RAJESH BALIA,J. - (1.) HEARD learned counsel for the parties.
(2.) THIS reference has been made, at the instance of assessee, by the Appellate Tribunal, Jaipur Bench, Jaipur, for the opinion of this Court on the following questions of law, said to be arising out of appellate order dt. 18th Nov., 1984, in ITA No. 798/Jp/83 relating to asst. year 1978 79 : "Whether, on the facts and in the circumstances of the case, the concealment of income by the assessee could be taken at Rs. 28,520 within the meaning of sub cl. (c) of Expln. 1 to S. 271(1)(c) of the IT Act and consequently the minimum amount of penalty to be levied would come to Rs. 19,629 ?" Brief facts of the case are that assessee is a building contractor and is being assessed in the status of a registered firm. The assessee submitted its return for the asst. year 1978 79 showing total income at Rs. 99,164. The ITO noticed various defects in the maintenance of accounts. After discussion with the AO and finding unvouched nature of expenses, the assessee agreed for application of gross profit at the rate of 12 per cent on contract receipts so declared by the firm, to be taken as assessible income and, accordingly, assessee's income came to Rs. 1,27,680. In respect of said additions, the AO, taking support from Expln. 1 appended to S. 271(1)(c)(iii), initiated penalty proceedings against the assessee for levying penalty, by raising presumption under the Explanation that the additions made in the total income returned, represent the income in respect of which particulars have been concealed and ultimately, levied penalty on finding that some of the expenses, referred to in the order, having been not properly explained equal to amount of income, held to be such in respect of which particulars have been concealed. Said order has been affirmed by CIT(A) as well as by the Tribunal, by holding that Expln. 1 to s. 271(1)(c), as amended w.e.f. 1st April, 1976, apply to the facts of present case.
(3.) BEFORE further examining contours of the controversy, it would be appropriate to reproduce relevant portion of S. 271 as they existed at the relevant time, covering asst. year 1978 79 : "271. (1) If the ITO or the AAC or the CIT(A) in the course of any proceedings under this Act, is satisfied that any person : (a)........................ (b)....................... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, ................ ................... ...................... (i) ................ ................... ...................... (ii) ................ ................... ...................... (iii) in the cases referred to in cl. (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income : Provided that, if in a case falling under cl. (c), the amount of income (as determined by the ITO on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty five thousand rupees, the ITO shall not issue any direction for payment by way of penalty without the previous approval of the IAC. Explanation 1 : Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation which is found by the ITO or the AAC or the CIT(A) to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of cl. (c) of this sub section, be deemed to represent the income in respect of which particulars have been concealed : Provided that nothing contained in this Explanation shall apply to a case referred to in cl. (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation, is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him." ;