Commissioner of Income Tax vs Ram Singhani Dall Mills

A.M. Sapre, J.—This is an application made by the revenue u/s 256(2) (since repealed) of the income tax Act, 1961 (''the Act'') seeking to call for a reference to this Court on questions of law which according to the revenue do arise out of the order of the Tribunal passed in second appeal bearing IT Appeal No. 903 (Ind.) of 1985 decided on 18-10-1990. By order dated 27-3-1991, the Tribunal, Indore, was pleased to reject the application made by the revenue u/s 256(1) holding, inter alia, that no question of law arises out of the Tribunal''s order, and, hence, no reference could be made to the High Court. For the assessment year 1979-80, the respondent-assessee filed a return showing loss to the extent of Rs. 11,400. However, when the Assessing Officer made the assessment, he was of the view that the total income of the assessee is Rs. 71,970 (sic) which included a sum of Rs. 77,454 being the sum towards sales-tax. In the opinion of the Assessing Officer, deduction claimed by the assessee on the claim of sales-tax which had resulted in loss amounted to concealment of income within the meaning of section 271(1)(c) ibid. Treating this to be a case of concealment, the Assessing Officer initiated the penalty proceedings against the assessee u/s 271(1)(c) and after giving the assessee an opportunity of submitting his explanation levied a penalty of Rs. 30,000. An appeal filed by the assessee against the order imposing penalty to the Asstt. Commissioner having failed, the assessee filed an appeal to the Tribunal. The Tribunal by its order dated 10-12-1990 allowed the appeal and set aside the penalty. Accepting the explanation offered by the assessee and examining the entire facts of the case, conduct of assessee, nature of deduction claimed and the findings of the Assessing Officer and that of First Appellate Court, the Tribunal as Second Appellate Court held that no case for imposition of any penalty is made out and in any case the deduction if held to be wrongly claimed does not amount to concealment so as to attract the rigour of penalty as contemplated u/s 271(1)(c). Accordingly, the appeal filed by the assessee was allowed and penalty was quashed. The revenue then felt aggrieved and filed an application u/s 256(1) to the Tribunal. It was prayed that since questions of law arose out of the order of the Tribunal which decided the appeal in favour of the assessee, the Tribunal should refer the case to the High Court on the questions of law so proposed by the revenue in their application which reads as under:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty when there was deliberate concealment on the part of the assessee?

Whether, on the facts and in the circumstances of the case, the cancellation of penalty by the Tribunal was on justifiable grounds?

Whether, on the facts and in the circumstances of the case, there was reasonable explanation of the assessee before the Tribunal justifying cancellation of penalty u/s 271(1)(c)?

As observed supra the Tribunal by its order dated 27-3-1991 dismissed the application made by the revenue and declined to make the reference to this Court and hence this application by the revenue u/s 256(2).

Heard Shri R.L. Jain, the learned counsel for the revenue and Shri T.M. Panjwani, the learned counsel for the assessee-respondent.

Relying upon the decisions in D.M. Manasvi Vs. Commissioner of Income Tax, Gujarat, II Ahmedabad, , KEDAR NATH SANWAL DASS Vs. COMMISSIONER OF INCOME TAX, PUNJAB., and V. Hari Prasad Vs. Commissioner of Income Tax, the learned counsel for the applicant-revenue urged that the questions of law does arise out of the order of the Tribunal and, hence, the Tribunal ought to have made reference to this Court of the questions proposed by the revenue. We do not agree to what is urged.

In our considered opinion, no question of law arises out of the order passed by the Tribunal when it proceeded to allow the appeal filed by assessee. It was essentially on facts, namely, whether to accept the explanation offered by the assessee or not. In other words, the decision of the Tribunal in appeal turned on facts and while rendering it, no issue of law as such fell for consideration or was gone into. In order to examine the case of penalty, one has primarily to see the nature of concealment, explanation offered by the assessee, his conduct, etc. These are essentially the matters which are required to be gone into. Once they are examined with a view to find out whether any case as contemplated in section 271(1)(c) is made out so as to exercise the discretion of imposing the penalty on the assessee or not, the issue comes to an end. In the facts of this case, the Tribunal while allowing the appeal filed by the assessee examined the entire facts and then came to a conclusion that no case of concealment as contemplated u/s 271(1)(c) is made out and, accordingly, the penalty was set aside. In our opinion, reliance placed by the learned counsel for the appellant on certain cases referred supra is misplaced. They do not deal with a case falling u/s 256(2). Those cases related to merits of the issue. This Court is not hearing a reference u/s 256(1) but is examining whether any question of law arises or not. Since we are of the view that no question of law arises in the matter, we dismiss the application and uphold the order of the Tribunal dated 27-3-1991.