Madhya Pradesh High Court
Commissioner Of Income-Tax ... vs Smt. Chandrakanta And Anr. on 5 August, 1991
Equivalent citations: [1994]205ITR607(MP)
JUDGMENT B.C. Varma, J.
1. This court, vide order dated June 30, 1991, passed in Miscellaneous Civil Case No. 796 of 1974, required the Tribunal to state the case and refer the following questions of law for determination by this court :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty levied under the Explanation to Section 271(1)(c) ?
(2) Whether the finding given by the Tribunal could reasonably be arrived at on the basis of material considered by it ?"
2. The relevant assessment year is 1963-64. The assessee-respondent first showed a loss of Rs. 51,530. He then revised his return and showed profit of Rs. 7,500. He was not maintaining any account books. The Income-tax Officer, therefore, estimated and determined the income at Rs. 51,000. Since the minimum penalty leviable exceeded Rs. 1,000, the matter was referred to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner imposed a penalty of Rs. 10,000 as, according to him, the case fell under Section 271(1)(c) of the Income-tax Act, 1961. On appeal, the Tribunal cancelled the penalty, holding in paragraph 11 of its order (annexure II) that the assessee gave his estimate of income and the Income-tax Officer also assessed the income on estimated basis. According to the Tribunal, therefore, the estimate could be a ground for addition but not a ground for levying penalty. As we have stated above, the Department wanted the two questions to be referred to this court but the Tribunal declined and, therefore, at the instance of the Department, the Tribunal was directed to state the case and has referred the two questions quoted above for the determination by this court.
3. After considering the arguments advanced by learned counsel for the Department, we are of the opinion that the first question must be answered in favour of the Department and against the assessee. Section 271(1)(c) and the proviso thereto run as follows :
"271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person--. . . .
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-....
Provided that, if in a case falling under Clause (c), the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner."
4. The facts stated above clearly disclose that the assessee first showed a loss of Rs. 50,000. Then he revised the return, showing profit of Rs. 7,500. Apparently, it has been found that the estimate of the income was incorrect and he had concealed the income and inaccurate particulars were furnished. In our opinion, the case clearly falls under Clause (c) of Sub-section (1) of Section 271 of the Act and, therefore, the penalty was levied. We fail to see the logic behind the reasons assigned by the Tribunal to exonerate the assessee from payment of penalty. When the assessee submitted his return and showed a loss of Rs. 50,000 and then revised it and showed a profit of Rs. 7,500, he had necessarily suppressed the particulars of income and given an incorrect account of his income. It may also be mentioned that the assessee did not maintain books of account. Income had, therefore, to be assessed on estimate basis. That being so, it is difficult to swallow that since the assessee's income was assessed on estimate basis, the assessee was not liable to any penalty. Instead, we find that the reasons assigned by the Tribunal have no basis under the law. We, therefore, have no hesitation in holding that the Appellate Tribunal took an absolutely incorrect view of law by exonerating the assessee from penalty. As we have stated earlier, the assessee did conceal his income and furnished inaccurate particulars and, therefore, was rightly subjected to penalty. In these circumstances, we hold that, on the facts and in the circumstances of the case, the Tribunal was not at all justified in cancelling the penalty levied under the Explanation to Section 271(1)(c) of the Income-tax Act. In view of the above finding, question No. 2 need not be answered.
5. In the result, we answer the first question in favour of the Department and against the assessee that the Tribunal was not justified in cancelling the penalty levied under the Explanation to Section 271(1)(c) of the Income-tax Act. The reference is answered accordingly. No order as to costs.