- (1.) This Tax Case No. 10 of 1999(R) has been registered on receipt of reference under Section 256(1) of the Income Tax Act, 1961 and following question of law has been referred to this Court: Whether on the facts and in the circumstances of the case and in law, the ITAT was right in deleting the penalty levied under Section 271 even though the income disclosed during search was deliberately not declared in the return. Learned counsel for the appellant-Revenue submitted that during the course of search, one of the partners of the firm voluntarily disclosed undisclosed income of Rs. 20 lakhs. On the basis of said declaration of the assessee's partner and after rejecting the defence of the assessee, the assessment order was passed by the assessing officer on 31st January, 1991 adding the undisclosed income of Rs. 20 lakhs. This assessment order attained finality. The assessing officer in assessment order dated 31st January, 1991 directed to take proceeding under Sections 271(1)(a), 271(1)(6) and 271(2)(c) of the Act.
(2.) In pursuance of said order, the proceeding under Section 271(1)(c) was initiated and the assessing officer relying upon the order of assessment, which attained the finality, wherein assessing officer found assessee's undisclosed income of Rs. 20 lakhs and held that the assessee failed to disclose the facts in the return and thereby concealed the income of Rs. 20 lakhs, and imposed the penalty of Rs. 12 lakhs under Section 271(1)(c) of the Act of 1961.
(3.) Learned counsel for the appellant submitted that the fact of declaration of undisclosed income by the assessee cannot be disputed by the assessee in view of the finality of the assessment order wherein this finding of fact has been recorded that the assessee himself has disclosed that he had undisclosed income of Rs. 20 lakhs. In that fact situation, no any further inquiry was necessary by the assessing officer and assessing officer rightly imposed the penalty under Section 271(1)(c) of the Act of 1961. Whereas the Tribunal has set aside that penalty only on the ground that no further inquiry was conducted by the assessing officer, which according to learned counsel for the respondent was not at all required in view of the admission of the assessee himself as well as in view of the finding of fact that has been recorded in the assessment proceeding.;