G.P. Singh, C.J.
1. This is a reference made by the Income-tax Appellate Tribunal as directed by this court in M.C.C. No. 158 of 1973, decided on 12th October, 1978, referring for our answer the following question of law :
'Whether, on the facts and in the circumstances of the case and on the findings recorded by it, the Tribunal was right in holding that the asses-see was guilty of fraud or gross or wilful neglect in filing the return so as to justify the penalty under Section 271(1)(c) of the Act '
2. The relevant assessment years are 1967-68 and 1968-69. The assessee joined the firm of tax practitioners, M/s. D. C. Jain & Co., on 1st April, 1965. The assessee also became a partner of another firm dealing in petroleum products some time in October, 1965. This firm carried on business in the name of United Traders. A return was submitted by the assessee for the year 1967-68 on 11th June, 1967, in which the income received by him as partner from the firm, United Traders, was alone shown. Another return was submitted for the same assessment year on 21st August, 1967, in which the income received by him from the firm, M/s. D. C. Jain & Co., only was shown. The same thing happened for the assessment year 1968-69. One return was filed by the assessee on 1st July, 1968, showing only the income received from the firm, United Traders, and another return was filed on 30th December, 1968, showing the income from the firm, M/s. D. C. Jain & Co. The ITO also while assessing the income on these returns overlooked that the same assessee cannot file two returns and that the income from the two firms received by the assessee should have been included in the same return. The income assessed as received from each firm in both the assessment years was below the taxable limit and, therefore, no tax was imposed. Thereafter, the mistake was discovered by the ITO and a notice was issued under Section 148 for reassessment. In reassessment proceedings the assessee filed fresh returns showing income from both the firms for both the years and assessments were accordingly made. Penalty proceedings were then taken against the assessee. The case of the assessee was that this was a case of ignorance and that there was no intention to conceal the income or to evade the tax. The contention of the assessee was negatived by the ITO and the case was referred to the IAC for imposing penalty. The IAC also negatived the contention of the assessee and imposed penalty. The Appellate Tribunal also rejected the contention of the assessee. It, however, reduced the amount of penalty.
3. The assessee, although a partner of the firm of tax practitioners from 1st April, 1965, has never practised on the income-tax side. The assessee also contended before the Tribunal that the two returns in respect of the same assessment year in the same capacity were filed before the same ITO and this would show that the assessee had no intention to conceal the income and it was a case of a bona fide action because of ignorance. This very important fact although urged before the Tribunal as is clearly mentioned in para. 13 of the statement of the case was not taken into account while negativing the case of the assessee. It is, no doubt, true that the Explanation to Section 271(1)(c) applied and the presumption arose against the assessee but the assessee could rebut that presumption by showing circumstances that there was no intention to conceal the income and evade payment of tax. The very fact that the two returns for the same assessment year were filed before the same ITO is, in our opinion, a very important circumstance to show that the intention was not to evade payment of tax or to conceal income but it was an action under a mistaken belief that two returns could be filed for two different sources of income. In our opinion, having regard to this circumstance along with other circumstances, the assessee was able to rebut the presumption. The learned standing counsel has submitted before us that the finding reached by the Tribunal is a finding of fact. No doubt normally such a finding is a finding of fact but when an important circumstance is not taken into account in reaching that finding, then such a finding becomes erroneous in law. That is the position in the instant case.
4. For the reasons stated above, we answer the question as follows:
'The Tribunal was not right in law in holding that the assessee was guilty of fraud or gross or wilful neglect in filing the return so as to justify the penalty.'
5. There will be no order as to costs of this reference.