C. S. P. Singh, J. - The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad has under section 256(1) of the Income tax Act, 1961 referred the following question for our opinion :-
1. Whether for the assessment year 1957-58 simply because the revised return of income has been filed after 1-4-1964, the Explanation to section 271(1)(c) of the Income-tax Act, 1961 could be invoked
2. Whether on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty imposed under the Explanation to section 271(1)(c) of the Act
2. The facts necessary for disposal of this reference fall within a narrow compass. The assessee is a registered firm and carries on business in kirana goods and also has a commission agency for such goods. The assessment for the year 1957-58 was completed on a total income of Rs. 38,739/- against disclosed income of Rs. 23,269/-. On appeal, the assessed income was reduced to Rs. 23,634/-. In course of assessment for the year 1958-59, the Income-tax Officer found that the assessee had introduced a number of cash credit amounts in its books of accounts. The assessees explanation regarding the source for this amount was rejected and the amounts aforesaid were added to the assessees income. On appeal, the amounts were deleted by the Appellate Assistant Commissioner on the basis that the amounts related to the earlier assessment year i.e. 1957-58. The Income-tax Officer thereafter reopened the assessment for 1957-58 under section 148 of the Income-tax Act, 1961. The assessee filed a return showing an income of Rs. 16,999/- and also gave an explanation for the cash credits. The explanation was rejected by the Income-tax Officer and the entire cash credits were treated to be the income of the assessee from an undisclosed source. Proceedings were thereafter initiated under section 271(1)(c) of the Income-tax Act, 1961, and as the amount of penalty imposable was in excess of Rs. 1,000/-, the matter was referred to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner relying on the explanation to section 27(1)(c) of the Act placed the onus of proof on the assessee to prove that there was no fraud or wilful neglect on the part of the assessee. He held that the onus had not been discharged, and as such imposed a penalty of Rs. 12,500/-. The Tribunal held that the explanation to section 27(1)(c) of 1961 was not application to the assessment year 1957-58, inasmuch as the explanation was introduced after 1.4.1965. It found that there was lack of evidence for disbelieving the explanation given by the assessee, and that the Inspecting Assistant Commissioner had committed an error in relying solely on the findings given in the assessment proceedings for reaching the conclusion that the assessee was guilty of concealment. It held that the Department had failed to prove by independent evidence that the assessee had concealed its income. In this view, the penalty was deleted.
3. So far as the first question is concerned, that is covered by the decision in Commissioner of Sales Tax, Lucknow vs. M/s. Ram Achal Ram Sewak, Faizabad (1974 UPTC 254) wherein it has been held that for imposing penalty under section 271(1)(c) of the Act it is the original return and not the return filed in response to notice under section 148 which is relevant. This being so, the explanation to section 27(1)(c) of 1961 Act could not be invoked in the present case of the original return was filed before the explanation to section 271(1)(c) was added.
4. So far as the second question is concerned, that is one of pure fact and no question of law arises. The Tribunal has categorically found that there was no evidence to disbelieve the assessees explanation, and that the facts of concealment had not been established.
5. We, therefore, answer the first question in the negative and the second question in the affirmative. The assessee is entitled to his costs which was assess at Rs. 200/-. Counsels fee is assessed at the same figure.