1. The following question of law has been referred under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as 'the Act', by the Income-tax Appellate Tribunal, Gauhati Bench, to the High Court for decision :
' Whether, on the facts and in the circumstances of the ease, the Tribunal was justified in law in cancelling the penalty order of the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income-tax Act, 1961 '
2. The assessee filed a return of income for the assessment year 1966-67 on September 30, 1966, showing a total income of Rs. 92,591. The relevant balance-sheet and profit and 'loss account was subsequently filed on January 18, 1967. A revised return was filed on August 30, 1967, showing a total income of Rs. 56,899. In the revised return the assessee included an amount of Rs. 10,360 being interest which was omitted from the original return and a further claim for deduction on account of bonus for 1962, 1963, 1964 and 1965 to the extent of Rs. 1,07,519 was made in the revised return. No such claim was, however, made in the original return.
3. The Income-tax Officer found that the net profit shown by the assessee as per profit and loss account was Rs. 1,94,975. He made additions of Rs. 41,338 and Rs. 62,138 by disallowing various bona fide expenses. As regards the bonus, the Income-tax Officer disallowed the bonus of Rs. 25,560 on account of the claim for 1962 and similarly he disallowed the claim of bonus for the years 1963, 1964 and 1965. In other words, the Income-tax Officer rejected the total claim of bonus and considering the income from other sources he ultimately assessed the total income for the assessment year 1966-67 at Rs. 1,27,390.
4. The Income-tax Officer initiated penalty proceedings under Section 271(1)(a) of the Act and, as the minimum penalty leviable would exceed Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner.
5. The Inspecting Assistant Commissioner held that the assessee was guilty of concealment of Rs. 10,360 relating to interest on fixed deposit
and that ho was also guilty of concealment of income relating to the bonus claimed. The Inspecting Assistant Commissioner further hold that in view of the Explanation to Section 271(1)(c) of the Act the assessee had failed to prove that the failure to return the correct income was not due to fraud or gross or wilful neglect on the part of the assessee. He, therefore, held that the assessee was guilty of concealment and so he imposed a penalty of Rs. 30,000 against the assessee. The assessee then filed an appeal before the Tribunal challenging the levy of penalty.
6. It appears from the record that from the assessment order passed by the Income-tax Officer the assessee preferred an appeal before the Appellate Assistant Commissioner who reduced the total income by a sum of Rs. 1,431. The assessee then preferred an appeal before the Tribunal against the order of the Appellate Assistant Commissioner and the Tribunal in the quantum appeal allowed the total claim for bonus, the entire claim being Rs. 1,44,098. Thus, out of the total claim of Rs. 1,69,658 for bonus, only the claim of Rs. 25,560 relating to bonus for 1962 was disallowed.
7. From the Tribunal's order in the quantum appeal it appears that in the relevant assessment year, i.e., 1966-67, there was loss of the assessee. That being so, the Explanation to Section 271(1)(c) of the Act is not at all attracted and the Tribunal has rightly observed in its order as follows :
' The learned counsel for the assessee has pointed out that after the order of this Tribunal in the quantum appeal, the Explanation to Section 271(1)(c) will not be attracted and the learned departmental representative has not challenged this assertion of the learned counsel for the assessee. Under the circumstances, we hold that the Explanation to Section 271(1)(c) will not be applicable to the case of the assessee, the income returned by the assessee will not be less than 80% of the total income as finally assessed after the order of this Tribunal after excluding the bona fide expenses made by the assessee for the purpose of making or earning the income which has been disallowed as a deduction by the income-tax Officer.'
8. That being so, in the penalty proceeding the onus will be on the department to prove and the Tribunal has correctly observed in its order as follows :
' Hence the onus is on the department to prove that the assessee had claimed the bonus of Rs. 25,560 in the assessment year 1966-67 with a mala fide motive. The department has failed to discharge the onus.'
9. The Tribunal has also held that the department has failed to prove that the assessee had deliberately or consciously concealed the income of Rs. 10,360.
10. After the disposal of the quantum appeal, the penalty proceeding stood on two legs, one is the claim for deduction of Rs. 25,560 as bonus for 1962
and the other is not showing the sum of Rs. 10,360 in the original return, which was the interest on the fixed deposit for the relevant assessment year.
11. So far as the claim of bonus for 1962, the contention on behalf of the department is that this deduction was claimed in 1965-66 and it was allowed. Rut again the same amount of Rs. 25,560 has been claimed as deduction by way of bonus for 1962 in the assessment year 1966-67 and according to the submission made on behalf of the department, this was a mala fide act on the part of the assessee which brings the case within the four corners of the provision of Clause (c) of Sub-section (1) of Section 271 of the Act.
12. The Tribunal after considering the materials and all aspects of this question has observed in its order as follows :
' The assessment order of the Income-tax Officer shows that in the assessment year 1965-66 the liability for bonus for 1962 of Rs. 25,560 was debited to the accounts for 1964 on the basis of interim award made in 1964 though no payment at all was made out of this amount. The order of the Income-tax Officer also shows that in the previous years the assessee claimed the bonus on the basis of actual payment. Thus, in the assessment year 1965-66 the assessee had deviated from the method he had adopted in the earlier years and naturally he was doubtful about the claim being sustained subsequently. Thus, under this doubt, he made the claim again in the assessment year 1966-67. It cannot be doubted that before the passing of the payment of Bonus Act, 1965, the position was extremely doubtful and if under such doubtful circumstance the assessee claimed the bonus of Rs. 25,560 in the assessment year 1966-67, although it had been allowed in the assessment year 1965-66, the assessee cannot be said to have acted in mala fide manner.'
13. Considering the above observation of the Tribunal and in consideration of the peculiar facts and circumstances of the case, it cannot be sa[d that the finding of the Tribunal that the claim of bonus of Rs. 25,560 for 1962 in the assessment year 1966-67 was not mala fide or it was not claimed with any ulterior motive, is unjustified. The finding of the Tribunal cannot also be said to be otherwise perverse. That being so, this court of reference has to accept the Tribunal's finding that the claim of bonus of Rs. 25,560 for 1962 in the assessment year under consideration was made under some misapprehension and mistaken 'notion of the correct position of law. Therefore, no penalty can be sustained on account of the claim of bonus in the instant case.
14. Regarding the interest of Rs. 10,360 it is found that the original return for the assessment year 1966-67 was filed on September 30, 1966. In this return, the sum of Rs. 10,360, which was interest on some fixed
deposit, was not shown. Same thing happened in the return for the assessment year 1965-66 and this amount was, however, assessed in that year. Thereafter, the asscssee filed a revised return on August 30, 1967. The assessment was completed on October 31, 1967. It is thus found that this sum of Rs. 10,360 was disclosed in the revised return by the assessee voluntarily and it was not detected in that year by the taxing authority. That being so, the revised return which included this sum of Rs. 10,360 may be accepted as a revised return within the true scope and ambit of the provisions of Section 139 of the Act and if the revised return with respect to this amount of Rs. 10,360 is within the true scope and ambit of Sub-section (5) of Section 139 of the Act, then there is no question of penalty proceeding in connection therewith. Indeed, the Tribunal has observed in this connection as follows :
' The Inspecting Assistant Commissioner had mentioned that the interest on fixed deposit amounting to Rs. 10,360 was not declared in the first return filed on 30-9-66 and that it was declared only in the revised return when the assessment for the assessment year 1965-66 was completed on 10-2-67 including a similar income. Thus, it is evident that the detection was not made in the assessment year 1966-67. The detection was made by the Income-tax Officer in the assessment year 1965-66 and if the assessee felt that this income had to be included and so the assessee included by way of revised return before the assessment was taken up by the Income-tax Officer, it cannot be said that the assessee was guilty of concealment of this income. The onus in this case is on the department to prove that the assessee had deliberately concealed this income. There are no materials to hold that the assessee had deliberately or consciously concealed this income.'
15. The above finding is a finding of fact arrived at by the Tribunal and, therefore, in the reference this has to be accepted. That being the position, we find that no penalty is leviable with respect to this sum of Rs. 10,360 also.
16. The view taken by us in this connection is also supported by this court's decision in Income-tax Reference No. 9 of 1972 [Additional Commissioner of Income-tax v. Dasitram Mirzamal ], decided on July 7, 1975 ; Income-tax Reference No. 22 of 1975 [Padma Ram Bharali v. Commissionmr of Income-tax ], decided on September 17, 1976 ; Income-tax Reference No. 8 of 1972 [F. C. Agarwal v. Commissioner of Income-tax ], decided on July 16, 1975 and Civil Rule No. 990 of 1969 [K. C. Trunk and Bucket Factory v. Commissioner, of Income-tax , decided on June 19, 1974.
17. In the result, we hold that, on the facts and in the circumstances of
the case, the Tribunal was justified in law in cancelling the penalty order
of the Inspecting Assistant Commissioner under Section 271(1)(c) of the
Income-tax Act, 1961.
18. The question of law referred is thus answered in the affirmative and
against the department.
19. The reference is accordingly disposed of. There will be no order as to costs.
N. Ibotombi Singh, J.
20. I agree.