- (1.) FOLLOWING questions of law have been referred for opinion of this Court by the Tribunal, Chandigarh, arising out of its "(1) Whether on a proper interpretation of s. 271(1)(c) of the IT Act, 1961, the Tribunal is right in law in holding that where a case falls under the Explanation to s. 271(1)(c), only the minimum penalty is leviable under s. 271(1)(iii) ? (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the main provision of s. 271(1)(c) of the Act and the provisions of the Explanation thereto are mutually exclusive so that they cannot operate in the same field ? (3) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the penalty levied under s. 271(1)(c) of the Act in respect of the addition of Rs. 1,26,000, the admitted value of the stock which was not accounted for -
(2.) THE facts of the case, as noticed in the statement of case submitted by the Tribunal, are as under : "The assessee is a registered firm which was manufacturing, selling and exporting goods. The assessment year involved shown in a sum of Rs. 3,17,641. The assessment was framed under s. 143(3) of the IT Act, 1961 (for short, "the Act") 1967 and that not having been done assessment had become 'time -barred' and, therefore, was a nullity. The ITO rejected the said contention of the assessee and observed that the case fell within the mischief of s. 271(1)(c) of the Act and, therefore, under the provisions of s. 153(1)(b) of the Act, limit of eight years from the end of the assessment year the basis for bring in the provisions of s. 271(1)(c) r/w s. 153(1)(b) of the Act. He further stated that his predecessor had duly recorded his satisfaction regarding the assessee being guilty of concealment of income within the meaning of s. 271(1) of the Act. The matter was carried by the assessee before the AAC, who did not agree with the ITO that the assessee's case was covered by the provisions of s. 153(1)(b) of the Act, as, according to him, there was no positive evidence on record to prove that the assessee was guilty of concealment of income within the meaning of s. 271(1)(c) of the Act. The Tribunal while adjudicating the penalty appeal, took note of the above observations and findings in order to point out that unless were shown to have been disturbed or vacated, it was difficult to go with the Revenue that mere assessment or certain additions which happened to be substantially modified by the AAC, the CIT as also by the Tribunal's could have the effect of penalising the assessee on the charge of concealment with the help of the main provisions of s. 271(1)(c) of the clarification and reconciliation of certain discrepancies noticed in the books of account and did not have the effect of establishing any concealment within the meaning of s. 271(1)(c) of the Act. The AAC further observed that a request from the assessee for entering into a settlement with the CIT (agreeing to be assessee in respect of certain shortage in the closing stocks to the tune of Rs. 1,96,000) was not an admission on the part of the assessee of any concealment of income. The AAC, however, did not accept the assessee's case that assessment was void as according to him, the provisions of s. 139(4) of the Act were wide enough to cover not only a late but even a revised return after filing of the belated return. The AAC was also of the opinion that a return under s. 139(4) of the Act could be filed at any time before the end of the period mentioned in cl. (b) and such a return could be an original or a revised return. Therefore, according to the AAC, extended time -limit of one year under s. 153(1)(c) of the Act would apply to an original or a revised return under s. 139(4) of the Act. The assessee and the Revenue both felt aggrieved by this decision of the AAC. The assessee filed a regular appeal and the Revenue a cross -objection. The Tribunal, however, did not agree with the assessee's plea. The Tribunal further noted the above facts with a purpose in mind that even before framing the assessment, the ITO had recorded his satisfaction of concealment and it is not a case where difference of 20 per cent between returned and assessed income was meant to be utilized for levying three additions as follows : (I) Unaccounted for woolen yarn and stock pledging Rs. with the bank (para 5 of the ITO's order) 2,45,600 (ii) Unaccounted for bank deposits with Union Bank of Rs. 65,696 India, Bombay (para 6 of the ITO's order) (iii) Extra profit on wool tops (para 8 of the ITO's Rs. 42,230 order) The addition of Rs. 65,695 was deleted by the CIT by an order under s. 264 of the Act and addition of Rs. 42,230 was vacated by the Tribunal in quantum appeal in ITA No. 603 of 1973 -74, which had become final. The addition of Rs. 2,45,600 was reduced by the AAC to Rs. 2,11,000 and at the Tribunal's stage it further came to be reduced and retained at Rs. 1,26,000 on the ground entirely different than the one on which the original addition in a sum of Rs. 2,45,600 was made. The Tribunal while reducing the said addition in a sum of Rs. 1,26,000 observed that it was not an account of concealment of closing stock but there was an omission of not accounting for certain stocks. The benefit of enhancement of opening stock was allowed in the following year. The IAC in para 8 of his order held that assessee concealed the particulars of its income in respect of Rs. 2,11,000 and was liable to penalty. When this penalty was levied, the matter was not adjudicated by the Tribunal. The IAC noted in clear terms that the assessee was liable to penalty under Explanation to s. 271(1)(c) of the Act in respect of addition of Rs. 65,695 and Rs. 42,230 and the assessee's filing of its return at Rs. 3,17,641 clearly brought it within the ambit of penalty provisions. As observed above, the two additions of Rs. 65,695 and Rs. 42,230 were ordered to be deleted one by the CIT and the other by the Tribunal. The IAC after observing that the assessee concealed particulars of taxable income in respect of Rs. 2,11,000 held that the facts connected with this part of concealment of income were very heavy and, therefore, it was not a case of minimum penalty of 100 per cent but was a fit case for levy of 150 per cent. The result was that with regard to the addition of Rs. 2,11,000, penalty was worked out @ 150 per cent and with regard to other two items @ 100 per cent was considered sufficient. This resulted in an imposition of penalty of Rs. 4,25,000. When the assessee came before the Tribunal against the imposition of penalty of Rs. 4,25,000, by that time only addition of Rs. 1,26,000 out of the addition of Rs. 2,11,000 was sustained. The Tribunal in para 10 of its order noted that on facts of the case and keeping in view the IAC's order particularly paras 8 and 9, there was no doubt that the Revenue charged the assessee with actual concealment and the IAC's reference to Explanation under s. 271(1)(c) was entirely superfluous and wrong. The Tribunal in paras 10 and 11 of its order dealt with the facts and in para 12 recorded the assessee's contention. The Tribunal, however, in para 14 of its order rejected the assessee's contention that a charge under the Explanation should be separately handed over to it. The Tribunal accepted the assessee's contention that since the phantom created by the Revenue by making additions totalling Rs. 4,25,000 had simply vanished because of the Tribunal's decision in quantum appeal, the IAC's decision for levy of penalty cannot survive. The Tribunal also accepted the contention raised for the assessee that omission cannot give rise to any punishment for concealment. The Tribunal in para 15 of its order absolved the assessee from charge of concealment and in para 17 cancelled the penalty on three counts detailed therein."
(3.) WE find that though the questions have to be answered against the assessee to the effect that Explanation is part of the main provision as held by the Hon'ble Supreme Court in K.P. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC) and no express invocation of Explanation to s. 271 was required in a notice under s. 271 of the Act, the Explanation being part of the provision itself, from the findings recorded by the Tribunal, we do not find that any error has been committed by the Tribunal in deleting the penalty, levied on the assessee under s. 271(1)(c) of the Act on appreciation of material on record. Accordingly, we answer question No. 3 against the Revenue and in favour of the assessee. The reference is disposed of accordingly.;