1. This reference raises a very short question of law and it i :
'Whether on the facts and circumstances of the case, the Income-tax Officer can calculate penalty on the basis of the return filed by the assessee on 28th September, 1953, under (c) of the Income-tax Act ?'
2. The facts are that the assessee is a firm and for the assessment year 1953-54 for which the accounting year was S.Y. 2008 the assessee filed a return showing a total income of Rs. 7,038. This was on the 28th September, 1953. The books of the assessee were examined on the 19th of October, 1953, when the Income-tax Officer discover that the assessee had not disclosed an income of Rs. 17,548. The assessee filed a revised return dated the 18th of October, 1953, on the 19th of October, 1953, declaring his total income to be Rs. 24,528 which included an addition of Rs. 17,548 to the original income returned, namely, Rs. 7,038. The Income-tax authorities came to the conclusion that the income had been deliberately concealed by the assessee in his return dated the 28th of September, 1953, and imposed a penalty on him of Rs. 4,500. Against this decision, the assessee went to the Tribunal and the Tribunal while agreeing with the conclusion of the Income-tax authorities that a penalty was leviable, held that the penalty should be calculated on the basis of the revised return of the 18th of October, 1953, which had been accepted by the Income-tax Officer and which would result in the penalty being nil. The contention of the Income-tax Commissioner is that the penalty should have been calculated on the basis of the return filed by the assessee on the 28th of September, in respect of which he incurred the penalty.
3. Now, when one turns to the provisions of section 28(1)(a) which deals with penalty for concealment of income, the relevant part of the section i : 'That such person shall pay by way of penalty,.......in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income.' Therefore, the question i : 'Which is the return that is referred to in this section which has to be taken into account in considering what tax has been avoide ?' To begin with the words are 'as returned'; and they appear to us to be capable of only one meaning, namely, that it is the return in respect of which the penalty is imposed. This conclusion is strengthened by the words that follow which are 'if the income as returned by such person had been accepted as the correct income.' The income as returned on the 28th of September, if it had been accepted, would have led to an avoidance of tax; but the income as returned on the 18th of October, 1953, which was accepted has led to no avoidance of tax. Therefore, obviously the return that has to be taken into account is the return, which, if accepted, would have avoided tax and which was not accepted. In our opinion, therefore, the Tribunal erred in holding that the return to be taken into account was the return of the 18th of October, 1953, and in thereby negativing the assessee's liability to a penalty.
4. The answer to the question, therefore, will be in the affirmative.
5. Mr. Palkhivala has then argued that before the Tribunal he had appealed against the quantum of penalty also and it is because the Tribunal took the view that it is the second return that was to be taken into account for determining the quantum of penalty which led to the result that the penalty was nil that the Tribunal did not apply their mind to the quantum of penalty. That no doubt may be true. Then Mr. Palkhivala says that we should, therefore, send this matter back to the Tribunal for determining that question. We do not find any power in this Court under the provisions of section 66 of the Income-tax Act to remand a matter back to the Tribunal for determining what might have been left undetermined by them, because they took a particular view of the law. We have merely the jurisdiction to answer the question of law referred to us, and we are not concerned with any questions which are pure questions of fact or its determination by the Tribunal. We cannot direct the Tribunal on this reference to proceed to determine the question as to whether the quantum of penalty should be maintained or varied. If they are in law bound to do so by reason of our decision on the question of law that has been referred to us, Mr. Palkhivala must canvass that position before the Tribunal.
6. The assessee shall pay the costs of the reference.
7. No order on the notice of motion. No order as to costs.
8. Question answered in the affirmative.