Commissioner of Income Tax vs Gauri Shanker Sushil Kumar and Co.

1 .This is a petition u/s 256(2) of the Income Tax Act, 1961 (for short "the Act"), seeking a direction to the Income Tax Appellate Tribunal, Delhi, to draw up a statement of the case and refer the following question for the opinion of this court :

"Whether, the Income Tax Appellate Tribunal was justified in law in upholding the order of the Commissioner of Income Tax (Appeals), cancelling the penalty u/s 271(1)(c) at (of) Rs. 4,29,520 ?"

The business premises of the assessed were searched on April 30, 1987, by the officers of the Directorate of Revenue Intelligence, which resulted in the recovery of cash amounting to Rs. 6,36,000, which was seized. On requisition the amount was remitted to the Income Tax Department. During the course of assessment proceedings for the assessment year 1988-89, when the assessed was required to explain the source of the said cash, it was stated that the said cash was the sale proceeds of cloth sold by the assessed between the period from March 16, 1987 to April 3, 1987. It was claimed that the sale was made out of the cloth purchased by the assessed from one Banarsi Das Shankar Lal of Secunderabad through an agent, S. R. Textiles. The assessed was asked to furnish evidence in support of its said stand. However, after seeking a few adjournments, the assessed filed a revised return declaring a total income of Rs. 6,40,300, instead of Rs. 95,859, declared earlier. The return was captioned "without prejudice" and in the accompanying letter it was stated that the assessed was surrendering Rs. 5,50,442 as business income for the assessment year 1988-89 and requested that penalty and prosecution proceedings may not be initiated. Assessment was completed on the basis of the said revised return.

Proceedings u/s 271(1)(c) of the Act were initiated against the assessed for concealing the particulars of its income. After hearing the assessee, the Assessing Officer imposed a penalty of Rs. 4,29,520 upon the assessee.

Aggrieved by the penalty order, the assessed filed an appeal to the Commissioner of Income Tax (Appeals), who deleted the penalty, holding that the revised return was filed by the assessed to buy peace of mind and avoid litigation. The Revenue''s appeal to the Income Tax Appellate Tribunal against the order of the Commissioner was unsuccessful. While affirming the order of the Commissioner, the Tribunal observed that the Assessing Officer had not detected any concealment and merely because the assessed had surrendered the amount in the revised return, penalty under the said section cannot be levied. The Tribunal finally held as follows :

"Availability of cash with the assessed is fully supported by entries of purchases and sales in the books of account. The Assessing Officer in order to verify the claim of purchases, wrote letter dated November 2, 1987, to the seller Banarsi Das Shankar Lal. Vide their reply dated November 7, 1987, they confirmed the sale made to the assessed through S. R. Textiles. With the letter the party annexed complete details of transport of goods sold. The Assessing Officer did not refute the claim of the seller by bringing any adverse material on record. He examined Rajinder Prasad, proprietor of S. R. Textiles, behind the back of the assessee. The general observations like abnormal purchases and sales in March, 1987, etc., etc., cannot sustain charge of concealment. The surrender of income made in the revised return has already been explained and the Commissioner of Income Tax (Appeals) in our considered opinion rightly accepted the Explanation of the assessee. There is Therefore, nothing on record to show that the Explanation of the assessed relating to availability of cash was not bona fide or false. The charge of concealment of income or furnishing of inaccurate particulars of income has not been established,"

It is vehemently argued by Mr. Sanjeev Khanna, learned senior standing counsel for the Revenue, that the above said question is a question of law and the Tribunal ought to have referred the same to this court for opinion. Relying on Commissioner of Income Tax Vs. Lal Chand Tirath Ram, it is submitted by Mr. Khanna that the assessed having failed to substantiate its stand by adducing evidence, by producing the parties to whom the cloth was allegedly sold, the assessed failed to discharge the onus cast on it under Explanation 1 to Section 271(1)(c) and, Therefore, the Tribunal erred in law in deleting the penalty.

We are unable to agree with learned counsel for the Revenue. From the afore-extracted paragraph of the Tribunal''s order, it is evident that while accepting the Explanation given by the assessed with regard to the availability of cash as bona fide, the Tribunal has also found as a fact that availability of cash with the assessed is fully supported by the entries of purchases and sales in the books of account. The question proposed by the Revenue does not lay a specific challenge to the correctness of these findings arrived at by the Tribunal. That being so, the stand of the Revenue that the assessed has failed to discharge the initial onus under Explanation 1 cannot be accepted.

We are, Therefore, of the view that on the facts found by the Tribunal, which remain unchallenged, the question as framed, is not a question of law fit for reference to this court. The petition is accordingly dismissed but with no order as to costs.