Sen, Actg C.J. - (1.) This application under section 256 (2) of the Income Tax Act, 1961 by the Additional Commissioner of Income-tax, Rajasthan, Jaipur is for directing the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur to refer to the Court for its opinion. The following question of law is said to arise from its order in Income-tax Appeal No. 6052/69-70 dated 3.2.72, namely. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty under section 271(1) (c) was not leviable for the assessment year 1963-64 -
(2.) During the assessment year 1963-64, the corresponding previous years being the financial year ending on 31-3-63; the assessee had undertaken contracts under the Irrigation Department of the Government of Rajasthan in connection with the Vallabhnagar project. The total Payment received during the assessment year 1963-64 amounted to Rs. 18,18,563. Out of this sum, Rs. 6,92,347/- were in respect of the contracts directly executed by the assessee and on which it disclosed a net profit rate of 10%. The assessee claimed to have got works executed to the extent of Rs. 11,30,333/- through subcontracts. The Income-tax Officer estimated the gross profit rate relating to the amount of Rs. 6,92,347/- at 12.5% and this estimated rate of the Income Officer was confirmed by the Appellate Assistant Commissioner and the Tribunal as well, as being reasonable. The Tribunal, however, held that while applying the gross profit rate of 12.5%, the value of the material supplied by the Government was to be excluded from the gross profits. With respect to the amount of Rs. 11,30,333/-, the ITO estimated the gross profit rate at 12.5% holding that the alleged sub-contracts were not proved, which finding was affirmed both by the Appellate Assistant Commissioner as cell as the Tribunal; but the rate of gross profit was reduced by them to 7.5% and accordingly they made an addition of Rs. 85,000/- and odd.
(3.) The Income-tax Officer started penalty proceedings against the assessee under section 271(1)(c) of the Act, having discovered certain cash credits of Rs. 40,000/- and the peak credits of Rs. 22,140/- in the Udarat Account. As the minimum penalty leviable exceeded Rs. 1,000/- the Income tax Officer referred the proceedings to the Inspecting Assistant Commissioner of Income-tax under section 274 (2) of the Act. Thereafter, the Inspecting Assistant Commissioner of Income tax, by his order dated 20-2-70, imposed a penalty of Rs. 24,500/-. on the ground that the assessee had not disclosed income from sub-contracts amounting to Rs. 20,500/- and it also concealed a part of its income by way of cash credits amounting to Rs. 62,140/-.;