1. The Income-tax Appellate Tribunal has referred the following question :
'Whether, on the facts and in the circumstances of the case, levy of Rs. 2,500 and Rs. 12,500 by way of penalty by the Tribunal amounted to an enhancement of the penalty levied by the Inspecting Assistant Commissioner ?'
2. The assessee, an individual, was assessed for the assessment year 1961-62 on a total income of Rs. 9,491 under Section 23(3) of the Income-tax Act, 1922. Subsequently, proceedings were taken under Section 147 of the Income-tax Act, 1961, and the assessee returned a total income of Rs. 17,684. On reassessment, the total income was computed at Rs. 33,241. In appeal, the Income-tax Appellate Tribunal reduced the total income to Rs. 21,902.
3. The Income-tax Officer initiated penalty proceedings against the assessee and the Inspecting Assistant Commissioner levied a penalty of Rs. 5,000.
4. In similar proceedings for the assessment year 1962-63, the assessee filed a return showing his income at Rs. 8,505 initially, but subsequently he filed a revised return showing his income at Rs. 23,151. The Income-tax Officer determined the total income of the assessee at Rs. 55,220. In appeal, the Tribunal reduced the total income to Rs. 44,311. Penalty proceedings for that year resulted in an order by the Inspecting Assistant Commissioner imposing a penalty of Rs, 15,000.
5. Against the penalty orders, the assessee appealed to the Tribunal. The Tribunal reduced the penalties for the aforesaid two assessment years to Rs. 2,500 and Rs. 12,500. Thereafter, the assessee applied for rectification of the appellate order of the Tribunal, contending, inter alia, that the effect of the appellate order was to enhance the amounts levied by the Inspecting Assistant Commissioner. That contention was not accepted by the Tribunal. And now at the instance of the assessee the Income-tax Appellate Tribunal has referred this case for the opinion of this court.
6. A preliminary objection has been raised on behalf of the Commissioner of Income-tax. It is pointed out that the question referred arises out of the order passed on the rectification applications and not out of the appellate order of the Tribunal, and no reference has been sought from the order on the rectification applications. It seems to us that the objection is not well-founded. The point embodied in the question referred is whether the effect of the appellate order of the Tribunal levying a penalty of Rs. 2,500 and Rs. 12,500 for the two assessment years is to enhance the penalties levied by the Inspecting Assistant Commissioner. Viewed as a consequence of the appellate order, it cannot be disputed that the question would arise out of that order. The assessee, believing the appellate order to have that effect, applied for the rectification of that order and the rectification was denied. Alternatively, he had recourse to these proceedings by way of reference to this court. In substance, it is the same question which he sought to raise in the rectification applications and now raises in this reference. In both cases, it is a question which arises out of the appellate order. The objection is overruled.
7. On the merits of the question, we have no hesitation in deciding against the assessee. From the data before us it seems that the assessee has assumed that while the Inspecting Assistant Commissioner imposed a penalty amounting to 50 per cent. of the maximum penalty, the Tribunal was also bound to maintain the same ratio. It is urged that the quantum of the penalty levied by the Tribunal exceeds 50 per cent. of the maximum penalty and that, therefore, it amounts to an enhancement of the penalty levied by the Inspecting Assistant Commissioner. We have perused the appellate order and we do not see any reason to hold that the Tribunal intended to apply the same ratio between the penalty levied and the maximum penalty leviable. The law did not bind the Tribunal to adopt the same ratio as the Inspecting Assistant Commissioner did. The Tribunal had before it several circumstances on the basis of which it reduced the penalty to Rs. 2,500 and Rs. 12,500 for the two assessment years and when doing so the Tribunal did not, as indeed it was not bound to, proceed on the basis that the penalty imposed should be 50 per cent. of the maximum penalty.
8. Accordingly we answer the question referred in the negative and against the assessee.
9. The Commissioner of Income-tax is entitled to his costs which we assess at Rs. 200. Counsel's fee is also Assessed at the same figure.
Question answered in the negative.