C.P. Venkataraman vs Commissioner of Income Tax

Veeraswami, J.—This reference involves a penalty proceeding and relates to the assessment year 1952-53. Four sums were added to the

income returned by the assessee in his individual capacity, after rejecting his explanation. It appears that in an appeal arising out of the assessment,

the Tribunal corrected the status of the assessee as Hindu undivided family. But the penalty proceedings were continued in the name of the

assessee in his individual capacity, which resulted in the levy of a penalty of Rs. 7,700. The Tribunal concurred with the revenue that the penalty

was properly levied. But on a consideration of one of the items in respect of which explanation had to be given by the assessee many years prior to

the institution of the proceedings, it reduced the penalty to Rs. 5,000. In the circumstances, the following question is referred :

Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 5,000 is justified?

We think, for the reasons which will appear, that it is not justified. So far as the factual basis for levy of penalty is concerned, learned counsel for

the assessee could not convince us that the case would not fall within the scope of Section 28(1)(c). It is true that where two views are possible on

an explanation in respect of cash credit entries in the books and one of which commends itself to the revenue, penalty may perhaps not be justified,

But this is not one such case, because there can be no explanation whatever at least in respect of one of the fixed deposits. The explanation of the

assessee was that the amount invested in fixed deposit had been borrowed. On the basis of it, it is impossible to accept this explanation. That

position applies to the other deposits as well.

But the penalty nevertheless cannot be sustained on a technical ground. As we mentioned earlier, the assessee in this reference is not the one

assessed. While the status of the assessee was corrected as Hindu undivided family, this has not been carried out in the penalty proceedings. But

this point has not been specifically dealt with by the Tribunal. In fact, learned counsel for the revenue invites our attention to the observation of the

Tribunal in the assessee''s application for reference that it should be dismissed on the ground that the assessee had not raised the question in that

form''. In view of this it is strongly pressed on us for the revenue that it is not open to the assessee to raise it in this reference. The limits of our

jurisdiction have been clearly laid down in Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., , which are summed up

thus :

When a question is raised before the Tribunal and is dealtwith by it, it is clearly one arising out of its order.

When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is

therefore, one arising out of its order.

When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.

When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding

that it may arise on the findings given by it.

In the same case the Supreme Court pointed out that a question of law raised before the Tribunal might be a complex one involving several facts

or aspects of which some only might have been raised before the Tribunal which, therefore, did not or could not have had the opportunity to deal

with the other aspects or facts and that in such a case where the question itself is under issue, there is no further limitation imposed by Section 66

that the reference should be limited to those aspects of the question which had been argued before the Tribunal. The Supreme Court observed that

to do so will be an over-refinement of the position to hold that each aspect of a question is itself a distinct questron for the purpose of Section

66(1). That aspect of the scope of jurisdiction of this court in a reference was again touched upon by the Supreme Court in Bhanji Bagawandas

Vs. Commissioner of Income Tax, Madras, .

We are of the view that the question before the Tribunal was whether the levy of penalty was justified. On aspect of that question would be

whether the factual elements to attract Section 28(1)(c) were present and another aspect may be whether in view of the fact that the appellant

before the Tribunal was not the appellant himself, the penalty could be levied on him. This is not a case, therefore, where a question not raised

before the Tribunal, which therefore had no occasion to decide, is raised for the first time in reference. The frame of the question before us also is

wide enough to cover the aspect of the question not argued before the Tribunal.

It is hardly necessary to point out that the appellant before the Tribunal not being the assessee, it necessarily follows that the levy of penalty on

him would be illegal.

The question is answered in favour of the assessee with costs. Counsel''s fee Rs. 250.