Madhya Pradesh High Court
Commissioner Of Income-Tax vs Ram Singhani Dall Mills on 6 October, 2001
Equivalent citations: [2002]254ITR264(MP)
Author: A.M. Sapre
Bench: Deepak Verma, A.M. Sapre
JUDGMENT A.M. Sapre, J.
1. This is an application made by the Revenue under Section 256(2) (since repealed) of the Income-tax Act, 1961, seeking to call for a reference to this court on questions of law which according to the Revenue do arise out of the order of the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 ITA No. 903/Ind of 1985 decided on October 18, 1990. By order dated March 27, 1991, the Tribunal ("the ITAT, Indore"), was pleased to reject the application made by the Revenue under Section 256(1) of the Act, holding, inter alia, that no question of law arises out of the Income-tax Appellate Tribunal order, and hence no reference could be made to the High Court.
2. 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 (AO) made the assessment, he was of the view that the total income of the assessee is Rs. 71,970 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 under Section 271(1)(c) of the Act 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 Assistant Commissioner having failed, the assessee filed an appeal to the Tribunal. The Tribunal by its order dated December 10, 1990, allowed the appeal and set aside the penalty. Accepting the explanation offered by the assessee and examining the entire facts of the case the conduct of the assessee, nature of deduction claimed and the findings of the Assessing Officer and those of the first appellate court, the Tribunal as the 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 under Section 271(1)(c) of the Act. Accordingly, the appeal filed by the assessee was allowed and the penalty was quashed. The Revenue then felt aggrieved and filed an application under Section 256(1) of the Act to the Tribunal. It was prayed that since the question of law arises out of the order of the Tribunal which decided the appeal in favour of the assessee and, hence, the Tribunal should refer the case to the High Court on the questions of law so proposed by the Revenue in their application which read as under :
"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in cancelling the penalty when there was deliberate concealment on the part of the assessee ?
(2) Whether, on the facts and in the circumstances of the case, the cancellation of penalty by the Income-tax Appellate Tribunal was on justifiable grounds ?
(3) Whether, on the facts and in the circumstances of the case, there was reasonable explanation of the assessee before the Income-tax Appellate Tribunal justifying cancellation of penalty under Section 271(1)(c) ?"
3. As observed supra, the Tribunal by its order dated March 27, 1991, dismissed the application made by the Revenue and declined to make the reference to this court and hence this application by the Revenue under Section 256(2) ibid.
4. Heard Shri R. L. Jain, learned counsel for the Revenue and Shri T. M. Punjawani, learned counsel for the assessee-respondent.
5. Relying upon the decisions reported in D. M. Manasvi v. CIT [1972] 86 ITR 557 (SC); 109 ITR 708 (sic); Kedar Nath Sanwal Dass v. CIT [1978] 111 ITR 440 (P & H) and Thakur V. Hari Prasad v. CIT [1988] 173 ITR 242 (AP), learned counsel for the applicant (Revenue) urged that the questions of law do arise out of the order of the Tribunal and, hence, the Tribunal ought to have made reference to this court on the questions proposed by the Revenue. We do not agree to what is urged.
6. 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 Tribunal in appeal turned on the 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, the explanation offered by the assessee, his conduct, etc. These are essentially the matters which are required to be gone into once then 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 under Section 271(1)(c) is made out and accordingly the penalty was set aside.
7. In our opinion, reliance placed by learned counsel for the appellant on certain cases referred to supra is misplaced. They do not deal with a case falling under Section 256(2) of the Act. Those cases related to the merits of the issue. This court is not hearing a reference under Section 256(1) of the Act 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 March 27, 1991.