- (1.) ON an application under Section 256(2), this court has directed the Tribunal to refer the following questions. In compliance with the direction of this court, the Tribunal has referred the following questions for our opinion : "Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in cancelling the penalty levied under Section 271(1)(c) ? Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the claim of higher deductions under Chapter VI-A by way of revised return was bona fide being based on legal opinion obtained by the assessee notwithstanding that the claim was not in accordance with the provisions of law and also that no such plea of having obtained legal opinion was raised during the course of assessment proceedings ? Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that there was no difference in the figures of income returned originally, revised income and assessed income ? Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the assessee had successfully discharged the burden of proof which lay on it in terms of Explanation to Section 271(1)(c) ?"
(2.) THE application relates to the assessment year 1988-89. THE assessment year was completed on December 28, 1988, under Section 143(3) of the Income-tax Act and a total income was assessed at Rs. 12,29,580. THE assessee in the original return filed on June 30, 1988, declared total income of Rs. 10,09,950 but in the revised return filed on December 27, 1988, he declared total income at nil as there was addition on account of wrong claim of deduction under Sections 80HH and 80-I. THE penalty proceedings under Section 271(1)(c) had been initiated and penalty of Rs. 8,60,000 was imposed by the Assessing Officer. THE Commissioner of income-tax (Appeals) has also confirmed the penalty but reduced the penalty amount to Rs. 6,25,510. In appeal before the Tribunal, the Tribunal has cancelled the penalty so imposed, holding that the assessee has claimed the deductions on arguable grounds and if that has not been allowed, the penalty under Section 271(1)(c) cannot be imposed automatically. While rejecting the application under Section 256(1), the Tribunal has considered and reproduced the facts stated in penalty order. The relevant part of the Tribunal's order reads as under : "The consistency of the assessee's conduct is further established from the fact that it filed an appeal against the assessment order though it was later not pressed due to there being no tax effect allowed. From the foregoing discussion it follows that such a deduction could be an arguable, controversial or a debatable question. In such a situation the claim could not be said to be false. If this were not so, it would become impossible for any assessee to raise any claims or claim any deductions which are debatable. It is not certainly the intention of the Legislature to make punishable such claims or deductions under Section 271(1)(c), if they are not accepted. Further the total income as per the original and revised computation of the assessee as also after the final assessment, remained the same, namely, Rs. 13,07,646 so also the income-tax computed by the assessee in both the returns and as computed on the basis of final assessment remained the same, namely, Rs. 6,86,519. In such a situation, therefore, when no further tax was payable, the question of concealment or computation of the penalty could not arise. The observation and findings of the income-tax authorities to the contrary were, therefore, not right. What is more, since the assessee had paid tax amounting to Rs. 6,90,000 a refund of Rs. 3,481 became payable to it as a result of the final assessment. There is another fact which also required to be noticed, namely, as against the deduction of Rs. 6,73,298, claimed by the assessee on the basis of the original return the total deduction allowed as a result of the final assessment was more, namely, Rs. 10,17,306. Therefore, in whatever manner the matter is looked at on the basis of the foregoing facts, it is not possible to uphold the levy of any penalty under Section 271(1)(c) in this case and the assessee can be said to have successfully discharged the burden of proof, which lay on it in terms of the applicable Explanation to Section 271(1)(c). The penalty has, therefore, to be deleted." The finding of the Tribunal that when the assessee has claimed some amount though that is debatable, in such cases, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars for evasion of the tax. In view of the findings of the Tribunal, no case is made out for interference by this court. In the result, we answer all the four questions in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference so made stands disposed of accordingly. ;