Commissioner of Income Tax vs S.T.I. Biplus Tubing (India) Ltd.

In compliance with the order dated April 24, 1996, passed in M. C. C. No. 492 of 1993, the Income Tax Appellate Tribunal, Indore Bench, has sent a statement of the case and the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the ratio of the judgment of the Madhya Pradesh High Court in the case of Commissioner of Income Tax Vs. Jaora Oil Mill, is applicable to the case of the assessee though the said decision relates to an assessment year when the penalty for concealment was linked with the amount of income concealed and not with the amount of tax ought to he evaded ?"

The brief facts of the case are that the assessee-company filed the return of income declaring the loss of Rs. 3,00,93,187 and the assessment was completed at a loss of Rs. 2,85.159. The assessee has claimed investment allowance of Rs. 1,23,71,486. On the queries made by the Assessing Officer, the assessee revised the return of income and claimed investment allowance of Rs. 1,09,58,055. In the process, the assessee withdrew the excess claim of deduction to the extent of Rs. 14,84,431. The Assessing Officer found concealment of particulars of income and furnishing inaccurate particulars of income and accordingly levied a penalty of Rs. 14,84,100. The assessee, being aggrieved by the same, preferred an appeal before the Commissioner of Income Tax (Appeals), who affirmed the finding of the Assessing Officer with regard to concealment but reduced the penalty to the minimum, i.e., Rs. 7,42,050. The assessee did not feel satisfied with the order of the Commissioner of Income Tax and had taken the matter before the Income Tax Tribunal, Indore Bench.

On consideration of the materials, the Tribunal found that "simply because a claim not tenable in law has been made, one cannot be permitted to jump to the positive conclusion that all was deliberate." Accordingly, it held that "where there is no positive evidence of wilful concealment, no penalty can be levied." Accordingly, it set aside the order of the Assessing Officer as also the Commissioner of Income Tax whereby the penalty was levied.

Mr. Jain appears on behalf of the Revenue whereas, Mr. Choudhary appears on behalf of the assessee. Mr. Choudhary points out that the finding of the Tribunal that there is no concealment by the assessee has become final and as the Revenue has not sought any reference on the said question, our opinion on the question as to whether concealment is to be linked with the amount of income concealed or the amount of tax sought to be evaded is academic in nature. Thus, according to learned counsel, we are not obliged to answer the question. Mr. Jain, however, appeals to us to render opinion on the question directed to be sent by the Tribunal u/s 256 of the Income Tax Act. He does not seriously dispute that the question sent for our opinion is academic in nature but he contends that once the reference has been made, the same deserves to be answered.

Having appreciated the rival submission, we are of the opinion that the question of imposition of penalty shall arise only when it is found that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In the present case, the finding of the Tribunal is that the assessee has not concealed the income or the amount of tax and hence whether concealment is to be linked with the amount of income concealed or the amount of tax sought to be evaded is academic in nature. Once it is held so, the next question which falls for determination is as to whether the statement of case and question if once called for by this court, the same is to be necessarily answered notwithstanding the fact that the question is academic in nature. This question came up for consideration before the Supreme Court in the case of Commissioner of Income Tax, West Bengal, Calcutta Vs. Smt. Anusuya Devi, , in which it has been held as follows (page 756) :

"We find it difficult to uphold that view of the Calcutta High Court that, if an order is passed by the High Court calling upon the Tribunal to state a case on a question which does not arise out of the order of the Tribunal, the High Court is bound to advise the Tribunal on the question even if the question does not arise out of the order of the Tribunal. The High Court may only answer a question referred to it by the Tribunal : the High Court is however not bound to answer a question merely because it is raised and referred. It is well settled that the High Court may decline to answer a question of fact or a question of law which is purely academic, or has no bearing on the dispute between the parties or though referred by the Tribunal does not arise out of its order. The High Court may also decline to answer a question arising out of the order of the Tribunal, if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the taxpayer and the department. If the power of the High Court to refuse to answer questions other than those which are questions of law directly related to the dispute between the taxpayer and the department, and which, when answered, would determine qua that question the dispute, be granted, we fail to see any ground for restricting that power when by an erroneous order the High Court has directed the Tribunal to state a case on a question which did not arise out of the order of the Tribunal. We are unable, therefore, to hold that at the hearing of a reference pursuant to an order calling upon the Tribunal to state a case, the High Court must proceed to answer the question without considering whether it arises out of the order of the, Tribunal, whether it is a question of law, or whether it is academic, unnecessary or irrelevant" (underlining ours)

He also points out that the power of this court to decline reference although called for, is not denuded and in this connection, learned counsel has drawn our attention to a Division Bench judgment of this court in the case of Mohanlal Mahribal v. CIT [1982] 135 ITR 683. Our attention has been drawn to the following passage of the said judgment (page 686) :

"The aforesaid observations of the Supreme Court make it very clear that the High Court''s power to decline to answer a question which does not arise out of the order of the Tribunal or which is unnecessary or irrelevant is not taken away, even when by an erroneous order, the High Court has directed the Tribunal to state the case and refer a question which is shown not to arise out of the order of the Tribunal. It is thus evident that, even at this stage, this court has power to decide whether the question referred by the Tribunal in pursuance of the directions of this court does arise out of the order passed by the Tribunal."

From what has been held by the Supreme Court in the case of Commissioner of Income Tax, West Bengal, Calcutta Vs. Smt. Anusuya Devi, and this court in Mohanlal Mahribal Vs. Commissioner of Income Tax, , we have no manner of doubt that this court possesses the power to decline to answer a question which is academic in nature notwithstanding the fact that the High Court has directed the Tribunal to state the case and refer the question.

Having found that the question calling for our opinion is academic in nature, we decline to answer the same. In the facts and circumstances of the case, the parties shall bear their own costs of reference. Application stands disposed of accordingly.