1. This order shall also dispose of Miscellaneous Civil Case No. 110 of 1980 (CIT v. Pradeep Shantaram Padgaonkar, Indore).
2. These applications under Section 256(2) of the I.T. Act, 1961, are filed by the Department on the following facts :
The assessee, non-applicant, made a total investment of Rs. 70,918 during the accounting periods relating to the assessment years 1969-70 and 1970-71. The assessee's contention before the ITO was that the above investment was made out of the gifts and donations received by him from his mother's sister. The ITO did not accept the assessee's explanation and held that such investment represented the assessee's income from undisclosed sources. The ITO also initiated penalty proceedings against the assessee and levied penalty of Rs. 24,000 and Rs. 35,000 for the assessment years 1969-70 and 1970-71 respectively. The penalty levied on the assessee for the year 1970-71 was eventually set aside by the Income-tax Appellate Tribunal, by its order dated April 29, 1978, in I.T.A. No. 92 (Ind) 77-78. The Tribunal held that the assessee came forward voluntarily offering the income for tax and it was a case where his explanation in respect of certain investment had been rejected. The Tribunal relied upon the decisions of the Supreme Court in : 76ITR696(SC) (Anwar Ali's case) and : 83ITR369(SC) (Khoday Eswarsa and Son's case) and cancelled the penalty imposed on the assessee for the assessment year 1970-71. The Department submitted an application before the Tribunal to state a case and refer questions of law arising out of the order of the Tribunal for the opinion of this court. This application was rejected by the Tribunal. The Department has submitted this application directing the Tribunal to state a case andrefer questions of law arising out of the order of the Tribunal. This application has been registered as Miscellaneous Civil Case No. 81 of 1979.
3. Following the decision of the Tribunal, the AAC cancelled the penalty levied on the assessee for the assessment year 1969-70 for the reason that the facts of the case leading to the levy of penalty in the year 1969-70 were identical to the facts on the basis of which the Tribunal cancelled the penalty for the assessment year 1970-71. The Department's appeal against the order of the AAC was dismissed by the Tribunal. The application submitted to the Tribunal for stating a case to this court and to refer questions of law arising out of the order of the Tribunal was also dismissed and the Department has submitted an application under Section 256(2) of the Act for directing the Tribunal to refer questions of law arising out of the order of the Tribunal cancelling the penalty in respect of the year 1969-70. This application has been registered as Miscellaneous Civil Case No. 110 of 1980. As common questions arise in these applications they are being disposed of by this order.
4. The questions of law proposed by the Department in Misc. Civil Case No. 81 of 1979 are as follows:
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty of Rs. 35,000 levied by the I AC under Section 271(1)(c) of the Income-tax Act, 1961?
(2) Whether the finding of the Tribunal that there was no fraud or gross or wilful neglect on the part of the assessee can be reasonably arrived at even on the material considered by it ?'
5. The questions proposed by the Revenue in Misc. Civil Case No. 110 of 1980 are as follows :
'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding the AAC's order cancelling the penalty of Rs. 24,000 levied by the ITO under Section 271(1)(c) of the Income-tax Act, 1961 ?
(2) Whether the finding of the Appellate Tribunal that there was no fraud or gross or wilful neglect on the part of the assessee can be reasonably arrived at on the material considered by it '
6. Now, the questions proposed by the Department are identical except in regard to the amount involved in the first question and the fact that the penalty order was cancelled by the AAC in one case and by the Tribunal on the other.
7. Having heard the learned counsel for the parties, we have come to the conclusion that these applications have no force and deserve to be dismissed. The learned counsel for the Department contended that asthe Explanation to Section 271(1)(c) of the Act applied to the case, the burden was on the assessee to show that he did not commit any fraud or gross or wilful neglect in returning the income and the Tribunal committed an error in placing the burden on the Department. This contention has no force. The Tribunal has considered the materials on record and came to the conclusion that no case was made out for imposing the penalty on the assessee. The Tribunal pointed out that the materials placed on record by the assessee, i.e., the certificate of the Secretary of the Maharani, who was the mother's sister of the assessee, showing that gifts and donations were made by the Maharani of Indore to the assessee from time to time, was not considered while imposing penalty on the assessee. The Tribunal also observed that the assessee voluntarily offered the income for assessment. The Tribunal further considered that the AAC, throughout the body of the order, treated the assessee as a defaulter and did notinvoke the Explanation to Section 271(1)(c) of the Act. The Tribunal also held that even if the Explanation was invoked, there was nothing to indicate that the assessee committed fraud or gross or wilful neglect in returning the income. On these findings, the Tribunal set aside the order imposing penalty on the assessee. The penalty has been set aside on the basis of findings of fact recorded by the Tribunal on the materials produced on record and no questions of law, as proposed by the Department, arise out of the order of the Tribunal. We, therefore, see no reason to allow these applications.
8. These applications are, therefore, dismissed. In the circumstances of the case, there shall be no order as to costs of these applications.