P.C. Jain, J. - (1.) THIS income-tax reference application under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), is directed against the order dated August 28, 1981, passed by the Income-tax Appellate Tribunal, Jaipur, by which the reference application under Section 256(1) of the Act preferred by the Revenue was rejected.
(2.) BRIEFLY stated, the facts of the case are that Manna Lal Surana is the managing partner of the assessee-firm, M/s. Hazari Mal Milap Chand Surana Shri Surana took two foreign tours in the year 1975-76. In one of the tours, Mrs. B. D. Surana accompanied her husband, M. L. Surana, and in another tour, the daughter of Shri Surana accompanied him. The assessee claimed a deduction amounting to Rs. 8,416.70 and Rs. 10,444, i.e., total expenditure of Rs. 18,860, on account of foreign tours as allowable expenditure, being business expenditure. The Income-tax Officer, vide order of assessment dated January 12, 1979, held that so far as the first tour was concerned, the tour was merely undertaken for medical purposes. The assessee's contention before the Income-tax Officer was that during his stay in the USA, Shri Surana, the managing partner of the assessee-firm, contacted various parties dealing in jewellery trade for the purpose of business of the firm. However, 3/4ths of the expenses relating to the first trip were disallowed by the Income-tax Officer and, only 1/4th of the expenses were allowed as business expenditure. In the second foreign tour, the assessee claimed an expenditure of Rs. 19,240 as expenditure on tour undertaken by Shri Surana In the report submitted to the Reserve Bank, Jaipur, regarding export promotion tour abroad undertaken by Shri Surana, it has been mentioned that the daughter of Shri M. L. Surana accompanied him on the tour and she was admitted to Albain Hospital under the care of the doctor. The Income-tax Officer disallowed 1/4th expenditure incurred in the second foreign tour as the expenditure incurred was for private purposes and was not connected with the business. Aggrieved by the order of assessment passed by the Income-tax Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Jaipur, who confirmed the order passed by the Income-tax Officer. On second appeal, the Income-tax Appellate Tribunal also dismissed the assessee's appeal, vide order dated August 28, 1981. In view of the fact that the Income-tax Officer disallowed 1/4th of the total expenditure involved in the second tour, the total disallowance made from the foreign tour expenditure amounted to Rs. 21,312. It was alleged that since the assessee-firm had furnished inaccurate particulars of income, inasmuch as the expenses of the partner and his relative amounting to Rs. 21,312 were claimed as business expenses of the firm, penalty proceedings under Section 271(1)(c) of the Act were initiated and a show-cause notice was served. The assessee-firm filed a reply on October 23, 1978. The assessee-firm submitted that the additions are in the nature of disallowance of expenses claimed by the firm under the honest and bona fide belief that the said expenses are allowable under the law. It was also submitted that the firm has not concealed any part of the income and has also not suppressed the profits in any way. Thus, the provisions of Section 271(1)(c) are not applicable. The submissions of the assessee-firm were not found to be correct by the Income-tax Officer who after hearing the assessee-firm held that the assessee-firm deliberately furnished inaccurate particulars of its income and consequently, levied a penalty of Rs. 22,500 under Section 271(1)(c) upon the assessee. An appeal was preferred against the order dated January 12, 1979, passed by the Income-tax Officer before the Commissioner of Income-tax (Appeals), Jaipur. The first appellate court also concurred with the Income-tax Officer and dismissed the appeal. Aggrieved by the order passed in appeal, the assessee-firm preferred a second appeal before the Income-tax Appellate Tribunal. The learned Tribunal allowed the appeal of the assessee-firm setting aside the order imposing a penalty on the assessee-firm. Aggrieved by the order dated March 10, 1981, passed by the Income-tax Appellate Tribunal, the Revenue moved an application for reference under Section 256 (1) of the Act, requiring the Tribunal to refer a question of law arising out of the order of the Tribunal dated March 10,1981, to this court. The learned Tribunal declined to refer the question proposed by the Commissioner of Income-tax to this court. Consequently, the Revenue has filed a reference application under Section 256(2) of the Act, arising out of the order dated March 10,1961, passed by the Income-tax Appellate Tribunal. Mr. M. N. Surolia, learned counsel appearing on behalf of the Revenue, submitted that the Income-tax Appellate Tribunal committed an illegality in setting aside the imposition of the penalty levied by the Income-tax Officer and in not stating the case for reference in the matter to this court, when an application for reference was moved. Controverting the submissions of Mr. Surolia, Mr. N. M. Ranka, learned counsel for the assessee, submitted that the order passed by the Income-tax Appellate Tribunal declining to make a reference to this court, is absolutely correct and no question of law arises from the order of the Income-tax Appellate Tribunal, dated March 10,1981. The main contention raised by Mr. Surolia, learned counsel for the Revenue, is that since the original assessment proceedings for computing the tax have been decided against the assessee and, as such, a presumption should be drawn that the assessee-firm has consciously concealed the particulars of its income, or had deliberatedly furnished inaccurate particulars in respect of the same, and that the disputed amount is a revenue receipt. Learned counsel also submitted that in view of the fact that with effect from 1st April, 1964, the word "deliberately" was omitted and an Explanation added to Section 271(1)(c) of the Act. The onus of proof does not lie on the Revenue, but upon the assessee to prove that no penalty is imposable upon the assessee-firm. In order to sub-stantiate his argument, Mr. Surolia placed reliance upon Rukmani Baku v. Addl. CIT [1979] 116 ITR 468 (All), CIT v. Midda Ram [1985] 152 ITR 203 (P & H) and Addl. CIT v. Dargapandarinath Tuljayya & Co. [1977] 107 ITR 850 (AP) [FB]. In these authorities it is laid down that, after the amendment in Section 271(1)(c) of the Act in 1964, the onus does not lie on the Revenue. However, it has been observed that the presumption can be rebutted by the assessee by adducing relevant evidence to show that there was no fraud or gross or wilful negligence on his part.
(3.) CONTROVERTING the submissions made by Shri Surolia, learned counsel for the Revenue, Mr. Ranka, appearing on behalf of the assessee-firm, contended that he is not disputing the proposition that after the deletion of the word "deliberately" and addition of the Explanation to Section 271(1)(c), the onus lies on the assessee-firm to prove that no penalty is imposable. He submits that though the initial responsibility is that of an assessee to advance some cause, it is the task of the Income-tax Officer or the Appellate Assistant Commissioner to satisfy himself whether the cause advanced is reasonable or not. He submits that no penalty can be levied unless the satisfaction of the concerned officer is indicated that the cause advanced by the assessee is not a reasonable one. As regards the finding recorded in the assessment proceedings, Mr. Ranka submits that the finding in the original assessment proceedings for computing tax may be a good item of evidence in the penalty proceedings, but penalty cannot be levied solely on the basis of the reasons given in the original assessment. Mr. Ranka relies on CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC). Mr. Ranka, learned counsel for the assessee-firm, further submitted that the assessee-firm has clearly proved that it had reason to believe that the expenses incurred in the above-mentioned two cases would be allowed as business expenditure. He also submits that in view of the fact that the Appellate Tribunal had considered the entire case and rendered a finding in favour of the assessee-firm which is a finding of fact and from which no question of law arises, the reference application was not competent and was rightly dismissed by the learned Income-tax Appellate Tribunal. The learned Tribunal considered the circumstances under which the expenses were incurred. The learned Tribunal gave the finding that the first visit which was undertaken by Shri M. L. Surana, was for his medical treatment and not for his wife's treatment. The wife was to accompany Shri Surana as his attendant. The learned Tribunal also rendered the finding that during the said visit, Mr. Surana, besides undergoing tests, etc., or medical treatment did undertake business for the assessee-firm. As regards the second tour, Mr. Surana took his daughter for medical treatment. The assessee-firm did not incur any expenditure in connection with the said visit of the daughter and Shri Surana had positively gone there for the purpose of business of the assessee-firm and, in fact, did considerable business there. The learned Tribunal also considered the case of the assessee-firm that the expenditure incurred by the firm was an allowable revenue expenditure on the ground of commercial expediency. The learned Tribunal also considered that the expenditure was incurred under the bona fide belief that such an expenditure would be allowed on the ground of commercial expediency. The learned Tribunal also considered the effect of the Explanation added to Section 271(1)(c) of the Act and recorded the finding that it was not attracted in the instant case inasmuch as the income returned was not less than 80% of the total income assessed for the year after adjustment of Rs. 21,312 in view of the fact that the said expenditure was incurred bona fide by the assessee for the purpose of earning income included in the total income of the assessee-firm for the year and that the assessee-firm was under the bona fide belief that the entire expenditure incurred in foreign tours will be allowed by the taxing authorities in the assessment and the quantum in appeal would be allowed by the Income-tax authorities. The learned Tribunal while declining to make a reference also, held that the finding recorded by the Tribunal while knocking off the penalty is a finding of fact and, as such, no referable question of law arises therefrom. Mr. Ranka relied upon CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC), a judgment of the Hon'ble Supreme Court, Addl. CIT v. Noor Mohd. & Co. [1974] 97 ITR 705 (Raj), Addl. CIT v. Id. Mohammad Nizamuddin [1979] 120 ITR 660 (Raj) and CIT v. Sah Swaroop Narain [1980] 124 ITR 676 (Raj) which are Division Bench judgments of this court. In all the said judgments, it has been laid down that if the Tribunal records a finding of fact for not imposing a penalty under Section 271(1)(c), it is a finding of fact, and, as such, no referable question of law arises there from. We are in agreement with the proposition of law laid down in the aforesaid cases and concur with the order dated August 28, 1981, passed by the learned Income-tax Appellate Tribunal for declining to make a reference. In the result, we see no force in the reference application and the same is dismissed with no order as to costs. ;