1. Application under Section 256(2) of the Income-tax Act, 1961, against the order dated January 31, 1976, passed in R.A. No. 36/JP/1975-76, has been filed before this court by the assessee. Learned Tribunal refused to refer some of the questions prayed for arising out of the appellate order dated May 25, 1975, in Income-tax Appeal No. 122/JP/1974-75.
2. The brief facts of the case are that in the assessment year 1966-67, the assessee firm filed its return of income on August 29, 1969, showing a total taxable income of Rs. 50,720.59. During the assessment proceedings, the Income-tax Officer made some queries and directed the petitioner-assessee to disclose the details and also to show the reasons on which he claims the deduction of the loss incurred out of the income of the firm. Placed in this situation, the assessee filed a revised return for the assessment year 1966-67 on August 25, 1970, showing a total income of Rs. 1,63,370.59. The difference between the original and the revised return arose on account of the exclusion of two debit entries of Rs. 82,393 loss on account of speculation in alsi, and (ii) Rs. 5,000 on account of loss in gram, palwal and also on account of right adjustment of provision for bonus payable of the relevant year. On January 20, 1971, the Income-tax Officer made a reference under Section 274 of the Income-tax Act, 1961, to the Inspecting Assistant Commissioner. The grounds on which reference was made and recorded by the Income-tax Officer which were as follows :
'In this case, return was originally filed on August 29, 1969, declaring an income of Rs. 50,720. During the course of examination of accounts, it wasnoticed that the assessee has claimed full deduction in respect of bonus whereas the bonus admissible as per rules ought to have been claimed.
It was further noticed that the speculation losses were also added back in the return. The assessee has, therefore, filed a revised return declaring an income of Rs. 1,63,370.
As the assessee did not disclose truly and materially all the facts in the original return, there are reasons to believe that he has concealed the particulars of income which he subsequently disclosed in the revised return.'
3. A notice under Section 274/271 dated January 20, 1971, was issued by the Income-tax Officer to the assessee and also, vide its despatch No. 3887-3888, dated January 21, 1971, A letter dated February 15, 1971, was also addressed by the Income-tax Officer to the Inspecting Assistant Commissioner, Jaipur Range-II, Jaipur, whereby he drew the attention of the Inspecting Assistant Commissioner to his earlier communication dated January 20, 1971. On receipt of this letter from the Income-tax Officer, the Inspecting Assistant Commissioner took cognizance of the matter and issued to the assessee a show-cause notice under Section 274(2) read with Section 271 of the Income-tax Act, 1961, on February 19, 1971. The assessment was completed finally on March 25, 1971, on a total income of Rs. 1,72,800. In the body of the assessment order, the Income-tax Officer made the following observations :
'The assessee was requested, vide this office letter dated 23/25-3-1970, to furnish certain information relating to bonus shown as well as loss claimed in alsi account, etc. The assessee immediately on receipt of this letter filed a revised return on 24-9-1970 declaring an income of Rs. 1,63,370. It is, therefore, abundantly clear that the assessee filed revised return after adding back amounts in respect of bonus which was wrongly allocated by him as well as the losses in gram, palwal and alsi account, which he formerly indicated as losses of ready business. The assessee, therefore, definitely concealed the particulars of income and penalty proceedings with the prior approval of the Inspecting Assistant Commissioner had been duly initiated by issue of notice dated February 19, 1971, by the Inspecting Assistant Commissioner and on February 15, 1971, by the Income-tax Officer.'
4. Penalty proceedings were initiated for concealing the particulars of income on January 17, 1983 (sic). Reply to the show-cause notice was submitted by the assessee to the Inspecting Assistant Commissioner. It was explained in the said letter that at the time of filing the original return, certain clerical mistakes had crept in while calculating the total income and, therefore, the assessee had filed a revised return of income on September 24, 1970, declaring an income of Rs. 1,63,370. It was also submitted that the four partners, ladies and males, are working outside. The Tribunal held that the assessee is guilty of concealment of the particulars of income with regard to the loss in speculation only and notwith regard to the excess debit in the bonus account, the quantum of penalty will stand reduced to Rs. 87,293 which is the minimum under the provisions of the Act as it stood on April 1, 1968. An application for making a reference to the High Court for opinion was submitted by the assessee before the Tribunal. The Tribunal partly accepted the application and referred the question to this court for opinion. The questions referred by the Tribunal are as under :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of the Inspecting Assistant Commissioner, imposing penalty on January 18, 1974, had not become time-barred, as the limitation for passing the order by the Inspecting Assistant Commissioner in this present case, on the basis of the penalty proceedings, initiated by the Income-tax Officer, vide his notice dated January 20, 1971, would be governed by the provisions of Section 274(2) of the Income-tax Act, 1961, as amended with effect from April 1, 1971 ?'
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty proceedings in the present case would not be governed by the law in force in the assessment year 1966-67, but by the law as obtained with effect from April 1, 1968 ?'
5. The applicant being aggrieved by the order relating to the other questions submitted this application before this court and submitted that the Tribunal may be directed to refer the following questions for the opinion of this court:
'1. Whether the Tribunal was right in law in holding that not adding back the amount of loss arising to the assessee in speculative transaction to the commercial profits disclosed in his books for the purpose of assessment was tantamount to concealment of income or furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act ?
2. Whether the Tribunal was right in law in holding that not adding back the amount of loss arising to the assessee in speculative transaction to the commercial profits disclosed in his books for the purpose of assessment was an act by which the assessee could be deemed to have concealed the income within the meaning of the Explanation to that section ?
3. Whether the finding of the Tribunal that the assessee has concealed income or furnished inaccurate particulars of its income and also simultaneously finding that he is deemed to have concealed income within the meaning of the Explanation to that section are legally consistent and not contradictory by themselves vitiating the entire order ?
4. Whether the assessee, on the facts and in the circumstances of the case, had failed to raise probabilities in his favour so as to repeal the charge that he did not discharge the onus which lay upon him to establish that the difference between the total income assessed and the income returned did not arisefrom any fraud or any gross or wilful neglect on his part within the meaning of Explanation to Section 271(1)(c) ?
5. Whether initiation of the penalty proceedings was valid in view of the fact that the Income-tax Officer did not initiate the penalty proceedings on his own accord but did so only after consulting the Inspecting Assistant Commissioner of Income-tax ?
6. Whether the learned Inspecting Assistant Commissioner could hold the assessee guilty of the charge of not discharging the onus cast under the Explanation to Section 271(1)(c) when the Income-tax Officer has categorically stated that the charge against the assessee was of concealment of income ?
7. Whether the assessee's failure to add back the speculation loss amounted to concealment of particulars of income or of submission of inaccurate particulars thereof ?
8. Whether, on the facts and in the circumstances of the case, the learned Inspecting Assistant Commissioner could have imposed a penalty on the assessee by holding that the latter has failed to discharge the onus cast under the Explanation to Section 271(1)(c) ?
9. Whether the learned Income-tax Appellate Tribunal was justified in holding in law that the charge of concealment of income covers also the charge of furnishing of inaccurate particulars of income ?
10. Whether the Income-tax Appellate Tribunal could, after categorically holding that the error is one which borders on the verge of wilful negligence or inadvertence, hold the assessee guilty of offence under Section 271(1)(c) ?
11. Whether the learned Inspecting Assistant Commissioner had jurisdiction to pass the penalty order on January 13, 1974, when the penalty proceedings were started by issue of notice dated February 15, 1971 ?
12. Whether there was any material before the Hon'ble Tribunal to hold that the assessee was guilty of the charge of concealment of income in view of the particulars given in the original return as supplemented by the revised return ?
13. Whether the penalty proceedings should be governed by the law in force in the assessment year 1966-67 or the law at the time of filing of return and whether any amendment to that law after riling of return could be made applicable to penalty proceedings ?
14. Whether the amendment of law with effect from April 1, 1971, which dealt with jurisdiction as well as time-limit for completion of assessment had the effect of extending the time limit in the cases of proceedings pending on the date of the amendment ?
15. Whether the facts that the computation of assessable income and the preparation of the return which was entirely the duty of the accountant of thefirm which had four lady partners and only one male partner residing in Calcutta was not enough to establish that there was no contumacy in the conductof the assessee ?'
6. It was submitted at the Bar that questions Nos. 11, 13 and 14 fall within the purview of the questions referred by the Tribunal and, as such, learned counsel for the petitioner assessee does not press for these questions.
7. As far as question No. 1 is concerned, the Allahabad High Court took the view that adding back the amount of loss arising to the assessee in speculative transactions to the commercial profits disclosed in his books for the purpose of assessment is liable to tax. However, the Supreme Court, vide its judgment in CIT v. Jagannath Mahadeo Prasad : [1969]71ITR296(SC) , reversed the judgment of the Allahabad High Court and held that the amount of loss arising to the assessee in a speculative transaction to the commercial profits disclosed in his books, is not liable to tax. Counsel for the petitioner submits that there was a bona fide belief and the petitioner acted bona fide. It was further submitted that ordinarily, every assessee cannot refer to the law laid down by the Supreme Court and, as such, under a bona fide belief, such mistakes can be committed by assessees. He further submits that it does not fall within the purview of gross negligence or wilful default and, as such, penalty, cannot be imposed, adding back the amount of loss arising in a speculative transaction to the commercial profits on the basis of bona fide belief cannot be said to be concealment of income or furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act. Learned counsel for the petitioner has also cited before us some cases to show that in the matter of imposition of penalty, considerations are altogether different and in every case of non-disclosure or no proper disclosure of the details of the income, expenditure or any other items in the return, penalty cannot be imposed as a rule. The Tribunal, while disposing of the application, has discussed in detail the submissions made by the assessee-petitioner. The Tribunal held that in the instant case, the facts on record clearly go to show that the Income-tax Officer had initiated penalty proceedings and the assessee did not disclose truly and fully all the facts in his original return. This was the reason recorded by him in his order dated January 20, 1971. It was also held by the assessing authority that the assessee had concealed the particulars of his income and in the notice served, the grounds of concealment of income and furnishing of inaccurate particulars of income have been mentioned.
8. The Tribunal, after examining the rival contentions of the parties and submissions made in the application, held that the contention that the Income-tax Officer has not made up his mind at the time of issuing the notice is not correct The Tribunal also held that the note which it had sent to the Inspecting Assistant Commissioner communicating matter of which he was making referenceclearly go to show that the Income-tax Officer was clear in his mind on the facts of the case and that on that basis, he had said that he had reasons to believe that the assessee had concealed particulars of its income. The initiation off penalty proceedings under Section 271(1)(c) by the Income-tax Officer was, therefore, in our opinion, valid. It will not be out of place here to mention that the Income-tax Officer has referred the case to the Inspecting Assistant Commissioner on January 20, 1971. He made up his mind and when he found that he was not in a position to impose penalty as the jurisdiction lay with the Inspecting Assistant Commissioner, he referred the matter. Learned counsel for the petitioner has invited our attention to the order passed by the Income-tax Officer. The Income-tax Officer in the order has said that the assessee, therefore, definitely concealed the particulars of income and the penalty proceedings with the prior approval of the Inspecting Assistant Commissioner had been duly initiated by the notice dated February 19, 1971, by the Inspecting Assistant Commissioner and February 15, 1971, by the Income-tax Officer. This order is dated March 25, 1971. A reference about the word 'approval' is not an inconsistency though the word has not been properly used. In fact, there was a reference on January 20, 1971, and no further proceedings have been taken by the Income-tax Officer, only he reminded, vide his letter dated February 15, 1971, to the Inspecting Assistant Commissioner about his earlier letter dated January 20, 1971, by which he had requested the Inspecting Assistant Commissioner to take the matter on hand. As far as question No. 1 submitted by the petitioner assessee is concerned, we are of the view that the Tribunal has rightly rejected the prayer of the petitioner for referring this question. The Tribunal has given a detailed order and we need not repeat the same here. We are in conformity with the view taken by the Tribunal in this matter.
9. As far as question No. 2 is concerned, it was submitted by the assessee that the Tribunal has raised a presumption of concealment under the Explanation to Section 271(1)(c) and no notice under Section 271(1)(c) read with Explanation was given to the assessee. A notice was only given under Section 271(1)(c) of the Income-tax Act. It was also submitted that the provision of the Explanation to Section 271(1)(c) is not attracted. Explanation is a part of the main section and the Explanation clears the ambiguity, if any, in the main section. The Explanation cannot be read in isolation. The intention of adding the Explanation is that if anything is not clear in the main section, then it should be made clear by adding the Explanation. For the purpose of taking any action or for the purpose of interpreting any law, the foundation is the main section and the Explanation is a subordinate part for the purpose of arriving at a particular conclusion in the matter of interpretation of the statute. It will not be out of place here to mention that the aid of the Explanation can be taken and it is not necessary to refer the Explanation in the notice issued. The Tribunal while rejecting the application of the present petition has discussedalso this question in detail in its order. We would not like to repeat the same. We are in full conformity with the view taken by the Tribunal as far as this question is concerned.
10. As far as question No. 3 is concerned, learned counsel for the petitionerhas submitted that question No. 3 is squarely covered by questions Nos. 1 and 2and he has not pressed this question.
11. As far as questions Nos. 4, 7 and 8 are concerned, learned counsel for the petitioner has taken them together and the Tribunal has also taken them in a similar way. One of the important grounds for the refusal to refer questions Nos. 4, 7 and 8, referred by the petitioner, is that the question involved in the said questions is a question of fact and the same cannot be referred. No substantial question of law is involved in these questions. The Tribunal while rejecting the reference of these questions in its order has stated as under :
'The question whether there is concealment of income or not, is purely a question of fact. Similarly whether or not the burden which in terms of the Explanation was on the assessee has been discharged or not is also a question of fact. The questions framed by the assessee seeking to refer these two aspects of the case are, therefore, in our opinion, pure questions of fact, in whatever manner they might have been worded, and, therefore, we would not be in a position to refer them for the opinion of the Hon'ble Court.'
12. Question No. 4 relates to the fact that the petitioner-assessee did not discharge the onus which lay upon him. It is the duty of the assessee to show that any particular fact mentioned in the return inadvertently is not because of wilful neglect or fraud. The burden of proof lies on the assessee to disprove the fact of wilful neglect. In the instant case, the assessee has come with a case that there were five partners out of whom four are ladies and the accountant prepared the return and the partner signed them without knowing the details and the consequences of the statements made therein. In every case, such a plea can be raised. It is for the assessee to prove that it is not a case of wilful neglect, but it is because of inadvertence. The finding that whether it is a case of wilful neglect or fraud is a finding of fact and no question of law is involved in it. It may be said that in some cases where there is no evidence to the contrary, but any perverse view is taken by the Tribunal, then this court has a jurisdiction to take the matter on hand as it may amount to a question of law on the ground that it is a case of no evidence. Appreciating and apprising the material facts which are on record, however, it can be said that drawing an inference on the basis of the admitted facts may be a question of law. The Tribunal below has already held on the basis of the material on record that the Inspecting Assistant Commissioner was justified in holding that it is a case of wilful neglect and the Tribunal has taken a view that it is a question of fact and no question of law isinvolved and it cannot be said that the view taken by the Tribunal is bad in law. We are in conformity with the view taken by the Tribunal.
13. As far as questions Nos. 7 and 8 are concerned, the Tribunal has given similar finding in both these questions. The Tribunal, taking into consideration question No. 4, has held that no question of law is involved in it and it is a pure and simple matter of fact. We are in conformity with the view expressed by the Tribunal in its detailed and reasoned order and it is not necessary to repeat the same again.
14. We do not find any force in the submissions made by learned counsel for the petitioner in the matter of questions Nos. 4, 7 and 8 and the prayer for issuance of the direction is rejected.
15. As far as question No. 5 is concerned, we have already given the history earlier stating that the Income-tax Officer on January 20, 1971, made up his mind that it was a case of concealment and wilful neglect and also of giving inaccurate particulars in the return. He made a reference to the Tribunal on the same day and also issued a notice to the Inspecting Assistant Commissioner. There is no question of getting an approval only inadvertently. The words 'approved by the Inspecting Assistant Commissioner' finds place in the order passed in the month of March, 1971. The Inspecting Assistant Commissioner issued a notice to the assessee on February 19, 1971, heard the assessee and decided the case of penalty. No question of law is involved in question No. 5. The Tribunal has also discussed this point in the detailed order while rejecting the application for reference on this question. We are in full conformity with the view expressed by the Tribunal. We would not like to repeat them again in this order.
16. Question No. 6 also does not find favour with us. Section 271(c) of the Income-tax Act can be divided into two parts--(i) concealment of income and (ii) inaccurate particulars of such income given in the return. These parts have to be read as one section and any one of the ingredients may be the cause for the imposition of penalty. One may treat concealment to be one part and the same part can also be considered in some respects as a matter of furnishing inaccurate particulars. Both the parts may be overlapping in some cases. Both the parts have been used distinctly but, at the same time, the intention of the Legislature should be considered and one case may fall within the purview of both the parts also. We agree with the view taken by the Tribunal in this matter and we need not repeat the reasons given by the Tribunal for this view.
17. As far as question No. 9 is concerned, it was not pressed.
18. As far as question No. 10 is concerned, the words 'borders on the verge of wilful negligence' have been used in the order in a different context. Even if it is said that it is a border case, it becomes a question of fact also and it cannot besaid that being a border case, the view taken by the Tribunal is perverse. Learned counsel fur the petitioner has submitted that the Tribunal has itself taken it as a case bordering on negligence and, as such, the Tribunal was not justified in imposing the penalty and was not also competent to do so. As far as the question of competence and jurisdiction is concerned, the Tribunal was competent to do so and the Tribunal had the jurisdiction in the matter. Even if it is assumed that it is a borderline case, it cannot be said that it was not a case for imposing penalty, especially when a minimum penalty has been imposed which is imposable under the law. We are in conformity with the view taken by the Tribunal in this matter and, as such, we need not express our opinion in detail. The revised return and the original return have to be considered for the purpose of penalty in a different way. If there is a voluntary disclosure by filing a revised return, it may be a case in which the party may submit that the question of wilful neglect does not arise at all. But, in a case where there are queries and queries by the Tribunal or the authority concerned and the party discloses the same facts on the directions of the assessing authority and subsequently files a revised return, the party cannot escape the liability for penalty by filing a revised return because it cannot be said that it is a wilful act of filing a revised return but it can be said that it is an act under compulsion as the matter has come out and the party is filing the revised return for taking a defence in anticipated proceedings of penalty. The matter has been discussed at length by the Tribunal and we need not repeat the same.
19. It was submitted that questions Nos. 11, 13 and 14 are covered by the reference made by the Tribunal and, as such, these questions have not been pressed in this application. There are some materials before the Tribunal and it cannot be said to be a case of no evidence and it is not necessary to direct the Tribunal to refer question No. 12 as suggested by learned counsel for the petitioner.
20. As far as question No. 15 is concerned, it is also a question of fact and it is for the Tribunal to see how things are appreciated and apprised in the facts and circumstances of the case and no question of law is involved in it also.
21. For the reasons mentioned above, we are of the view that it is not necessary to direct the Tribunal to refer the questions referred by the petitioner in his application under Section 256(2) of the Income-tax Act. The application is disposed of accordingly. There is no order as to costs.