Commissioner of Income Tax vs Kundan Lal

J.V. Gupta, J.—In this reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the revenue, by the Income Tax Appellate Tribunal (Amritsar Bench), Amritsar, the following question of law has been referred:

"Whether, on the facts and in the circumstances of the case, for the purpose of levy of penalty u/s 273(1)(b), the total income determined should be the criteria or the total income which the assessee sought to be his income per his account books ?"

For the assessment year 1964-65, the assessee, Shri Kundan Lal, proprietor of M/s. Janta Trading Company, Pathankot, declared a loss of Rs. 339. The ITO, however, completed the assessment on a total income of Rs. 53,690. The additions made to the total income of the assessee included the additions of Rs. 30,000 and Rs. 20,000 on account of unexplained cash credits in the names of M/s. Madhavji Finance Private Ltd., Delhi, and M/s. Gopaldas Manohar Lal, Delhi, respectively. The addition of Rs. 50,000 was sustained by the Income Tax Appellate Tribunal, Chandigarh, in I.T.A. No. 140 of 1969-70.

Since the total income of the assessee as determined by the department, exceeded the maximum amount not liable to tax by over Rs. 2,500 and since the assessee had not filed the estimate of advance tax in accordance with the provisions of Section 212(3) of the Act, the ITO initiated penalty proceedings and, in due course, levied a penalty of Rs. 6,000 on the assessee u/s 273(1)(b) of the Act. On appeal, the AAC upheld the legality of the penalty order but reduced the amount of penalty to the minimum imposable under the law. On second appeal, the Income Tax Appellate Tribunal, Chandigarh, deleted the penalty. The Tribunal took the view that " we are of the view that for filing of an estimate of income u/s 212(3), the income which should form the subject-matter of an estimate should be of an undisputed nature When the nature of the income is disputed by the assessee, the assessee is not under an obligation to file an estimate within the meaning of Section 212(3) ".

After hearing the learned counsel for the revenue, we are of the opinion that this approach of the learned Tribunal is not correct. The statutory requirement is that if the assessee has furnished an estimate under any of the sub-sections of Section 212, which he knew or had reason to believe to be untrue, he would be liable to a penalty u/s 273 of the Act. Penalty may be imposed u/s 273 for deliberately furnishing an untrue estimate. If the assessee had made an honest and fair estimate, no penalty could be imposed. No such finding has been recorded by the Tribunal in its order dated 14th May, 1971. Under the circumstances, it is not possible to answer the question referred to this court. All that we can do is either to call for a supplementary statement from the Tribunal or to remand the case for a fresh hearing. As observed earlier, the Tribunal has completely misdirected itself as to the question of fact to be decided. Therefore, it will be in the interest of the parties to remand the case to the Tribunal, and to decide the case afresh in accordance with law. We order accordingly. Since there is no appearance on behalf of the assessee, we pass no order as to costs.

Bhopinder Singh Dhillon, J.

I agree.