Shyam Oil Mills vs Commissioner of Income Tax

A.K. Tiwari, J.—The assessee has filed this application u/s 256(2) of the income tax Act, 1961 (''the Act'') seeking direction to the Tribunal to state the case and refer the undernoted questions, labelled as of law, arising out of the order dated 17-3-1994 passed by the Tribunal in I.T. Appeal No. 680 (Ind.) of 1989 for assessment year 1982-83 after rejection of the application, presented u/s 256(1) and registered as R.A. No. 67 (Ind.) of 1994 on 5-10-1994, for our opinion:- (i) Whether the Tribunal is correct in law to hold that the income tax Officer was right in imposing penalty when he has not sought instructions from the Commissioner about the revised return filed under the Scheme admitting the addition and whether in such circumstances, the order imposing penalty by the Income Tax Officer is in accordance to law?

(ii) Whether on the facts and circumstances of the case the order passed by the Hon''ble Tribunal confirming the minimum penalty on addition of Rs. 74,044 even when the return was under the scheme and is protected by Circular No. 451 dated 17-2-1986, is correct in law, when the merits of the said addition is not gone into either by CITA or by the Tribunal to find out the scope of the Circular?

(iii) Whether on the facts and circumstances of the case, the order of the Tribunal is valid in law in confirming the minimum penalty and not sending it back to CITA to consider on merits about the said addition and whether the penalty could still be leviable on such addition, even of minimum quantum?

Briefly stated, the facts of the case are that the assessee had income from manufacture of groundnut and other edible oil. In the course of the assessment proceedings certain additions were made. Firstly, according to the Assessing Officer purchases were not verifiable and there was no day to day production record. An addition of Rs. 76,040 was made on account of low yield of oil out of which an addition of Rs. 10,340 was confirmed by the Commissioner (Appeals). During the previous year the Flying Squad of the Sales Tax Department had conducted a raid at the business premises of the assessee and seized certain books of accounts which were examined by the Assessing Officer also in the presence of the assessee. Certain discrepancies were noticed due to which the Assessing Officer made an addition of Rs. 29,970 as income from undisclosed sources and further an addition of Rs. 44,074 as income on account of alleged on accounted payment. The assessee felt dissatisfied by these additions and, therefore, filed an appeal before the Commissioner (Appeals), in regard to the above two additions. Later the assessee withdrew the appeal and filed a revised return offering a sum of Rs. 74,044 as income from undisclosed sources. It was claimed that the benefit of amnesty scheme be given to the assessee since the revised return were filed on 31- 3-1986 and no penalty be levied. The Assessing Officer, however, negatived the contention and levied the minimum penalty of Rs. 56,000 on account of the above three additions. The Commissioner (Appeals) ob served that the assessee had written a letter to the Commissioner showing the position of return filed under the amnesty scheme and requesting that no penalty and interest be charged as the appeal had been withdrawn. The attention of the Commissioner was also invited to CBDT Circular No. 451 dated 17-2-1986. The Commissioner (Appeals) accepted the contention of the assessee and held that the imposition of the penalty was pre-mature and unwarranted. The penalty was, therefore, deleted. The department felt aggrieved by the order of Commissioner (Appeals) and thus filed the appeal before the Tribunal. The Tribunal allowed the appeal in part. The Tribunal held that levy of penalty with respect to the two additions totalling Rs. 74,044 was just and liable to be restored. The Tribunal, however, also held that no penalty u/s 271(1)(c) was leviable with reference to the addition of Rs. 10,340. The appeal was thus partly allowed. Aggrieved by the order of the Tribunal, the assessee filed an application for rectification which was registered as M.A. No. 15 (Ind.) of 1994. That was rejected on 3-8-1994. The applicant then filed application u/s 256(1). That was rejected on 5-10-1994 by an elaborate order. The assessee thereafter filed this application u/s 256(2).

We have heard Shri S.C. Goyal, the learned counsel for the applicant/ assessee and Shri A.M. Mathur, the learned senior counsel with Shri A.K. Shrivastava, for the non-applicant/department.

Right at the threshold the counsel for the applicant submitted that the Question No. (iii), as noted above, is not being pressed in this application as according to him the entire controversy is fully covered by Question Nos. (i) and (ii), as noted above.

The question to be considered is whether it was obligatory to obtain instructions from the Commissioner in regard to the revised return under the amnesty scheme?

Further question is whether minimum penalty was liable to be foisted and addition of Rs. 74,044 in the face of the revised return having been filed under the protective umbrella of Circular No. 451 dated 17-2-1986 were to be made?

In our view a prima-facie case is made out for issuing the direction to the Tribunal to state the case and refer the first two questions, i.e., Question Nos. (i) & (ii) as noted above.

In view of this direction, we deem it improper to express definite opinion for or against at this stage.

In the result we allow this reference to the extent of Question Nos. (i) and (ii) and call upon the Tribunal to state the case and refer these two questions to this Court for opinion as expeditiously as possible.

A copy of this order be transmitted to the Tribunal for expeditious compliance.

This reference stands disposed of in terms indicated above but without any order as to costs. Counsel fee is, however, fixed at Rs. 750.00 for each side, if certified.