Commissioner of Income Tax vs Rajnandgaon Roadways Ltd.

J.S. Verma, J.—At the instance of the revenue, a direction was given by this Court u/s 256(2) of the income tax Act, 1961 (''the Act'') to state the case and refer for the decision of this Court, the following question of law, namely:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in setting aside the IAC''s order regarding penalty u/s 271(1)(c) of the income tax Act, 1961, and remanding the case to him?

The material facts are these: The assessee is a private company deriving income from plying passenger buses. For the assessment year 1975-76, on scrutiny of the assessment books of the assessee, the ITO discovered an amount of Rs. 30,000 shown as borrowed from Sardar Jagdeepsingh, son of Dhamsingh. The ITO came to the conclusion that the genuineness of this entry was doubtful. Accordingly, he added the amount of Rs. 30,000 to the assessee''s income as income from undisclosed sources. He also initiated action u/s 271(1)(c) of the Act. The IAC after hearing the assessee, imposed a penalty of Rs. 30,000. The assessee preferred an appeal before the Tribunal. The Tribunal came to the conclusion that the material present was not sufficient to accept the case of either the revenue or the assessee. Accordingly, it set aside the order of the IAC imposing the penalty and directed the IAC to decide the matter afresh after giving a reasonable opportunity to the assessee to produce all the material on which it relied.

Aggrieved by the order of remand made by the Tribunal, the revenue applied to the Tribunal for a reference u/s 256(1), which was refused and, therefore, an application u/s 256(2) was filed by the revenue in this Court resulting in reference of the above question in the manner already indicated.

The only question before us is whether on the conclusion reached by the Tribunal, there was any justification for it to remand the case to the IAC for deciding afresh the question of penalty u/s 271(1)(c). Admittedly, the present case is not governed by the Explanation to section 271(1)(c) and, therefore, the initial burden is on the revenue to make out a case for imposition of penalty and it is only after this initial burden is discharged by the revenue that the burden shifts to the assessee. In view of the Tribunal''s finding in the present case, that the material present was not sufficient to hold that the initial burden of the revenue was discharged, the burden had not shifted to the assessee. For this reason alone, the IAC''s order imposing the penalty accepting the case of the revenue was rightly set aside. The remand made thereafter requiring the IAC to decide the matter afresh after giving a reasonable opportunity to the assessee to produce the material on which it relied to satisfy the IAC cannot, therefore, be treated as a direction to the detriment of the revenue, by which the revenue could be aggrieved. No further question arises for decision in the present case, at the instance of the revenue. Consequently, the above question is answered in the affirmative and against the revenue by saying that the Tribunal was justified in setting aside the IAC''s order imposing the penalty and remanding the case to him. Since, no one has appeared to oppose, there shall be no order as to costs.