1. This is a reference made under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal, Jaipur Bench.
2. The brief facts leading to this reference are that M/s. Aggarwal Misthan Bhandar, Kota (hereinafter referred to as 'the assessee'), was carrying on the business of halwai and declared a total income of Rs. 98 in its return filed on July 19, 1968, for the assessment year 1968-69. The ITO found that the books of account maintained by the assessee were not maintained regularly and in the absence of a day-to-day stock account and the net profit declared by the assessee being very low, the ITO discussed the assessment with the assessee and proposed to estimate- it at the income of Rs. 16,500. The assessee accepted the above proposal made by the ITO. The ITO thereafter initiated proceedings under Section 271(1)(c) of the I.T. Act, 1961, against the assessee for concealing the particulars of its income. The penalty proceedings were referred to the IAC, as, in the opinion of the ITO, the minimum penalty leviable exceeded Rs. 1,000. In reply to the show-cause notice of penalty issued by the IAC the assessee submitted a written explanation in which it took the stand that the assessment had been made purely on the basis of a subjective estimate of the ITO, that the assessee had maintained regular books of account which were disbelieved by the ITO only on account of certain routine defects, such as, the absence of a day-to-day stock account and there was no indication in the accounts of any manipulation or any admitted suppression of income. The assessee also took the stand that it had accepted the assessment purely as a matter of expediency as all the earlier assessments had been made on an estimated basis. The IAC, however, did not agree with the explanation given by the assessee and held that the fact that estimated assessments were made in the past should have given an indication to the' assessee that its books of account will not be accepted for the present assessment also and it should have accordingly filed its return showing a reasonable amount. For these reasons, he came to the finding that the assessee had rendered itself liable for a penalty under Section 271(1)(c) and, thus, imposed a penalty of Rs. 16,500 equal to the amount of income estimated by the ITO. Aggrieved against the aforesaid order, the assessee filed an appeal before the Appellate Tribunal. The Appellate Tribunal accepted the appeal and set aside the penalty. The Accountant Member took the view that the assessee had merely accepted the estimated assessment made by the ITO for the reasons which have been properly explained. He also observed that the assessee agreed to a certain assessment proposed by the ITO so as to avoid further dispute by way of appeals, penalties, etc., and such cooperation extended by the assessee in completing the assessment should not have been equated with a confession of concealment of income. It was further observed that the assessee had maintained such accounts as were possible and practicable in a kind of business run by the assessee and the department had not pointed out any manipulation of accounts or other indication of concealment of income. The Judicial Member also agreed with the overall conclusion of the Accountant Member that the penalty should be quashed, but he gave a different line of reasoning. According to the Judicial Member, the assessee-firm was duly registered under the I.T. Act as a firm for that year and was thus liable to pay income-tax if its income exceeded Rs. 25,000. The present assessee's income, however, was Rs. 16,500 only which was far less than that limit and no tax was payable thereon. As such, it was held that where no tax was found payable, the penalty which was incidental thereto became meaningless. In the above circumstances, the Assistant Commissioner of Income-tax, Rajasthan, Jaipur, submitted an application under Section 256(1) of the I.T. Act, 1961, before the Income-tax Appellate Tribunal to draw a statement of the case and refer the following question of law for the opinion of this court. The Tribunal allowed the application and referred the following question of law :
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty under Section 271(1)(c) was not leviable and further in cancelling the same '
3. Mr. Metha, learned counsel for the department, has contended that the fact that the assessee in the return delared his total income at Rs. 98 only, and subsequently accepted his estimated income at Rs. 16,500 was a strong circumstance to hold that he was guilty of wilfully concealing his income. It is further contended that the assessee was not maintaining his books of account in a proper and regular manner and this also should be taken as a circumstance that he wanted to conceal his income.
4. We find no force in the above contentions of Mr. Mehta, learned counsel for the department. The assessee was doing a halwai business andwas admittedly not a big businessman in such a trade. One of the members of the Tribunal accepted the explanation given by the assessee that it had merely accepted the estimated assessment made by the ITO for the reasons which have been properly explained. The learned Member also observed that the assessee agreed to a certain assessment proposed by , the ITO so as to avoid further disputes by way of appeals, penalties, etc , and such co-operation extended by the assessee in completing the assessment should not have been equated with a confession of concealment of income. It was also observed that the assessee had maintained such accounts as were possible and practicable in a business of this kind, and the department did not point out any manipulation of accounts or other indication of concealment of income. It was for the Tribunal to accept the explanation given by the assessee to be correct or not. In the facts and and circumstances of the case, if the explanation submitted by the assessee has been accepted by the Tribunal, it is a question of fact which lies within the discretion of the Tribunal and no question of law arises out of such discretion exercised by the Tribunal. It cannot be said that the opinion of the Tribunal in this regard was based on no evidence, or was against some statutory provisions of law.
5. In the facts and circumstances of the case, we find that the order of the Tribunal dated April 27, 1972, does not suffer from any defect. The question referred to above is thus answered in the affirmative. There will be no order as to costs as nobody has appeared from the side of the respondents before us.