Jankilal Jaju vs Commissioner of Income Tax

Sohani, J.—This is an application u/s 256(2) of the I.T. Act, 1961, hereinafter referred to as the Act.

The material facts giving rise to this application briefly are as follows : For the assessment year 1969-70, the petitioner filed a return disclosing his income at Rs. 46,224. The assessee also claimed deduction amounting to Rs. 19,560. The ITO rejected the claim of the assessee for deduction and assessed him on the total income of Rs. 35,988. The ITO also initiated penalty proceedings against the assessee and, as the minimum penalty imposable under the Act exceeded Rs. 1,000, the matter was referred to the IAC who, after hearing the assessee, imposed upon him a penalty of Rs. 9,650. The IAC held that the Explanation to Section 271(1)(c) of the Act was attracted and as the assessee had failed to prove that the difference between the returned income and the assessed income was not due to any fraud or gross or wilful neglect on his part, he would be deemed to have concealed the particulars of his income. On appeal, the Tribunal held that as the claim made by the assessee for deductions could not be held to be bona fide, the assessee was guilty of concealment. In this view of the matter, the Tribunal affirmed the order passed by the IAC and dismissed the appeal. On an application made by the assessee u/s 256(1) of the Act, the Tribunal held that no question of law arose out of the order passed by the Tribunal and the Tribunal, therefore, declined to make any reference. The assessee has, therefore, preferred this application.

Having heard learned counsel for the parties, we have come to the conclusion that this application deserves to be allowed. The question as to whether the failure on the part of an assessee to substantiate the claim for deductions would, on the facts and in the circumstances of the case, amount to concealing the particulars of his income as contemplated by the provisions of Section 271(1)(c) of the Act, arises in this case. Thus, in our opinion, the following question of law arises out of the order passed by the Tribunal :

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was guilty of concealing the particulars of his income and was liable to pay penalty under the provisions of Section 271(1)(c) of the Income Tax Act, 1961 ? "

For all these reasons, this application is allowed. The Tribunal is directed to state the case and refer the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of this application.