as the minimum penalty imposable under that section exceeded Rs. 1,000. The Inspecting Assistant Commissioner, after noticing that the aforesaid addition was upheld by the Appellate Assistant Commissioner and that no further appeal was preferred by the assessee against the said order of the Appellate Assistant Commissioner, came to the conclusion that the assessee had concealed the particulars of his income and, therefore, the provisions of Section 271(1)(c) of the Act were clearly attracted in his case. He, accordingly, imposed a penalty of Rs. 32,500.;