Commissioner of Income Tax vs Allied International Product Ltd.

Arijit Pasayat, C.J.—This is an appeal u/s 260A of the income tax Act, 1961 (''the Act'') . The revenue has questioned correctness of the order passed by the Tribunal, Delhi Bench ''SMC'' cancelling the penalty imposed u/s 271(1)(c) of the Act for the assessment year 1978-79. A detailed reference to the factual aspects would be necessary as the order of the Tribunal contains certain factual inaccuracies, which have to be clarified, as they have weighed with the Tribunal for arriving at its conclusions.

The assessee filed return of income declaring that it had no income for the year under consideration. However, the assessment was completed on a total Rs. 60,000. The addition had its foundation on the assessee''s declaration of five high denomination notes of Rs. 10,000 each under the High Denomination Bank Notes Demonetisation Ordinance, 1978 (''Ordinance'') . The said declaration was submitted on 19-1-1978. Thereafter a survey was conducted u/s 133A of the Act and statement of the secretary of the company viz. one Mr. Biranzai was recorded. Statement of Shri D.N. Sinha, Managing Director was also recorded on 19-12-1978. In his statement it was stated that the five notes were acquired by the company from the Bank of Tokyo and not from the Central Bank of India as was mentioned in the declaration form. The Assessing Officer verified the cash balance of the assessee at the branch and at the Head Office. It was found that only a sum of Rs. 4,355.50 was opening balance available on 17-12-1977. Cash balance was Rs. 9,808.32 at the Head Office as on 29-11-1977, 7-12-1977 and 20-11-1977 were the dates up to which the cash balances were struck. Therefore, it was concluded that the cash balance was not prima facie sufficient to explain source of acquisition of Rs. 50,000 representing five high denomination notes. Enquiries were made from the Central Bank of India, Muradabad. It was indicated by the said bank that it had not paid any note of high denomination to the assessee-company. Details of the cash receipts from 7-12-1977 to the date of declaration were also noted. All these cash receipts were from the Central Bank of India, Muradabad but no payment was made by the bank in the denomination of Rs. 10,000. Enquiry was also made from the Central Bank of India, Parliament Street, New Delhi. The said bank also indicated that no high denomination note was issued to the assessee. Thereafter as noted above, Shri D.M. Sinha gave a different version on 19-12-1978 stating that the money was exchanged from Bank of Tokyo, Bombay. A letter dated 6-7-1978 from the said bank was filed which supported the stand of the assessee that high denomination notes were issued to the assessee. However, when the Assessing Officer contacted the bank, it gave a different version vide letter dated 9-1-1979. It was indicated in the letter that Shri D.N. Sinha had called upon them in the first week of July, 1978 and handed over three letters dated 4-7-1978 addressed to the bank, one by himself and other two by Ms. Madhu Sinha and Ms. Anita Sinha asking confirmation in respect of eleven currency notes of Rs. 10,000 each stated to have been exchanged by the bank. Believing the contents to be true, letters were signed. But the bank had not issued any such currency notes to the assessee. Considering these aspects assessee''s explanation in the proceedings u/s 271(1)(c) were found to be untenable and penalty of Rs. 40,950 was levied. In appeal before the Commissioner (Appeals) , the levy was confirmed. Matter was carried in further appeal before the Tribunal by the assessee. Though various aspects were highlighted before the Tribunal what seems to have weighed with it to cancel the penalty is that the explanation of the assessee was rejected merely on the plea that the certificate was dated 9-1-1979 as against the declaration on 19-1-1978. As noted above, this is not a correct statement of the factual position. It is true that at one place the Assessing Officer had noted the date to be 9-1-1978, but that position is not clearly the actual position. In the orders passed by the revenue authorities it is manifest that the date of the letter of the Bank of Tokyo is 9-1-1979. In fact no certificate was filed by the assessee which is dated 9-1-1978. This also is impossible in view of the fact that the declaration was filed on 19-1-1978. As a matter of fact, the foundation of assessee''s claim was the letter issued by the Bank of Tokyo dated 6-7-1978. Above being the factual position, in our considered opinion, Tribunal has not kept in view the real factual position and was not justified in cancelling the penalty. We may note that there was submission made by the assessee before the Tribunal that Commissioner, Delhi-II had considered that there was no concealment or misrepresentation and the prosecution case was to be withdrawn. No material seems to have been placed before the Tribunal to test the correctness of the said stand.

It would be, therefore, appropriate if the Tribunal hears the matter afresh, permitting the parties to place materials in support of their respective stands and takes a fresh decision in the matter. We make it clear that we have not expressed anything on the merits of the case except nothing the factual details which are relevant, so far as the case is concerned.

The appeal is, accordingly, disposed of.