1. The question of law we are asked to consider in this tax case is as follows:
'Whether, the Appellate Tribunal's finding that the assessee was not guilty of concealment of income within the meaning of s. 271(1)(c) read with the Explanation thereto is based on relevant materials and is a reasonable view to take on the facts of the case ?'
2. The assessee in this case is a Lady belonging to the Nattukottai Chettiar community. For the assessment year 1967-68, she returned a total income of Rs. 2,764 disclosing, among other items of income, interest on deposits. The assessment was completed under s. 144 of the I.T. Act, 1961. Subsequently, the assessment was reopened, and the total income was determined at Rs. 48,170. The difference between the figure as originally assessed and the figure at which the subsequent assessment was made for the same year represented what, according to the ITO, was income from certain unexplained investments of the assessee. The assessee appealed against this assessment. The AAC reduced the addition made by the ITO and sustained it to the extent of Rs. 20,400 as against Rs. 45,401. The order of the AAC reducing the estimate was sustained by the Tribunal in further appeal.
3. In parallel proceedings taken by the authorities for levy of penalty under s. 271(1)(c) of the I.T. Act, 1961, the IAC invoked the Explanation to s. 271(1)(c) of the Act. He observed that the assessee was not in a position to how that her disclosing a figure of income less than that which was ultimately brought to assessment was not due to wilful neglect or fraud on her part. On this basis, he levied a penalty of Rs. 20,400, which was equivalent to the amount which was ultimately sustained in the appeal against the assessment.
4. The assessee appealed against this order to the Tribunal contending that there was no material in support of the finding that to the extent of Rs. 20,400 the assessee had concealed her income. It was further urged that, in the circumstances of the case, the IAC ought not to have invoked the Explanation to s. 271(1)(c) of the Act. Both these contentions were accepted by the Tribunal. The Tribunal observed that it was always the case of the assessee that she had obtained Rs. 40,000 by way of stridhan in 1944 representing the funds realised from Burma Rs. 5,250 as funds realised from Ceylon and Rs. 13,500 as representing the amounts received by her as mamiar samans being given to her at the time of the marriage of her two sons in 1952 and 1958.
5. The assessee's further explanation before the authorities was that these monies were lent by her at interest at the rate of 3 per cent. per annum, and both the principal and interest had gathered muster during all these years subject to personal drawings every year from 1944 onwards. It was urged that even after allowing for personal drawings, there was a balance of Rs. 82,230 which was available to her.
6. Examining these representations regarding the availability of resources, the Tribunal recorded a finding that, to the extent of at least Rs. 58,750, there was no dispute that the assessee had sources of money available to her. Indeed, it was on this basis that in the appeal against the relevant assessment, the AAC had restricted the addition to Rs. 20,400 as against Rs. 43,463 added by the ITO. After referring to this feature in the determination of the assessee's income, the Tribunal pointed out that even this figure of Rs. 20,400 must be regarded only as having been based on the AAC's estimate as to the quantum of unexplained resources with the assessee.
7. According to the Tribunal, the fact that an estimate of income was made in the assessment on the basis of unexplained resources cannot be the basis for the levy of penalty. The Tribunal further held that the fact that the assessee's explanation as to the origin or availability of funds was rejected either in part or in whole in the assessment proceedings, cannot be a ground for holding that she furnished inaccurate particulars of income. In these circumstances and having regard to the fact that the assessee belonged to the Nattukottai Chettiar community which was noted for its thrift, the Tribunal held that the penalty levied by the IAC in the sum of Rs. 20,400 was not based on any evidence of actual concealment of income. As for the reliance placed by the IAC on the Explanation to s. 271(1)(c) of the Act, the Tribunal held that there was no evidence of fraud or gross or wilful neglect in not disclosing the amount of Rs. 20,400. Such a finding cannot be come to, merely because the assessee's estimate on the size and resources was not accepted by the Department. On the basis of the reasoning aforesaid, the Tribunal cancelled the penalty and held that s. 271(1)(c) of the Act was not attracted in this case.
8. In this reference at the instance of the Department, the conclusion of the Tribunal is questioned as being erroneous in the sense that it was not based on any relevant material, nor was it based on a reasonable view of the facts. We have already summarized the reasoning of the Tribunal and the materials on the basis of which the Tribunal had expressed its conclusion that there was no evidence of concealment in this case. We do not think that the materials which have been relied on by the Tribunal are farfetched or irrelevant to the point at issue. Nor can we bring ourselves to say that on the facts found, no reasonable Tribunal properly instructed in the law could have come to this conclusion which this Tribunal has come to. Our answer to the question of law, therefore, must be in the affirmative and against the Department. The reference is accordingly answered in the assessee's favour. The Department will pay the assessee's costs. Counsel's fee Rs. 500.