Cit vs Smt. Kamla Jain

JUDGMENT

1. The Income Tax Appellate Tribunal, Delhi has referred the following question of law under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court:

"1. Whether on the facts and in the circumstances of the case, there was any material on record to sustain the findings of the Income Tax Appellate Tribunal in deleting the penalties under section 271(1)(c) in respect of the assessment years 1978-79 and 1981-82 to 1986-87 and also penalties under sections 271(1)(a) and 273(2)(b) for the assessment year 1986-87 ?"

2. Briefly stated the facts giving rise to the present reference are as follows:

The reference relates to the assessment years 1978-79,1981-82 to 1986-87.

The present reference arises out of the penalties imposed under section 271(1)(c) for all these years; while the penalty for late filing of the returns, i.e., under section 271(1)(a) of the Act and under section 273(2)(b) of the Act was levied for the assessment year 1986-87 only.

3. A search and seizure was carried out on the residential premises on 30-7-1985 against the husband of the assessee and the lockers with the Central bank of India and Punjab National bank bearing Nos. 259,28 and 29 respectively were also searched. Two of the lockers were in the joint names of the assessee and her husband and the third one was in the name of her husband and a third person. The assessee admitted the undisclosed investment in FDR of Rs. 24,500 and it was submitted by her that although she is in a position to offer explanation regarding the sources of acquisition of fixed deposit receipts but to avoid long drawn out process of litigation, she offered the inclusion of fixed deposit receipts and the interest thereon for the assessment purposes in her hand. An application was moved by her on 13-2-1987 and on that basis, the assessee also revised her return on 18-2-1987 rectifying the calculation mistake. The revised return was regularized by issue of notice under section 148 on 3-3-1987 after obtaining prior approval of the Commissioner of Income-tax. The assessments were concluded on the basis of the applications filed by her on agreed basis.

4. Penalty proceedings were initiated by the Income Tax Officer and ultimately penalty was levied. The Tribunal has set aside the penalty proceedings on the finding that there was no concealment of the particulars of the income by the assessee. The Tribunal found that the Explanation 3 to section 271(1)(c) of the Act is not applicable as the satisfaction of the assessing officer that the assessee had taxable income in earlier years, has not been recorded by the assessing officer.

5. Heard Shri Shambhu Chopra, the learned standing counsel for the department. None appeared on behalf of the respondent assessee.

6. In the present reference we find that the return of income of the assessee has been accepted by the department. Search warrant was issued against the husband of the assessee. The return for the assessment year 1986-87 was not due on the date of search. In this view of the matter the Tribunal has found that it cannot be said that the assessee had concealed any particulars of the income. So far as the applicability of Explanation 3 to section 271(1)(c) of the Act is concerned, the Tribunal has recorded the following finding:

"In the instant case, one of the conditions namely the assessee not being assessed is satisfied. As regards the satisfaction of the assessing officer. that the assessee had taxable income, this is not established because though the officers doubted that the assessee might be having income but were not sure of the extent of income and whether it could exceed the minimum limit not taxable. The assessee had offered her capital namely FDRs as well as her investment in pawning business. This does not mean that these were incomes earned in those years. Therefore, Explanation 3 to section 271(1)(c) would not operate."

7. The learned standing counsel could not show from the assessment order or otherwise that the above finding of the Tribunal is vitiated.

8. In the result we are of the considered opinion that the Tribunal was right in setting aside the penalty order.

9. in view of the above discussion we answer the questions referred to us in affirmative, i.e., in favour of the assessee and against the revenue. There shall be no order as to costs.