A.S.BAINS,J. - (1.) AT the instance of M/s. Sohinder Singh and Brothers, Jullundur, the assessee, the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as " the Tribunal "), has referred under Section 256 (1) of the I. T. Act, 1961 (hereinafter referred to as " the Act "), the following question of law for the opinion of this court : " Whether, on the facts and circumstances of the case, the Tribunal was right in upholding the penalty imposed under Section 271 (1) (c) of the I. T. Act, 1961 ? "
(2.) IN order to appreciate the scope of the reference, it is necessary to refer to the material facts that gave rise to the aforesaid question : The assessee, M/s. Sohinder Singh and Brothers, Jullundur, is a registered firm carrying on business in the manufacture and sale of pipe fittings and resale of ready-made goods on wholesale basis. During the course of the examination of accounts for the assessment year 1964-65, relevant to the accounting period ending March 31, 1964, the ITO while examining the correctness of the closing stock shown by the assessee with reference to the overdraft obtained by pledging the stock with the bank, found that there was a huge discrepancy between the value of the closing stock shown to the bank and the value of the stock as per its books of account. The assessee was asked to explain as to how an overdraft of Rs. 19,828 was obtained from the State Bank of India against the security of the stock while no such stock was shown in the books of account. The explanation offered by the assessee did not find favour with the ITO and, in that situation, the assessee agreed to an addition of Rs. 23,054 and the ITO gave a note on the front page of the return filed by the assessee with regard to the aforesaid offer and it was got signed from the assessee. The ITO completed the assessment on March 22, 1969, on a total income of Rs. 1,99,678, which included the sum of Rs. 23,054 agreed to by the assessee, as against the income of Rs. 64,640 shown in the return of income filed by the assessee on December 31, 1964. The ITO also initiated penalty proceedings and referred the matter to the IAC under Section 274 (2) of the Act as the minimum penalty imposable exceeded a sum of Rs; 1,000, which the ITO eould not impose. A copy of the assessment order dated March 22, 1969, is marked as annex. " A " and is attached to the statement of the case. The IAC of Income-tax, after hearing the assessee, imposed a penalty of Rs. 5,500 under Section 271 (1) (c) of the Act. A copy of the order passed by the IAC of Income-tax on March 20, 1971, is annexed with the statement of the case as annex. " B ".
(3.) AGGRIEVED by the order of the IAC of Income-tax, the assessee filed an appeal before the Tribunal, which was dismissed. Hence this reference.;