A.P. Sen, Actg. C.J.
1. This is an application under Section 256(2) of the I.T. Act, 1961, by the CIT, Jodhpur at Jaipur, for requiring the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, to state a case and refer to the court, a certain question of law said to arise from its order in I.T.A. No. 86/JP/1974-75, decided on December 10, 1975, pertaining to the assessment year 1967-68.
2. The facts giving rise to this reference application briefly stated are as follows: The assessee filed a return for the assessment year 1967-68, declaring the income of Rs. 3,986. Subsequently, the return was revised, and in the revised return the income was declared at Rs. 11,703. The total income as determined by the ITO was Rs. 67,960. However, the Income-tax Appellate Tribunal determined the income at Rs. 42,591. The amount assessed included amongst others income from plying of truck No. RJY 1600 and profits on sale thereof under Section 41(2) of the I.T. Act, 1961, which the assessee had failed to disclose in the return filed by her. The order of assessment became final in respect of the assessment year 1967-68.
3. As the returned income was less than 80% of the assessed income, penalty proceedings under Section 271(1)(c) were initiated against the assessee. After taking into consideration the explanation furnished by the assessee in this regard, the IAC, vide his order dated March 27, 1974, imposed a penalty of Rs. 15,500. The IAC was of the opinion that the assessee had failed to disclose the income from the plying of truck No. RJY 1600 either in the original return or in the revised return, and as such there was concealment of income by the assessee. He further found that the profits under Section 41(2) were also not disclosed by the assessee. The IAC rejected the explanation given by the assessee after considering the decisions of the AAC and the Income-tax Appellate Tribunal given in the assessment proceedings. The Tribunal, while deciding I.T.A. Nos. 4198 to 4200 of 1970-71, in respect of preceding assessment years, vide its order dated October 7, 1972, observed as follows :
' The above truck was purchased by the assessee in April, 1960, for Rs. 29,000 from a transport concern of Ahmedabad. Of the purchase price, Rs. 21,000 were obtained by the assessee from Motor and General Finance Company Ltd. as loan. This was guaranteed by her father-in-law Shri Mahendra Singh. The balance of Rs. 7,000 came from Beharilal, Sriram and Smt. Veeranwali in equal shares. The truck was registered in the assessee's name, and the accounts of its earnings and expenses were also entered in the assessee's books. This truck was later on converted into an oil tanker and, in that capacity, the assessee executed a contract with Esso Standard Eastern Inc. This agreement also stood in the assessee's name. The profits earned from this truck were also retained by the assessee right up to the time of her death in December, 1970.'
4. In conclusion, the Tribunal observed in the quantum appeal, as follows :
' In our considered opinion, the above facts brought out on record were overwhelming as not to leave any doubt that the truck in fact belonged to the assessee and he had been enjoying its income. It was purchased by him and registered in his name. It was also got financed by Mm in his own name to the extent of Rs. 21,000 from Motor & General Finance Co. Ltd., with the guarantee of his father-in-law. Subsequently, he executed a contract with Esso Standard Eastern - Inc. after converting the truck into an oil tanker. Furthermore, its income and expenses were entered in his account books. His case, therefore, that the truck did not belong to him was false. The income-tax authorities were, therefore, fully justified in treating the income drawn therefrom as part of the assessee's earnings.'
5. On appeal, the Tribunal cancelled the order of imposition of penalty, vide its order dated December 10, 1975, in respect of the assessment year 1967-68, stating :
' It is undisputed fact that penalty proceedings are independent proceedings. The assessee gave detailed explanation as reproduced above that really the truck in question belonged to Beharilal. It was sold by him. The sale proceeds were recorded in his books. The income earned by Beharilal from the said truck was duly shown in the returns by Shri Beharilal. The credit standing in the name of Beharilal and others were recovered by them, after the death of the assessee, from the legal representatives. Beharilal also gave legal notice to the legal representatives. The legal representatives made payment by demand draft. The learned Inspecting Assistant Commissioner did not give any finding on these points. As a matter of fact, the learned Inspecting Assistant Commissioner imposed penalty solely on the basis of the finding given in assessment proceedings. Looking to the facts and the explanation given by theassessee in penalty proceedings, the learned Inspecting Assistant Commissioner should have independently examined the explanation of the assessee and all evidence on record. Since the learned Inspecting Assistant Commissioner failed to do so, as such, in our opinion, the penalty order could hardly be sustained.'
6. Feeling aggrieved, the CIT applied to the Tribunal under Section 256(1) of the I.T. Act, 1961, to draw up the statement of the case and refer a question of law said to arise from its order, to the High Court for its opinion. The Tribunal, however, by its order dated December 10, 1976, declined to state tbe case on the ground that the question as to whether there was concealment of income or not, as to attract the provisions of Section 271(1)(c), was essentially a question of fact.
7. In opposing the application for reference, learned counsel for the assessee has referred us to the decisions in Addl. CIT v. Noor Mohd. & Co. and Addl. CIT v. Gem Palace laying down that the question whether the presumption under the Explanation to Section 271(1)(c) had been rebutted or not or that the question whether there was no fraud or gross or wilful neglect on the part of the assessee are questions of fact. We refrain from expressing any opinion on this aspect at this stage.
8. The order of the Tribunal does, in our opinion, give rise to a question of law. In reaching the conclusion that it did, the Tribunal has completely overlooked the Explanation to Section 271(1)(c). Furthermore, the Tribunal based its conclusion solely on the explanation furnished by the assessee during the penalty proceedings, without taking into consideration the findings reached by it in the quantum appeal. It failed to appreciate that though the finding as to concealment in the quantum appeal was not conclusive, it was good evidence: CIT v. Anwar Ali : 76ITR696(SC) and CIT v. Khoday Eswarsa and Sons : 83ITR369(SC) . In the absence of new additional grounds, there was no reason for the Tribunal to depart from its finding given previously. The Tribunal, being the final fact-finding authority, should have arrived at its own conclusion of facts after due and proper consideration of the entire material for and against the assessee. This tbe Tribunal has failed to do and, therefore, a question of law clearly arises : Omar Salay Mohamed Sait v. CIT : 37ITR151(SC) and Lalchand Bhagat Ambica Ram v. CIT : 37ITR288(SC) .
9. The application under Section 256(2) of the I.T. Act, 1961, is, therefore, allowed and the Income-tax Appellate Tribunal, Jaipur, is directed to draw up the statement of the case and refer to the court the following question for its opinion, namely :
' Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in cancelling the penalty of Rs. 15,500 levied by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income-tax Act, 1961, for concealment of income '
10. There shall be no order as to costs.