PATHAK C.J. - The following question of law has been referred 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 and on proper construction of the Explanation to section 271(1)(c) of the Income-tax Act, 1961, the Tribunal was correct and justified in cancelling the penalty order ?"
The facts of the case, as appear from the statement of the case, may be briefly stated as follows :
The assessee is a registered firm and has a rice mill at Gauhati and various other activities. The assessment proceedings were taken against the assessee for the assessment year 1961-62, and the Income-tax Officer passed the assessment order on December 31, 1965. The assessee filed return of income for the assessment year 1961-62, on June 7, 1965, showing an income of Rs. 62,912. The Income-tax Officer, however, made the assessment on a total income of Rs. 1,48,183. During the course of the examination of the accounts of the rice mill, the Income-tax Officer found an entry of Rs. 19,154 debited to the paddy purchase account on May 12, 1960, but there was no actual purchase. The Income-tax Officer held that a fictitious purchase was shown and so he held that the assessee had concealed profit to the tune of Rs. 19,154 in the paddy account, and so he added this amount. For this amount of Rs. 19,154, penalty proceedings under section 271(1)(c) of the Act were initiated and the Income-tax Officer referred thee matter to the Inspecting Assistant Commissioner as required under the law. The Inspecting Assistant Commissioner thereafter held that the assessee was liable to penalty for concealing the sum of Rs. 19,154 and, therefore, he imposed a penalty of Rs. 20,000 by his order dated December 11, 1967. The assessee then preferred an appeal against the order of the Inspecting Assistant Commissioner before the Income-tax Appellate Tribunal, which considered the facts and circumstances of the case in detail and came to the finding in its appellate order as follows :
"It appears that the appellant had no dishonest or fraudulent intention, otherwise he would not have made the entries of the cash amount in the cash book. It appears that due to bona fide mistake the amount was not posted in the ledger and was not shown in the paddy account and the appellant did not deliberately suppress the amount before penalty can be imposed. The entirety of circumstances must reasonably point to the conclusion that the assessee had consciously concealed the particulars of his income... Here also the appellant has asserted that one of the partners was dead and there was difference between the munim and the assessee and so the mistake could not be detected. The explanation appears to be believable. We hold that the appellant had not consciously concealed the particulars of his income or had not deliberately furnished inaccurate particulars."
As it appears, there may be some doubt about the applicability of the Explanation to clause (c) of sub-section (1) of section 271 of the Act. Whatever that may be, even if the Explanation is applicable in the instant case, the clear finding of the Tribunal is that the assessee had not consciously concealed the particulars of his income and had not deliberately furnished inaccurate particulars. The matter is thus concluded by the finding of fact arrived at by the Tribunal after considering the facts and circumstances of the case in their entirety and so that finding is binding on us. That being so, the case does not come under clause (c) of sub-section (1) of section 271 of the Act and we hold that the Tribunal has correctly cancelled the penalty order in question.
We, accordingly, answer the question of law referred in the affirmative and against the department. There will be no order as to costs.
B. N. SHARMA J. - I agree.