Commissioner of Income Tax vs Badrilal Chaturbhuj

This reference application at the instance of the Revenue u/s 256(2) of the Income Tax Act, 1961, has been filed seeking opinion of this court on the following questions :

"1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is legally justified in cancelling the penalty u/s 271(1)(c) even after giving clear finding that the assessee made a punishable default u/s 271(1)(c) ?

Whether, the Income Tax Appellate Tribunal is justified in cancelling the penalty u/s 271(1)(c) on the ground that under similar circumstances no penalty was levied in the case of a sister concern ?"

In the proceedings u/s 271(1)(c) of the Income Tax Act, a penalty of Rs. 19,320 was levied. The Commissioner of Income Tax confirmed the penalty. The Income Tax Appellate Tribunal held that out of the total addition of Rs. 29,267, penalty was rightly imposed on Rs. 24,267 but the addition of the balance of Rs. 5,000 did not merit imposition of any penalty. The Tribunal found that on the assurance given by the Department to the effect that no penalty shall be levied, if the appeal was withdrawn by the assessee and also the fact that a similar treatment was given to the sister concern, no penalty could be levied.

It is contended by Mr. Sandeep Bhandawat, learned counsel for the Revenue, that there cannot be any estoppel against the statute. It is submitted that even in the case of admission by the assessee, the question of cancellation of penalty is a question of law. Learned counsel has placed reliance on a Division Bench judgment of this court in Rasoolji Buxji Vs. Commissioner of Income Tax, Learned counsel has also placed reliance on a decision of the Delhi High Court in Tube Fabrico (I.) Ltd. Vs. Commissioner of Income Tax, Mr. Bhandawat also placed reliance on a decision of the apex court in , wherein the apex court held that on setting aside the penalty on the ground that the same income was assessed as income of another firm, the question whether the Tribunal could do so in view of the statutory presumptions rests on question of law.

On the other hand, Mr. Kothari has placed reliance on a judgment of the Division Bench of the Punjab and Haryana High Court in CIT v. Jaswant Rai, wherein it is held that the finding of the Tribunal that the assessee agreed to addition to buy peace of mind and to avoid litigation on an understanding and assurance that no penalty would be levied, though the entire amount did not relate to the assessment year in question is a finding of fact. Learned counsel has also relied on a judgment of this court in Commissioner of Income Tax Vs. H.M. Lalwani, to which one of us was a party (Mr. N.N. Mathur J.), wherein it is held that penalty u/s 140A(3) gives discretion to the Assessing Authority to inflict or not to inflict penalty.

We have considered the rival contentions. The case referred to by learned counsel decided by the Punjab and Haryana High Court reported in CIT v. Jaswant Rai is more close to the facts of the instant case. A reading of the order of the Income Tax Appellate Tribunal particularly paras. Nos. 20 and 22 clearly shows that the respondent-assessee agreed for the addition and then had withdrawn the appeal to buy peace of mind and to avoid litigation on a clear understanding given by the Revenue that no penalty would be levied. The said finding is a finding of fact. Thus, in our opinion, no referable question arises. Hence, the reference application is rejected.