1. The two questions which have been referred at the instance of the Revenue in this reference are as follows :
'(1) Whether, on the facts and in the circumstances of the case. Penalty can be sustained after the assessee has filed the revised return before the assessment is completed by the ITO ?
(2) Whether, on the facts and in the circumstances of the case. Explanation to section 27(1)(c) of the Act is applicable since the disclosure is made in the revised return ?'
2. The assessee originally filed a return on August 30, 1969, showing an income of Rs. 13,319. However, later when in the course of assessment proceedings of the HUF of which the assessee was the karta, for the assessment year 1968-69, certain credits in the name of the assessee in the books of another firm Rai Bahadur Seth Durgaprasad (Mining) in which the HUF was a partner were noticed, the assessee filed a revised return for the assessment year 1969-70 showing an income of Rs. 57,960. The additional income was Rs. 43,800 which was shown by the assessee under the head 'Capital gains' was on the sale of certain shares. The assessee wrote a letter to the ITO on December 27, 1967, and September 29, 1967, respectively, represented an advance received against sales of 78 shares of Rs. 100 each of M/s. Bombay Metal and Alloys Manufacturing Co. and 378 shares of Rs. 100 each of the same company. The assessee informed the ITO that the transfers of the shares were made on April 22, 1968, for those amounts, Thus the assessee requested the ITO to treat those transactions as shown in the revised return filed for the assessment year 1969-70. The assessment of the assessee was completed on March 10, 1972. And his income determined at Rs. 67,580. The total income was reduced in appeal to Rs. 59,516 including the capital gains of Rs. 43,800.
3. Taking the view that the assessee had concealed his income when he filed the original return and that he had furnished inaccurate particulars of his income, penalty proceedings were started against the assessee which were dealt with by the IAC who levied a penalty of Rs. 65,000 holding that the assessee had not disclosed the correct particulars of his income and had also concealed his income. In appeal, the Tribunal took the view that since the assessee had shown the income from the transfers of the shares in the revised return, penalty could not be levied. In addition to this, on merits the Tribunal came to a finding that the failure to disclose the income by way of capital gains 'was just an Amazon on the part of the assessee.' The Tribunal recording a finding in favour of the assessee observed as follows :
'It is further to be borne in mind that the assessee's tax matters are attended to h one of his agents and it ma be a slip on the part of the agent or the assessee to have mentioned about the transfer of shares (sic). It cannot be said that the fact about the transfer of shares in the year. 1968 was deliberately done by the assessee (sic). Mala finds cannot be straightway applied to the case of the assessee. Errors and omissions are not uncommon in every day life. There should be material to support a contrary view which is lacking in the present case. Therefore, considering the assessee's letter and that the assessee has filed the revised return on that very day, we hold that it was just an omission on the part of the assessee. Since the item regarding the capital gains was mentioned by the assessee in the revised return, we hold that penalty is not attracted. It is cancelled.'
4. Arising out of this order of the Tribunal, the questions reproduced above have been referred.
5. Now, the order of the Tribunal shows that the question as to whether the assessee had deliberately concealed the item of capital gains when the original return was been expressly considered by the Tribunal and the finding with regard to the bona FIDES of the assessee has been returned in favour of the assessee. The failure to include the income by way of capital gains in the return has been attributed by the Tribunal to some omission on the part of the assessed or his agent. Now, the correctness of this finding has to been put in issue in any of the two questions. Because no question arising out of that finding has been referred, and probably rightly so because the finding will become one of fact, the answer to both the questions would straightaway flow from the finding recorded by the Tribunal that there was no deliberate concealment or omission. Consequently, there is no scope for the argument on behalf of the Revenue in this case that the two questions must be answered in their favour. The answers to both the questions will, therefore, have to be against the Revenue. The questions are thus answered as follows : Question No. (1) : In the negative and against the Revenue. Question No. (2) : In the negative and against the Revenue. The assessee to get the costs of this reference.