U.N. Bhachawat, J.
1. This order shall also dispose of Misc. Civil Case No. 111 of 1977 and Misc. Civil Case No. 110 of 1977 as a common question is involved in all these cases with a variation in the assessment years. Parties are common in all cases. The relevant assessment years are as under:
Relevant assessment year
M.C.C. 112 of 1977
M.C.C. 110 of 1977
M.C.C. 111of 1977
2. The Department has filed the present applications under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as ' the Act'), praying that the Income-tax Appellate Tribunal, Bench A, be required to state the case and refer to this court for its answer the following question :
' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied under the Explanation to Section 271(1)(c) of the Income-tax Act '
3. The short facts, essential for the decision of these applications, are these : The assessee, in all these cases, is the same. He is an individual. He has three sources of income ; (i) liquor business, (ii) chemist shop, and (iii) property.
4. The corresponding accounting years for the above assessment years ended on March 31, 1967, March 31, 1968, and March 31, 1969, respectively.
5. The table below shows the income returned by the assessee, the income finally assessed in the second appeal by the Tribunal as also the difference between the income assessed and the income returned under each source in the respective three assessment years :
Income finally assessed
Difference of income
1. Property income
3. Liquor shop
2. Liquor shop
1. Chemist shop
2. Liquor shop
6. It may be stated that in support of his return, the assessee had not given any basis. On being given notice under Section 143(2) of the Act to the assessee, the assessee had produced Rokad Khata and balance-sheet for the chemist shop ; for liquor business, maintenance of account books was denied and income from house property was not shown. The Income-tax Officer had passed orders of assessment on March 29, 1972, for the respective assessment years under Section 143(3) of the Act.
7. The Income-tax Officer, while passing the order of assessment for the respective assessment years, was satisfied that the assessee had concealed the particulars of his income and furnished inaccurate particulars of such income and on account of the fact that the declared total income fell far short of 80% of the total income assessed, made a reference to the Inspecting Assistant Commissioner of Income-tax under Section 274 read with Section 271(1)(c) of the Act for the imposition of penalty. The Inspecting Assistant Commissioner proceeded to call upon the assessee to show cause why a penalty should not be imposed on him.
8. In answer to this notice, the assessee filed written explanations, all dated November 3, 1973, for each of the three assessment years. It would also be relevant to state here that at that time, the quantum appeals of the assessee for the respective three years were pending before the Tribunal.
9. The assessee, in his explanations, claimed that apart from the fact that the appeals were pending before the Appellate Tribunal, the difference between the assessed income and the returned income were due to estimates of income from the business of the assessee ; that in respect of property income, the omission to return it was due to a slip and was not a deliberate concealment and with regard to unexplained cash credits, the assessee contended that the creditors having been produced, the addition was only due to rejection of the assessee's explanation and as such did not attract any penalty.
10. The Inspecting Assistant Commissioner found that the assesse was returning income year after year on estimate basis and was accepting large additions and held that non-compliance with notice under Section 143(2) of the Act and non-maintenance of acceptable accounts revealed a pattern and a design on the basis of which it must be held that the assessee has concealed the income or furnished inaccurate particulars. The Inspecting Assistant Commissioner had also taken into account the additional evidence which was available with him and it was that on February 10, 1974, when there was a raid and search of the residential premises of the assessee and his brother, a sum of Rs. 10,52,988 was discovered and that two of the creditors of the assessee who were present at that time were found to be the assessee's employees getting Rs. 100 to Rs. 200 per month and that they had stated that they had never such large sums as to advance Rs. 30,000 in 1972-73 or Rs. 34,000 in 1973-74. The Inspecting Assistant Commissioner before taking this additional evidence into account had put it to the assessee, for which the assessee contended that they were extraneous matters which could not be taken into consideration and that the subsequent events cannot prejudice the earlier proceedings. The Inspecting Assistant Commissioner, however, came to the conclusion that subsequent events had converted intangible additions into visible and tangible assets and proved that the cash credits were false. The Inspecting Assistant Commissioner had also noticed that with regard to cash credits, the assessee had originally claimed that they represented intangible additions of the past, whereas subsequently it was claimed that they were loans. The Inspecting Assistant Commissioner was, therefore, of the view that the onus cast by the Explanation to Section 271(1)(c) of the Act had not been discharged by the assessee ; that substantial evidence of absence of accounts and intangible additions in each year, surrender of the assessee to such assessment in the past, the failure to explain the cash credits and the discovery of unexplained cash go to indicate a design to conceal the particulars of income year after year. He, therefore, imposed penalty of Rs. 25,000 for the year 1967-68, Rs. 35,000 for the year 1968-69 and Rs. 40,000 for the year 1969-70, vide his order dated March 25, 1974.
11. On appeal by the assessee, the Appellate Tribunal held, vide its order dated September 11 , 1975, that the assessee was not guilty of concealing or furnishing inaccurate particulars of income and that the imposition of penalties cannot be sustained. The Tribunal was of the opinion that the fact relating to the raid has not been linked up with these assessment years so as to materially affect the complexion of the cases. The raid had so far not resulted in a finding that the assessee had large sums of money which he could not account for. The Tribunal was also of the view that even assuming that the assessee was unable to explain possession of large sums of money in 1974, the provisions of the Act deem it that that money would be the income of the year in which they were seized unless there was material to show that they were not income of that year. The Tribunal also observed: 'these proceedings have concluded, then, we would have had further information as to the claim of the assessee regarding the nature of these amounts seized in 1974. As yet, however, there is no material to link the monies seized in the year 1974 with the income earned in the earlier assessment years. We must, therefore, come to the conclusion that the facts relating to the seizure of the money from the premises of the assessee in 1974 cannot be relied on by the Revenue in drawing any adverse inference for these assessment years. We must, therefore, proceed to test each addition in the assessments to see whether the assessee had discharged the burden cast by the explanation.'
12. With regard to the failure to return property income for the assessment year 1967-68, the Tribunal came to the conclusion that it was an inadvertent omission and not a deliberate concealment. The reason assigned for this conclusion by the Tribunal is that the particulars of the income from property for the subsequent years were returned by the assessee prior to the assessment for this year and that 'the assessee appears to have come out with entire particulars when the omission was brought to his notice'.
13. With regard to income from liquor business for all the three years, the Tribunal held that the returned incomes were based on statements obtained from the Excise Department, which maintains a record of purchases and sales as well as the prices at which the liquor is sold and calculate the profit that may be earned by the assessee for the purpose of fixing the licence fee. Thus, the figures of sales and sale price were ascertainable from that statement and the assessee only estimated the figure of expenditure and since the assessing authority, applying Section 145(1) of the Act, made an estimate of income from the business and there being no material to show that there was inflation of expenditure by the assessee, the burden cast by the Explanation to the said section, on the assessee was discharged. With regard to the income from the business of chemist shop, the assessment was made by applying s. 145(1) of the Act and there being no evidence of suppression of sales and inflation of expenses or other material irregularity, the burden cast on the assessee by virtue of the Explanation to the said section has been discharged by him.
14. With regard to the cash credit, it found : ' From a close scrutiny of the explanation dt. 15-2-1972 and the subsequent production of the creditors, it appears to us that the assessee's initial attitude was that the available funds of the assessee could be set off against the past intangible additions without any investigation. We do not think that this statement dated 15-2-1972 could be construed to mean that the assessee claimed that the sum of Rs. 25,000 represented his past savings. In the circumstances, the subsequent production of the creditors and the claim that this amount represented loans was only an explanation of the nature of the amount which became necessary for the assessee to state when he found that he could not avoid investigation into the nature and source of the funds by asking for set off against past intangible additions. We are, therefore, of the opinion that this is not a case of shifting stands or contradictory explanations as to the nature and source of the cash credits. We must, therefore, see whether the assessee has reason to believe that this cash credit did not represent his income and in view of the fact that the assessee produced the creditors, we must hold that the assessee had discharged the burden cast by the said Explanation.'
15. The Department then made an application before the Tribunal under Section 256(1) of the Act for referring the question extracted in paragraph 2 of this order contending that this question arises as a question of law out of the order of the Tribunal dated September 11, 1975, quashing the penalty. The Tribunal, vide its order dated September 21, 1976, rejected these applications, holding that no question of law arises out of its order dated September 11, 1975. Hence, the present applications have been made under Section 256(2) of the Act.
16. The Tribunal, in its order, on an application under Section 256(1) of the Act, after giving a brief resume of the facts and findings of the Tribunal's order dated September 11, 1975, said that it shows that it was on a balance of probabilities that the Tribunal held that the onus that lay on the assessee under the Explanation to Section 271(1)(c) of the Act stood discharged on the facts and in the circumstances of the case and, as such, it is purely a question of fact and no question of law arises.
17. Before we proceed to dwell on the question whether a question of law arises from the order of the Tribunal dated September 11, 1975, it is apt to quote the observation of Mr. Justice Jaganmohan Reddy (as he then was) of the Supreme Court in CIT v. S.P. Jain : 87ITR370(SC) :
' Whether we adopt the extended view advanced by Lord Radcliffe or the view of Lord Simonds, what has to be safeguarded against is that any crystallization of the view of this court and its reluctance to interfere with the findings of fact should not make the Tribunals or the Income-tax Authorities smug in the belief that, as the courts do not interfere with the findings which form the bedrock upon which the law will be based, they can act on that assumption in finding facts or by their mere ipse dixit that they are findings of fact wish it to be so assumed irrespective of whether they are sustainable in law or on the materials on record.'
18. The scope and the subject-matter of Sub-section (2) of Section 256 of the Act is co-extensive with that of Sub-section (1). Thus, this court can require the Tribunal to refer only those questions which fall within the ambit of Sub-section (1). Therefore, the Tribunal cannot be required to refer a question which is a pure question of fact or which does not arise out of its order. It is also pertinent to note that under Sub-section (2), the Tribunal can be required to state a case upon a particular question if the Tribunal has refused to do so. If a party did not apply under Sub-section (1) to the Tribunal to refer that particular question and consequently there has been no refusal by the Tribunal to refer that question, this court cannot issue a direction to the Tribunal, under Sub-section (2), to state and refer a case upon that question.
19. If a question of law does arise and the Tribunal's view that no such question arises is incorrect, the court cannot refuse to require the Tribunal to refer the case merely because the Tribunal's decision on the question of law is correct. [CIT v. Jaiprakash Omprakash : 52ITR23(SC) .] The ultimate decision upon the point of law--whether for or against the Department--can have no bearing on the question whether there is a point of law upon which a case should have been stated. [See CIT v. Managing Trustee, Jalakabhai Trust : 66ITR619(SC) ]. Of course in a case in which though a question of law does arise, the answer to the question is self-evident, or where the question is of an academic nature, e.g., where it is concluded by a judgment of the Supreme Court, the position would be different. It is also to be noted that a reference cannot be refused merely because this court has taken the same view on the question as the Tribunal.
20. We now proceed to decide the question whether a question of law arises in the instant case from the order of the Tribunal dated September 11, 1975, bearing in mind the aforesaid legal position. At the outset, we may point out that from the resume of the facts and findings of the authorities below, it is apparent that according to the Inspecting Assistant Commissioner, the subsequent event, that is, the seizure of the sum of Rs. 10,52,988 in the raid and search at the assessee's residence and the statements of his employees regarding their financial status, indicating the inability to advance big sums of money to the assessee, which the assessee had claimed that they had advanced to him, can be taken into account in the matter of the imposition of penalty in question; whereas according to the Tribunal, for the reasons stated by it in its order dated September 21, 1975, which have been summarised in paragraph 11 of this order, it could not be taken into account. This itself indicates that a question of law arises as to whether the forequoted subsequent event could be taken into account 'as an evidence for the imposition of penalty in question.
21. It was argued by the learned counsel for the assessee that the Tribunal has found as a fact that in its opinion, the fact regarding the raid has not been linked up with the assessment years and so, it cannot be taken to affect materially the complexion of the cases. This finding, being a finding of fact, cannot be interfered with. He also urged that it is an undisputed fact that till the Tribunal passed the order quashing the penalty, the raid had not resulted in a finding so far, so as to conclude that the assessee could give no explanation for the amount found in search. In this sequence, the learned counsel had also urged that the raid has now resulted in the finding and an order has been passed by the Commissioner of Income-tax (Appeals), Indore, on February 24, 1981, which has been filed in this court in connected case M.C.C. No. 110 of 1977 which should be taken into account as an additional evidence for the purpose that the amount found in the search does not warrant the inference against the assessee in the matter of imposition of penalty. The learned counsel was unable to point out any provision of law to the effect that this court is competent to entertain an additional evidence which was not available before the Tribunal. This court has to decide the question whether a question of law arises out of the order of the Tribunal and, as such, in our opinion, we are not competent to admit any additional evidence. In this view of the matter, the request of the learned counsel in this behalf is rejected.
22. It was also urged by the learned counsel for the assessee that, as observed by the Tribunal, even if the amount seized in the raid is assumed to be unexplained, by virtue of Section 69A of the Act, this unexplained amount can be deemed to be the income of the assessee for the year 1974 only, in which this amount was found and as such no question of law arises. The argument of the learned counsel itself suggests that a question of law does arise, that is, the implication of Section 69A has to be determined while dealing with the question of taking into account the amount found during the raid. To reiterate, at this stage, we are not concerned with the question whether the point has to be answered in favour of the Department or against the Department. The limited question before us is whether a question of law arises or not.
23. It was also urged by the learned counsel for the assessee that since the Department, in its application under Section 256(1) of the Act, had not proposed the question that the Tribunal was wrong in law in refusing to take into account the subsequent event of raid wherein the sum of Rs. 10,52,988 was found and the statements of two of the employees-creditors of the assessee were recorded, the Tribunal cannot be required to refer such a question. The argument of the learned counsel is devoid of substance. The ultimate effect of taking into account or refusing to take into account the evidence in question is on the imposition of penalty and, therefore, the question that was proposed by the Department, as extracted hereinabove in paragraph 2 of this order, is a comprehensive one, so as to include within its ken this question also.
24. The learned counsel for the Department urged that the findings of the Tribunal that the failure to return property income was an inadvertent omission and not a deliberate concealment, that the explanation with regard to the cash credits of Rs. 25,000 was neither vacillating nor contradictory and that since the assessee had examined the creditors from whom he had allegedly taken the loan, the assessee had discharged the burden cast on him by the Explanation to Section 271(1)(c) of the Act, are unreasonable and perverse in face of the Tribunal's own finding in the quantum appeal. The argument of the learned counsel for the assessee, in counter was that the Tribunal is not bound by its finding in the quantum appeal; the view taken by the Tribunal in the penalty appeal is quite reasonable and just and the findings are findings of fact.
25. The assessee had returned 'Nil' income from property for the assessment year 1967-68. The assessment for the year is made under Section 143(3) of the Act. In that, it was found that the assessee had an income of Rs. 1,735 from house property and had invested a sum of Rs. 25,000 in the renovation and addition to the house property during the financial year 1966-67. The Income-tax Officer treated the sum of Rs. 25,000 as income of the assessee from undisclosed sources and the Tribunal has also confirmed that, discarding the explanation that was submitted by the assessee, observing that the assessee took three different stands. To quote: 'Firstly, he stated that the investment of Rs. 25,000 was made out of additions in the past. But in the wealth-tax return, the assessee showed the said amount in 'suspense'. When the Income-tax Officer called upon the assessee to explain the nature and source of this item of asset, the assessee produced about eight persons as depositors before the Income-tax Officer and attempted to prove the genuineness of the deposits. But the Income-tax Officer on examining each and every depositor as regards the source of their investment held that they failed to prove the same so much so that the Income-tax Officer had to conclude that all the advances are stated to have been made without interest, that each of the alleged creditors has admitted that he is unable to prove the availability of the amount advanced to the assessee in the year of advances to him in cash at that time, that it is highly improper that these persons with so limited financial resources would accommodate the assessee (who is financially very well off) with money for years together without interest. Thus, in view of these circumstances, we are unable to accept the plea of the learned representative of the assessee that the assessee had discharged the onus cast upon him to prove the genuineness of the entries. '
26. The finding of the Tribunal in the penalty appeal is that in its opinion, failure to return property income was an inadvertent omission and not a deliberate concealment; that for the sum of Rs. 25,000, the assessee's stand was not shifting or contradictory as to the nature and source of the cash credits and that on producing the creditors, the assessee had discharged the burden cast on him by the Explanation to Section 271(1)(c) of the Act.
27. From the above discussion, it is apparent that the Tribunal has, on accepting that very explanation which was discarded in quantum appeal, held that the assessee has discharged the burden that was cast on him under the Explanation to Section 271(1)(c) of the Act. It is also pertinent to note that the Tribunal's view is that the production of the creditors, from whom allegedly the assessee had taken the loans, ipso facto discharged the burden that was on the assessee regarding the sum of Rs. 25,000 under the Explanation to Section 271(1)(c) of the Act. In view of the aforesaid position, a legal question arises, whether the conclusion based by the Tribunal on the explanation furnished by the assessee, without taking into consideration the findings reached by it in the quantum appeal that the relevant sum of Rs. 25,000 was the assessee's earnings, is unreasonable, perverse or erroneous in law. In other words, a question arises as a question of law that whether a finding as to concealment in the quantum appeal is good evidence. The other question that arises is whether, as a matter of law, only by the production of the alleged creditors, being oblivious of their limited financial resources and other circumstances which makes it most improbable that those creditors could advance the respective loans or had advanced the loans, can the assessee be held to have discharged the onus that lay on him under the Explanation to Section 271(1)(c) of the Act.
28. It would be pertinent to refer to a decision of this court in Sulemanji Ganibhai v. CIT : 121ITR373(MP) . In this case, when the assessee filed his return on April 4, 1966, he did not return income from his truck business. Thereafter, he filed a revised return on February 20, 1969, disclosing an income of Rs. 2,840 from his truck business. A question arose in the penalty proceedings under Section 271(1)(c) of the Act whether the quantum of penalty to which the assessee became liable ought to be determined in accordance with law as it stood on July 4, 1966, or as it stood on the date of the filing of the revised return. Dealing with that question, it was observed as under (p. 380):
'The provision dealing with a revised return is Section 139(5) which says that if any person having furnished a return discovers any omission or wrong statement therein, he may furnish a revised return at any time before the assessment is made. A revised return can be filed only when the assessee ' discovers any omission or wrong statement' in the return earlier filed by him. The omission or wrong statement in the return which entitles the assessee to file a revised return must be one which is later discovered, i.e., which is unintentional and which occurs because of some mistake of which the assessee is not aware. When the assessee intentionally suppresses his income, i.e., conceals it in the return, there is no scope for filing any revised return, for, in such a case, the omission or wrong statement in the return is known to the assessee from the very beginning and is not later discovered by him...... '
29. In the light of this observation, a legal question arises in the instant case, that whether the Tribunal is right in law in holding that since the assessee came out with the entire particulars of the income from property in the assessment year 1967-68, when the omission was brought to his notice and had returned the property income for the subsequent year 1967-68 was complete, he cannot be held guilty of concealment.
30. With regard to the income from liquor business as also the chemist shop business, it is argued by the learned counsel for the Department that the view taken by the Tribunal in the penalty proceedings that since the income from these businesses was finally assessed on estimation under Section 145(1) of the Act and as there is no material to indicate that there was inflation of expenses and suppression of sales, the burden cast by the Explanation must be held to be discharged, is erroneous in law.
31. The learned counsel for the assessee, in his argument in counter, submitted that the finding of the Tribunal is a finding of fact and, therefore, no question of law arises. The Tribunal has simply not said that because the assessment was on estimation, no penalty can be levied. The Tribunal has also said that the figures of sales returned by the assessee were correct and as there was no inflation of expenditure, the assessee could bona fide estimate the profit he had estimated.
32. The Tribunal, in the quantum appeal, had, for estimating the income out of the aforesaid two businesses of the assessee, looked into the past history of the assessee as also the percentage of the profit in the like business in support of the reasonableness of its estimation of the rate of profit made by it in these two respective businesses. The Inspecting Assistant Commissioner had also, while imposing the penalty, looked into the past conduct of the assessee in arriving at its conclusion. The Tribunal, in the penalty appeal, did not take into account all those considerations. In this view of the matter, a question arises whether they were all relevant considerations or not and whether the sale price as shown in the statement of the Excise Department would unchallengeably be the price realised by the assessee. As such, a question of law does arise relating to these incomes for the purpose of penalty.
33. The upshot of the foregoing discussion is that a question of law does arise from the order of the-Tribunal dated September 11, 1975, as indicated by us hereinabove. The points of law arising have been indicated by us in our above discussion and, in our view, all that can be covered in the question proposed by the Department, as extracted by us in para. 2 of this order.
34. In the result, we allow the application of the Department and direct the Tribunal to state a case and refer to this court for its answer the question of law extracted in para. 2 of this order. We make no order as to costs.