JUDGMENT : By the Court – These references u/s 256(2) of the IT Act, 1961, have been made by the ITAT, Patna Bench, Patna. The following question of law has been referred for opinion of this court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the orders of the departmental authorities imposing penalty on the assessee, in view of the law engrafted in s. 271(1)(c) of the It Act, 1961 and the Explanation appended thereto, as it stood at the relevant time ?”
2. From the Statement of the Case, the following facts emerge. The assessee is a registered firm. The assessment years involved in these references are 1965-66 and 1966-67.
3. For the asst. yr. 1965-66, the assessee returned an income of Rs. 58,479. The ITO disallowing various expenses and adding Rs. 49,779 as cash credits computed the total income after depreciation at Rs. 1,31,528. On appeal to the AAC the total income was reduced by Rs. 5,000. On further appeal to the Tribunal the total income was further reduced by Rs. 14,700 and it stood at Rs. 1,11,828.
4. For the asst. yr. 1966-67, the assessee returned an income of Rs. 68,485. The ITO disallowing various expenses and adding Rs. 8,300 as cash credits computed the total income after depreciation at Rs. 99,883. On appeal to the AAC the assessment as made by the ITO was confirmed. On further appeal to the Tribunal the total income was reduced to Rs. 99,626.
5. The ITO initiated proceeding u/s 271(1)(c) of the Act, 1961, for both the assessment years. The matter was referred to the IAC. For the asst. yr. 1965-66, the IAC by his order dt. 14-2-1969 imposed a penalty of Rs. 13,100, a copy of which has been annexed as Annexure-A to the Statement of the Case. For the asst. yr. 1966-67, the IAC by his order dt. 25-3-1970 imposed a penalty of Rs. 6,000. This order has also been marked as Annexure-A to the Statement of the Case.
6. The assessee appealed before the ITAT. The Tribunal after hearing the assessee as well as the revenues representative observed that the penalty proceedings were started on the ground of additions of certain expenses and for cash credits and that so far as the cash credits were concerned, the assessees explanation was disbelieved and the amounts were added back to its total income. The Tribunal found that the law on the question was settled after the decision of the Supreme Court in the case of CIT v. Anwar Ali (1970) 76 ITR 696 (SC) and, therefore, no penalty could be imposed on this ground.
7. Learned senior standing counsel for the revenue vehemently argued that the appellate orders of the Tribunal were clearly erroneous as after the insertion of the Explanation to s. 27(1)(c) of the Act the initial onus of proving that there has been no deliberate and negligent act on the part of the assessee, lay on the assessee and unless that was discharged the onus could not be shifted on to the revenue. On principle the proposition is attractive and very sound. But on a perusal of the Tribunals appellate orders, we find that sufficient materials are available on the record to draw an inference that the initial onus has been discharged in this case by the assessee for both the years in question. The point of law raised by the ld. senior standing counsel of the department is, therefore, merely an academic one. We do not think that in view of the settled law and in view of the findings of fact arrived at by the Tribunal in its appellate orders, there is any justification in interfering with the orders passed by the Tribunal. The ld. senior standing counsel for the department relied on the case of CIT v. Parmanand Advani (1979) 119 ITR 464 (Pat) and on the case of Vishwakarma Industries v. CIT, Amritsar-I (1982) 135 ITR 652 (P&H) (FB). All these cases have been considered by this court in Tax Case No. 62 of 1974 decided on 16-3-1983. Furthermore the principle is fully discussed and settled by the cases of CIT Bihar v. Patna Timber Works (1977) 106 ITR 452 (Pat), CIT v. Gopal Vastralaya (1980) 122 ITR 527 (Pat) and Tax Act No. 36 of 1975 decided on 22-3-1983.
8. We, accordingly answer the question referred to the court in affirmative and hold that on the facts and in the circumstances of the case the Tribunal was justified is setting aside the orders of the departmental authorities imposing penalty on the assessee u/s 271(1)(c), Explanation.
9. In the circumstances of this case, however, we shall make no order as to cost.