- (1.) THE assessee, a registered firm, carried on business as dealer in gur and shakar and also as commission agent. For the assessment year 1970-71, it filed a return showing an income of Rs. 8,660. The assessing authority assessed the income at Rs. 1,02,050 which was reduced to Rs. 99,760 by the Appellate Assistant Commissioner and to Rs. 94,760 by the Tribunal. The Income-tax Officer had found during the course of the proceedings that the assessee had been doing business outside its books and had invested an amount of Rs. 78,075. As the explanation furnished by the assessee was found to be unsatisfactory, he added this amount to the income of the assessee taking it to be income from undisclosed sources. It is not disputed that the order of the Tribunal has since been affirmed by this court.
(2.) APART from the assessment proceedings, the Income-tax Officer also instituted penalty proceedings and on a reference from him, the Inspecting Assistant Commissioner imposed a penalty of Rs. 80,000 as against the maximum leviable penalty of Rs. 1,56,150. On appeal, the Tribunal accepted the explanation holding that the version of the assessee rings a note of plausibility and reversed that order. Aggrieved thereby, the Revenue moved an application under Section 256 (1) of the Income-tax Act (hereinafter called "the Act"), which was allowed and the following three questions have been referred to this court : "1. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 271 (1) (c) and (iii) of the Income-tax Act, 1961, as amended by Section 40 of the Finance Act No. 5 of 1964, the Appellate Tribunal was right in law in cancelling the penalty of Rs. 80,000 imposed by the Inspecting Assistant Commissioner of Income-tax ? 2. Whether the Tribunal was right in law in holding that separate monetary limits for the levy of penalty are laid by the substantive provisions of Section 271 (1) (c) and the Explanation does not come into operation unless the charge under the substantive provision is withdrawn or dropped ? 3. Whether the Tribunal was right in law in holding that the Inspecting Assistant Commissioner's failure to refer to the Explanation in his order meant that the Explanation to Section 271 (1) (c) is not applicable in this case ?"
(3.) LEARNED counsel for the assessee has fairly conceded that questions Nos. 2 and 3 are liable to be answered in favour of the Revenue and against the assessee. We order accordingly.;