P.D. Kudal, J.
1. The Income Tax Appellate Tribunal, Delhi Bench 'A' has submitted a statement of the case and has referred the following questions of law under Section 66(2) of the Income Tax Act, 1922, (hereinafter referred to as the Act):
Whether on the facts and in the circumstances of the case, the Tribunal was not right in disregarding the order of the Income-tax Officer dated 27th November, 1959 and in holding that the pro fit of Rs. 48,024/- credited in the accounts of eleven other persons was cot of the assesse.
2. The brief facts of the case are that the assessee was assessed for the year 1956 57, by the Income-tax Officer 'A' Ward Sri Ganganapar on 27/11/ 59 During the course of the assessment proceeding under Section 23(3) of the Income Tax Act, 1922, it came to the notice of the Income Tax Officer that the assessee firm has conceded its income in the shape of diversion of profits and as such a notice to show cause under Section 28(3) was served on 1st Dec 1959 as to why penalty be notimposed. The Income-tax Officer imposed a penalty of Rs. 20,000/- under Section 28(1)(c) of the Income Tax Act, on 27-6-1961. The assessee firm feeling aggrievec against this order of imposing of pen alty filed an appeal before the Appellate Assistant Commissioner of Income Tax, 'B' Range, Jaipur. The appeal filed by the assessee firm was dismissed on 24/3/65 by the Appellate Assistant Commissioner, Jaipur The assessee from then filed an appeal before the Income Tax Appellate Tribunal, Delhi This appeal was accepted by the Appellate Tribunal on 23/3/67. and the order of the Income Tax Officer dated 27/6/61 imposing a penalty of Rs. 20,000/ was set aside.
The Commissioner of Income Tax Rajasthan, Jaipur made a reference application under Section 66(1) of the Income Tax Act, 1922 before the Income Tax Appellate Tribunal, Delhi requesting it to state the case and refer the following questions of law which arise out of this order dated 23-31967:
1. Whether on the facts and in the circumstances of the case, the Tribunal was right in drawing an inference that the profit of Rs. 48,024/- credited in the accounts of eleven different parties did not belong to tbe assessee when the assessee itself had not challenged the inclusion of this amount in its assessment?
2. Whether on tbe facts and in tbe circumstances of the case, the Tribunal was right in holding that there was no concealment of income on the part of the assessee in respect of the amount of Rs. 48,024/- and in setting aside the order of penally of Rs. 20,000/-,
4. The Income Tax Appellate Tribunal, Delhi rejected this application on 20/7/1968 Feeling aggrieved by this order, the Commissioner of Income Tax Rajasthan, Jaipur submitted a reference petition to this Court under Section 66(2) of the Act This reference petition was allowed on 29th July, 1969 by the learned Division Bench of this Court. The Appellate Tribunal was directed to state the case and refer the following questions of law:
Whether on the facts and in the circumstances of the case, the Tribunal was not right in disregarding the order of Income Tax Officer dated 27th November, 1959 and in holding that the profit of Rs. 48,024/- credited in the account of the eleven other persons was not of the assessee?
5. In compliance of this order the Income Tax Appellate Tribunal, Delhi has stated the case, & referred the above mentioned questions or law to this Court by its order dated 8-1-1971.
6. On behalf of the petitioner, it was contended that the Income Tax Appellate Tribunal was not right in disregarding the order of the Income Tax Officer dated 27-11-1959 It was also contended that the assessee firm did not file any appeal against the said order dated 27-11-1959. It was also contended that no fresh or additional material was submitted before the Income Tax Officer by the assessee firm when the order of imposing penalty was passed on 27.6.61. It was also contended that the finding of the Income Tax Officer in his order dated 27.11.59 was a 'good piece of evidence', and the Income Tax Appellate Tribunal acted without jurisdiction and seriously erred in disregarding that finding It was contended that the question of law which his been referred by the Income Tax Appellate Tribunal is covered by the two questions of law, which were sought to be referred to by the applicant. It was also contended that it a different language has been used in referring this question of law, it would not amount that a totally new or different question of law has been referred which was not covered in the application under Section 66(1) of the Income Tax Act, 1922. It was also conteded that the courts have to look to the pith and substance of the matter rather than to go to mere technicalities of law, which may be enhance the ends of justice. It was also cont ended that the Income TAX Appeallate Tribunal, Delhi completely over-looked the evidence on record and ignored the finding of the Income-Tax Officer, and as such the order of the Income Tax Appellate Tribunal was without jurisdic tion.
7. On behalf of the aesessee firm it was contended that the question of law which has now been referred to, was not included in the petition under Section 66(1) of the Act. It was also contended that the Income Tax Appellate Tribunal was fully justified in re assessing the evidence which was led before the Income-tax Officer. It was also contended that the order of the Income Tax Appellate Tribunal suffers from no infirmity, as the evidence on record has been properly appreciated and evaluated. It was also contended that the finding of the Income-tax Officer dated 27.11.1969 looses all its importance when the entire evidence on the basis of which this finding has been based, has been screened and evaluated by the Income Tax Appellate Tribunal, it was further contended that under such circumstances, the finding of the Income tax Officer ceases to be a 'good piece of evidence' as contended by the learned Counsel for the applicant, It was further contended that where on the given set of circumstances a penalty should be imposed or not, on the assessee firm, is question of law on which no reference could lie before this Court. It was further contended that the jurisdiction on this Court under Section 66 of the Act is very limited and the present reference does not fall within that limited jurisdiction. It was also contended that there is no bar whereby the assessee firm can challenge the findings of the Income-tax Officer with regard to imposition of penalty when the original order of assessment has not been challenged. Under such circumstances, it was contended that this court may decline to answer the reference as no question of law arises. It was also cont ended that if the Income Tax Appellate Tribunal could not disregard the finding of the Income Tax Officer, then it would cease to be an Appellate Tribunal, and the question as has been referred doss not raise any substantive question of law.
8. The learned Counsel for the applicant has placed reliance on CIT. v. Indian Molasses Co. P. Ltd : 78ITR474(SC) , wherein it has been held that, 'The expression' question of law arises out of such order' in Section 66(1) is not restricted to only those questions which have been expressly argued and decided by the Tribunal. If a question of law is raised before the Tribunal, even if an aspect of that question is not raised, that aspect may be urged before the High Court.
9. In Common, of Inc. Tax v. Anawar Ali : 76ITR696(SC) , it was held that, 'Proceedings under Section 28 of the Income Tax Act, 1922, are penal in character. The gist of the offence under Section 28(1)(c) is that the aesessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the department to establish that the receipt of the amount in dispute constitutes income of the assessae. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes' his taxable income. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.
10. In Jethabhai Hirji & Co. v. Commr. of Income Tax, Bombay 27 ITR 533, it has been held that, It is for the High Court alone to indicate to the Tribunal what are the questions of law, and the only function of the Tribunal is, once a requisition is made upon of under Section 66(2), to formulate proper questions which arise out of those questions of law and to state a case which is germane to the questions of law indicated by the High Court. It would then be open to the Hah Court either to answer the questions formulated by the Tribunal or, it the High Court feels that the questions are not properly raised, to reframe the questions or modify the questions, and answer those questions as re-formulated or modied.
11. In Lal Chand Gopal Das v. Commr. of Income Tax : 48ITR324(All) , it has been held that there is no essential difference between tax and penalty. The liability for payment of both is imposed as a part of the machinery of assessment and penalty is merely an additional tax imposed in certain circumstances on account of the assessee's conduct. A taxing statute itself is required to be interpreted strictly like a penal statute and a provision imposing a penalty in a taxing statute is not to be interpreted differently from any other provision.
12. In C.A Abraham v. Income Tax Officer 41 ITR 224, it has been held that the Income Tax Act provides a complete machinery fur assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders pasted by the income tax authorities Tax-payer cannot be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he has adequate remedy open to him by way of an appeal to the Appellate Tribunal.
13. In Bai Velbai v. Commr. of Income Tax : 49ITR130(SC) , it was held that a finding of fact does not alter its character as one of fact merely because it is itself an inference from other basic facts, but a finding on a question of fact is open to attack under Section 66 of the Indian Income Tax Act, 1922, as erroneous in law when there is no evidence to support it of if it is perverse or has been reached without due consideration of the several matters relevant for such a determination.
14. In Commr. of Income Tax v. Smt. Annsuya : 68ITR750(SC) , it was held that the High Court is however not bound to answer a question merely because it is raised and referred. It is well settled that the High Court may decline to answer a question of fact or a question of law which is purely academic or has no bearing on the dispute between the parties or though referred by the Tribunal does not arise out of its order. The High Court may also decline to answer a question arising out of the order of the Tribunal, if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the tax power & the department. There is also no ground for restricting that power when by an erroneous order the High Court has directed the Tribunal to state a case on a question which does not arise out of the order of the Tribunal. At the hearing of a reference pursuant to an order falling upon the Tribunal to state a case the High Court is not bound to answer the question without considering whether it arises out of the order of the Tribunal whether it is a question of law or whether it is academic, unnecessary or irrelevant. Power to reframe a question may be exercised to clarify some obscurity in the question referred, or to pin point the real issue between the taxpayer and the department or for similar other reasons, it cannot be exercised for reopening an enquiry on question of fact or law which is closed by the order of the Tribunal.
15. In Commr. of Income Tax v. Scindia Steam Navigation : 42ITR589(SC) , it has been held as under:
Before the High Court the company for the first time raised the contention that the fourth proviso to Section 10(2)(vii) did not apply to the assessment as it was not in force on April 1, 1946, and the liability of the company had to be determined as on April 1, 1946, when the Finance Act, 1946 came into force A prelimilary objection was raised on behalf of the Commissioner of Income Tax that this question did not arise out of the order of the Tribunal within the meaning of Section 66 as it was neither raised before the Tribunal and dealt with by it nor referred to the Court The High Court overruled the objection on the ground that the form in which the question was framed was sufficiency wide to take in the new contention and the company was entitled to raise it even if that aspect of the question bad not been argued before the Tribunal, and held that the proviso was not retrospective in its operation, and was not in force on April 1, 1946, and, therefore, the sum of Rs. 9, 26, 532 was not liable to be included in the taxable income of 'he company for the assessment year 1946-47 On appeal to the Supreme Court, it was held that the High Court had jurisdiction to entertain the company's contention raised for the first time before it that the fourth proviso to Section 10(2)(vii) did not apply to the assessment; (per Das, Kapur, Hidayatullah and Venkatraman Aiyar, JJ.) as the contention was within the scope of the question as framed by the Appellate Tribunal and was really implicit therein.
It was further held that:
A question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with approaches leading a different points therein. Such a question might involve more than one aspect, requiring to be tackled from different stand points. All that Section 66(1) requires is that the question of law which is referred to the Court for decision & which the Court is to decide must be the question which was in issue before the Tribunal. Where the questing itself was under issue there is no further limitation imposed by the section that the reference should be limited to those as sects of the question which had been argued before the Tribunal, and it will be an over refinement of the question to hold that each aspect of a question is itself a distinct question for the purpose of Section 66(1) of the Act.
16. In Lakshminarayan Cotton Mills Co. Ltd. v. Commr. of Income Tax : 73ITR634(SC) , it has been that the correctness of an order of the High Court calling for a statement of case could be challenged at the hearing of the reference and the court could decline to answer the question referred pursuant to the direction of the High Court, if it did not arise out of the order of the Tribunal or was a question effect or was academic or could not have been raised because it was not incroporated in the application.
17. In Bhanji Bagwandas v. Commer. of Income Tax : 67ITR18(SC) , it was held that where the question referred to the High Court was whether on the facts and in the circumstances of the case, the assessment was saved from the bar of limitation under the second proviso to Section 34(3), on argument of the department raised before the Supreme Court that in answering that question the effect of Section 2 of the Income Tax (Amendment) Act, 1959, must be taken into consideration, was within the frame work of the question referred to the High Court, and it was therefore competent to the Supreme Court to allow that new contention to be raised.
18. On behalf of the non petitioner reliance has been placed on the following case laws : In C.I.T. v. Kaoday (sic) & Sons : 83ITR369(SC) , it has been held that the conclusion drawn by the Appellate Tribunal were all on findings of fact recorded against the department and on those findings no question of law arose for reference Penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assesses. Apart from falsity of the explanation given by the assesee, the department must have before it before levying penalty cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnish had inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt, the original assessment proceedings for computing tax may be good item of evidence n the penalty proceedings; but penalty cannot be levied sorely on the basis of the reason given in the original order of assessement.
19. In Rameshwar Prasad Bagla v. C.I.T. : 87ITR421(SC) , it hat been held as under:
The High Court in a reference under Section 66 of the Act could however, go into the question as to whether the conclusion of the Tribunal on a question of fact was based upon relevant evidence. If the High Court found that there was no such evidence to support the finding of fact of the Tribunal, that circumstances would give rise to a question of law and could be agitated in a reference. It was also well established that when a Tribunal acted on material which was irrelevant to the enquiry or considered material which was partly relevant and partly irrelevant or based its decision partly on conjuctures, surmises and suspicions and partly on evidence, then in such a situation as issue of law arose and the finding of the Tribunal could be interfered with.
20. In Commr. of Income Tax v. Gokuldas Harivallabhdas : 34ITR98(Bom) , it has been held that the assessment proceedings and penalty proceedings are criminal proceedings in their very nature; a decision or finding arrived at in the assessment proceedings is not binding on the authority who tries the assessee for an offence, It is perfectly open to the Income Tax Officer and the appellate Tribunal in the penalty proceedings to consider the hading arrived at in the assessment proceedings that a particular receipt constituted an income for a particular assessment year but they are not bound by that finding and where any other evidence is produced in the penalty proceedings it is open to them to come to a different conclusion.
21. In D.M Minaswi v. C.I.T. : 86ITR557(SC) , it has been held that on the facts, there was relevant material before the Tribunal to hold that the assessee had deliberately concealed the particulars of his income; there was not a case of inference from mere falsity of the explanation given by the assessee in the assessment proceedings but a case where there were definite findings that a device had been deliberately created by the assessee for the purpose of concealing his income.
22. In C.I.T. v. Mrs. Doris S. Luiz (sic) ITR 646, it was held that the penalty proceedings are distinct from assessment proceedings and are in the nature of quasi, criminal proceedings. Being quasi criminal proceedings the burden is on the department to prove positively concealment of income on the part of the assessee.
23. In C.I.T. v. Kotrika Venkataswamy & Sons : 79ITR499(SC) it has been held that if, on the materials and in the circumstances of the cases, the Appellate Tribunal reaches the conclusion that there was no suppression of sales by the assessee on the facts disclosed and no concealment of income was proved, no case can be referred to the High Court under Section 66(1) of the Income Tax Act, 1922, seeking to upset conclusion. The conclusion whether the Tribunal was justified in coming to the conclusion, on the facts and circumstances of the case, that no concealment was proved by the department, cannot include an enquiry whether the Tribunal had jurisdiction to reach a different conclusion from the one it had reached in the proceedings for assessment.
24. In Commr. of Income Tax v. Anwar Ali : 65ITR95(Cal) , it has been held as under:
Assessment proceedings may result in penalty proceedings but they are two distinct and separate proceedings and the former is not binding on the Income-tax authorities in the latter. Though the materials disclosed in assessment proceedings can be taken in consideration, they do not constitute res judicata. In penalty proceedings the the onus is upon the department to establish that the assessee is guilty of violation of the provisions contained in Section 28 of the Income-tax Act, 1922, and to prove that the assessee has concealed particulars of his income or deliberately furnished inaccurate particulars of such income. Though penalty proceedings are not 'criminal proceedings', they are 'quasi criminal' in nature.
25. In the instant case, the Appellate Tribunal was directed to state the case and refer the question of law, as indicated above, to this Court. The two questions, as contained in the application under Section 66(1), and also in the reference petition to this Court, under Section 66(2) of the Acs, did not specifically refer the question of law which has been directed by this Court to the Appellate Tribunna to state the case, and refer the same for decision But looking to the pith and substance of the matter, as contained in the pleedinds, it is evidently clear this the questions of law directed to be referred is not foreign to the pleadings of the parties. The High Court did frame the question of law to be referred in a different language; but it cannot be said that the said question of law was altogether a new, and that the partis were not a were of it. As a matter of fact, this question of law, though couched in a different language, has been aggravated right from the very beginning when the order of imposing the penalty was passed. Under such circumstance it cannot be said that the parties were taken by surprise or that this Court acted beyond its jurisdiction in directing the Tribunal to refer the aforesaid question of law to this Court. As has been held by their Lordships of the Supreme Court in the cases referred to above, this Court was quite competent to frame a question of law which arose from the pleadings of the parties, and from the order of the Tribunal. Having given our most anxious consideration to this is act of the case, w have no hesitation in holding that the question of law directed to the referred by the Tribunal was within the ambit and jurisdiction to this Court.
26. The assessment proceedings are quite distinct from the penalty proceedings. The penalty proceedings are quasi criminal in nature. A penalty can be imposed only when the assesses has consciously concealed his income, of has deliberately furnished inaccurate particulars, or has adopted a device for the purpose of a deliberate concealment of income, or for escapement from assessment . It is equality evident that an assesses may file an appeal only against the order of imposition of penalty, though he might not have filed any order of assessment. The order of assessing authority is 'a good piece of evidence', but it is not of a conclusive nature. The appellate Tribunal considered the evidence led by the assessee in the assessment proceedings and came to the conclusion that in the facts and circumstances of the case, the imposition of penalty on the assessee was not justified Whether a particular set of facts warranted an imposition of penalty or not is pure question of fact, in this case, the Tribunal having discussed the evidence led by the assessee, came to the conclusion that the order of imposition of penalty on the, assessee was not justified. The burden always lies on the Department to establish that the ass ease has consciously concealed his income, or has deliberatly filed false particulars, or has adopted a device with a view to avoid assessment of income which had, in fact, accrued to him. The accusation against the assessee was that he has shown false diversion of Income which actu lly accrued to him. Having considered the evidence, the Appellate Tribunal came to the conclusion that the Department; as not succeeded in establishing tie diversion of income by the assesses with a vie w to avoid inclusion of that income for assessment by conscious concealment, or by deliberate furnishing of inaccurate particulars. The learned Counsel for the applicant has strenuously argued that the appreciation of evidence of the assessee by the Appellate Tribunal is manifestly erroneous or grossly against the facts on record. We have carefully gene through the order of the Appellate Tribunal. It cannot be said that the Tribunal has not consigned the facts on record. The Tribunal appreciated the evidence on record, contrary to the appreciation of the facts by the assessing authority. As the Appellate Tribunal has considered the evidence on record, the finding of the assessing authority loose most of its probative value, because the very evidence on which that finding was based, has been evaluated. The finding of the assessing authority would remain 'a good piece of evidence', though not conclusive, when the evidence on which that finding is based is not evaluated. A court of reference will not substitute its own findings of fact in place of the finding of the Appellate Tribunal, however, profoundly it might disagree with the appreciation of evidence Appreciation of evidence is after all a question of fact and, unless the question of fact is based on absolutely no legal evidence, or the appreciation is capricious or arbitrary in nature, a court of reference has no jurisdiction to re-appreciate the evidence on record. We have also no hesitation in holding that the Appellate Tribunal had jurisdiction to appreciate the evidence on record, and in doing so, it could certainly disregard the findings of the assessing authority. If the Appellate Tribunal has no jurisdiction to disregard the fishing of the assessing authority, it would cease to function as an Appellate Tribunal.
27. In view of these circumstances of the case, the Appellate Tribunal had jurisdiction to disregard the finding of the assessing authority Having considered the evidence on record, the Tribunal came to the conclusion that the imposition of penalty on the assessee was not justified. This finding being a pure question of fact, cannot and does not call for any interference by this Court.
28. For the reasons stated above, the question of law referred to by the Tribunal is hereby answered in negative, and we order accordingly.