V.K. SINGAL, J. - (1.) THE Tribunal, Jaipur Bench, Jaipur, has referred the following two questions of law arising out of its order dt. 4th Jan., 1982 in respect of asst. yr. 1964-65 under s. 256(1) of the IT Act, 1961 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of s. 68 of the IT Act, 1961 under which cash credits aggregating to Rs. 27,500 found in the accounts of M/s Subhash Medical Store have been treated the assessee's income from undisclosed source of the previous year relevant to the asst. yr. 1964-65 are not only confined to the assessment proceeding but also to the penalty proceedings under s. 271(1)(c) ? 2. If the answer to the above question is in the affirmative, whether the Tribunal was right in holding that the quantum of penalty should be governed with reference to the return filed by the firm in the year 1964 which has been held by the Department to be the proprietary concern of the assessee and not with reference to the return filed by the assessee as an individual on 23rd Dec., 1971 ?" THE brief facts of the case are that the firm M/s Subhash Medical Stores, Bhilwara, was claimed to be a partnership concern of which Shri Ramesh Chandra Moondra was a partner. In the books of accounts of the said firm, there were three cash/credits in the name of Ganeshlal Hanuman Prasad, M/s Bajranglal Srikishandas and M/s Ballabhdas Bhanwarlal, for Rs. 10,000, Rs. 10,000 and Rs. 7,500 respectively. THE ITO held the concern M/s Subhash Medical Stores, as proprietary concern of the assessee and these three credits entries were considered to be `bogus' and, as such were treated the income of the assessee. THE credits were also included in the income of the firm for which assessment was made on protective basis, and real assessment was made in the hands of the assessee. THE assessee contended that these amounts were deposited by Shri Shankarlal Mahavir Prasad of Calcutta in the books of M/s Subhash Medical Stores through Sri Nathulal Mundra, father of the assessee. An affidavit dt. 17th May, 1969 was also submitted of Shri Shankerlal Mahavir Prasad confirming the advancing of the said loan. THE assessee was required by the ITO time and again to produce Shri Mahavir Prasad for cross examination but, he avoided the same on one pretext or the other. On enquiry from the ITO K-Ward District-I, Calcutta, a statement of Shri Shankarlal Mahavir Prasad were recorded and he stated that neither he knows Shri Nathulal Mundra nor he had advanced Rs. 27,500 to M/s Subhash Medical Stores. THE confirmation certificate submitted by the assessee was denied to have been given by the said alleged creditor. THE assessee was confronted with the deposition by Shri Mahavir Prasad by providing the copy. THE assessee submitted that Shri Shankarlal Mahavir Prasad had given a certificate confirming the credit and, therefore, he should be asked about the affidavit filed by him. Enquiries were again made through the ITO, Calcutta and the assessee was also required to appear before the ITO, Calcutta to avail the opportunity of cross-examination of the said creditor. THE assessee did not turn up. THErefore the said alleged creditor was again examined on 22nd Feb., 1977. He again denied having given any affidavit and clearly stated that he did not know the names in which the credits appeared, neither he had any connection whatsoever in the concerns mentioned by the assessee. THE creditor having denied the loan, the amount was considered as concealed income of the assessee. THE finding with regard to the assessment made were confirmed by the Tribunal in its order dt. 28th Jan., 1980 and it was held that Shri Shankarlal Mahavir Prasad (sic) is the proprietor of Subhash Medical Stores; Bhilwara.
(2.) PENALTY proceedings under s. 271(1)(c) of the Act were initiated and penalty of Rs. 27,500 was levied. The return of income was filed by the assessee, as an individual on 27th Dec., 1971. The ITO, therefore, imposed the penalty on the basis of the law, that was prevalent on that date on which the actual concealment was committed. The order of the assessing authority was confirmed by the CIT(A) as well as by the Tribunal. It has been submitted by Mr. Maheshwari, for the petitioner, that this Court in D.B. IT Ref. No. 37/80 decided on 7th Jan., 1987 has held that the Tribunal was not justified in refusing registration to the assessee-firm and in making the assessment in the status of an individual treating the concern to be the sole proprietary concern of Shri Ramesh Chandra Mundra. On the basis of the said decision order under s. 154 were passed for the asst. yrs. 1964-65 and the additions originally made in the assessment order have been excluded and the amount which was deposited have been refunded. We have gone through the copy of the order passed by this Court on 7th Jan., 1992 and the order passed by the CIT under s. 119(3). In the order passed by the CIT directions have been given to make the appropriate assessment in the hands of the partners on the basis of the decision given by this Court, which has since been complied with. In these circumstances since the very basis for additions of the income has gone, the question of levying of any penalty does not arise. The two questions which have been referred are not required to be adjudicated upon in view of the decision given in the DB IT Ref. No. 37 of 1980 and the order passed by the CIT under s. 119(3) of the Act and the order passed by the ITO for assessment by way of rectifying the assessment order. The question of levying of penalty in these circumstances does not arise. The reference is returned unanswered. The Tribunal would pass appropriate order in accordance with the observations made above, and after taking into consideration the various decisions and orders referred to above. The Revenue authorities would be free to launch prosecution proceedings for filing the false affidavit and to take such other action as is available under law. No order as to costs.;