1. In this reference the following question of law has been referred to, this court by the Income-tax Appellate Tribunal, Gauhati Bench, under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as ' the Act ' :
' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961 '
2. The facts of the case appearing from the statement of the case may be briefly stated as follows. The assessee is a contractor whose income has been estimated in the past by applying a rate of net profit. No regular accounts have been maintained by the assessee but the details of receipts from the various contract works were being submitted before the department for assessment. The relevant assessment year is 1964-65. In this assessment year the assessee filed a return showing his income at Rs. 13,310. He was, however, assessed at an income of Rs. 67,011. The income that has been assessed includes the share of profit in M/s. Madhabram Bora and others, Ulubari, Gauhati, which is a registered firm and the income of which has come up for consideration for the purpose of taxation in this assessment year for the first time. The difference between the income returned and the income assessed being very large, the Income-tax Officer initiated penalty proceedings under Section 271(1)(c) read with Section 274(2) of the Act. In due course, the Inspecting Assistant Commissioner levied a penalty of Rs. 15,000 against the assessee.
3. The assessee filed his return by showing his contract receipt and estimating the profits on that at 10% and from this amount he deducted salary and interest. The Income-tax Officer estimated the profits in the contract work at 121/2% and from that he deducted depreciation. The Inspecting Assistant Commissioner observed that the assessee had never produced any account before the Income-tax Officer and his income was assessed from year to year on estimation on percentage basis. The Inspecting Assistant Commissioner, therefore, held that the assessee by not producing the accounts concealed his income to a substantial extent and accordingly the case came within the purview of Section 271(1)(c) of the Act and so the penalty was imposed.
4. The assessee preferred an appeal against the order of penalty passed by the Inspecting Assistant Commissioner. In its order the Tribunal found that the assessee has been assessed on his income from contract works fqr several years on percentage basis and this was not on any accounts filed by the assessge. What the assessee did was that he. produced the receipt of the amounts from the contract works and on those amounts the Income-tax Officer used to assess tax on percentage basis. In the preceding assessment year the income was assessed at 10.5% and in the present assessment year the income has been assessed at 121/2%.
5. One factor, however, swelled the income of the assessee in the relevant assessment year and that is the income of the assessee as partner in the partnership firm, M/s. Madhabram Bora and others. The Tribunal considered the submission of the assessee's counsel that this was the first year of the firm and it was not known whether the firm would be registered or not and that the return of the partnership firm showing the assessee as a partner
also had been filed before the same Income-tax Officer and, therefore, according to the submission of the learned counsel for the assessee, there could be no intention on the part of the assessee to conceal the income derived from the partnership firm as such. The Tribunal gave due consideration to this aspect of the matter. Moreover, the Tribunal observed that in the order of penalty passed by the Inspecting Assistant Commissioner, there is no specific mention that the penalty has been imposed because of non-mention of the share income of the assessee in the return. According to the Tribunal it was not known whether the penalty was levied on the ground that the share income was not shown in the return concerned. The Tribunal also considered the fact that one of the reasons for the increase in the income of the assessee is due to the raising of the percentage. So, that also could not be a ground for intentional concealment as contemplated under Section 271(1)(c) of the Act. Having considered all these materials, the Tribunal observed that not showing the income from the firm was an inadvertent mistake and omission on the part of the assessee. In other words, according to the Tribunal, this case did not come within the proper ambit of Section 271(1)(c) of the Act and, therefore, the penalty was not justified. We do not find any sufficient ground to hold that the finding of the Tribunal in this respect is bad in law or otherwise perverse. The Tribunal had some materials before it which were considered and it came to a conclusion and this conclusion cannot be said to be illegal or perverse, in view of the facts and circumstances of the case as considered by the Tribunal and as noticed hereinabove.
6. Another question also appears from the order of the Inspecting Assistant Commissioner, that is, the applicability of the Explanation to Section 271(1)(c) of the Act. In the order of the Inspecting Assistant Commissioner it has not been stated that the assessee has failed to discharge the burden as required under the Explanation. There is no finding to that effect in the order of the Inspecting Assistant Commissioner. The Tribunal also has held that the difference between the income returned and the income assessed has been due to two reasons, namely, (i) the raising of the percentage, and (ii) the inclusion of the income of the assessee from the partnership firm for the first time. Neither the Inspecting Assistant Commissioner nor the Tribunal has come to any definite finding to the effect that the Explanation is really attracted in the instant case. Whatever that may be, if there is some doubt in regard to that, that will go to the benefit of the assessee.
7. Since the Tribunal's definite finding on consideration of the materials on record is that not showing the income from the firm was an inadvertent mistake and omission on the part of the assessee, the Tribunal cannot be unjustified in cancelling the penalty levied under Section 271(1)(c) of the Act.
8. In the result, we answer the question of law referred in the affirmative and against the department. In view of the facts and circumstances of
the case, we make no order as to costs.
N. Ibotombi Singh, J.
9. I agree.