JUDGMENT
B.S. Dhillon, J.
1. The following question of law has been referred to us for our opinion by the Income-tax Appellate Tribunal, Chandigarh Bench:
” Whether, on the facts and in the circumstances of the case and in view of the agreement of the assessee to the levy of penalty of Rs. 32,188, the Tribunal was right in law in not going into the question whether the penalty was, in law, the minimum penalty leviable under Section 271(1)(c) of the Income-tax Act, 1961 ? ”
2. The brief facts giving rise to this reference may be mentioned. The assessee is a registered firm and carries on business of re-rolling mills at Mandi Gobindgarh. For the accounting year ending 30th September, 1965, relevant to the assessment year 1966-67, a return of income was originally filed on June 16, 1966, declaring an income of Rs. 42,131. The assessment was completed on January 7, 1967, and the total income was determined at Rs. 74,110. Subsequently, the ITO discovered that the assessee-firm had obtained hundi loans from M/s. Gurdit Singh Swaraj Singh, Majith Mandi, Amritsar, who denied having advanced any loan to the assessee and confessed that they were indulging in kawala business. Consequently, proceedings under Section 147(a) of the I.T. Act, 1961 (hereinafter referred to as ” the Act “), were initiated with the approval of the Commissioner and notice under Section 148 of the Act was issued on December 10. 1969. The assessee thereafter submitted a letter dated January 23, 1970, to the Commissioner purporting to be an application under Section 271(4A) of the Act. In this application, it was disclosed that the peak of the bogus hundi loans amounted to Rs. 1,30,000 on April 12, 1965, and a statement was also filed with this letter showing the working of the peak of the hundi loans. A return of income was filed on January 24,
1970, declaring an additional income of Rs. 8,388 with a note that this interest amount was surrendered as per application dated January 23, 1970, to the Commissioner. The Commissioner by a letter dated February 25, 1970, informed the assessee that its application for settlement was premature and was, therefore, rejected. The assessee thereafter wrote a letter dated May 6, 1970, to the ITO pointing out that over and above the amount of Rs. 8,388 already surrendered, the assessee was also surrender-ii)g a further amount of Rs. 30,988. From the peak credit of Rs. 1,30,000 a sum of Rs. 99,012, which had already been assessed for the assessment years 1960-61 to 1964-65, was excluded and this is how the amount of Rs. 30,988 was arrived at. A revised return of income was enclosed with this letter wherein Rs. 30,988 was disclosed as additional income. The assessee again sought the intervention of the Commissioner and after discussion with the assessee’s representatives, the Commissioner incorporated the terms of the agreement arrived at by the assessee in a note dated January 1, 1971. The assessee’s petition was not treated as a petition under Section 271(4A) of the Act. For this assessment year, the assessee agreed to be taxed on an amount of Rs. 39,376 (including interest amounting to Rs 8,388). The assessee also agreed to the levy of minimum penalty, the basis of which was given in the Commissioner’s note as under :
” 8. For 1966-67, the assessment was originally made on the basis of return filed before 1-4-1968. In response to notice issued under Section 148, the assessee filed another return on 24-1-1970 declaring an additional income of Rs. 8,388. With regard to this amount of Rs. 8,388 the penalty is leviable with reference to the return filed prior to 1-4-1968. So the minimum penalty will be 20% of the tax sought to be evaded in respect of this amount of Rs. 8,388.
9. The assessee filed another revised return for 1966-67 on 8-5-1970 declaring an additional income of Rs. 30,988. This return is also being accepted under the settlement. Therefore, with regard to this concealed income of Rs. 30,988 the penalty is leviable not only with reference to the original return but also with reference to the return filed on 24-1-1970. The minimum penalty in respect of this concealed income will be Rs. 30,988.”
3. The assessment was thereafter completed on a total income of Rs. 1,09,870. The assessment was accepted and no appeal was preferred.
4. The penalty proceedings under Section 271(1)(c) of the Act were initiated at the time of completing the assessment and as the minimum penalty imposable exceeded Rs. 1,000, the matter was referred to the IAC who, in due course, levied a penalty of Rs. 32,188. Before the IAC, M/s. B. D. Bansal
& Co., Chartered Accountants, vide their letter dated January 5, 1972, specifically agreed to the levy of a penalty of Rs. 32,188.
5. Being aggrieved, the assessee came in appeal before the Tribunal and pleaded that the penalty levied was not the minimum penalty leviable according to law. The assessee’s contention was not accepted by the Tribunal for the following reasons stated in its order :
” The point to be considered in this appeal is whether the calculation of minimum penalty is correct. The penalty in this case arises out of the settlement proceedings and we feel that it will not be proper on our part to interfere with the penalty levied when even the calculation of penalty was specifically noted by the Commissioner of Income-tax in his note dated 1-1-1971 and when the assessee’s chartered accountants, M/s. B. D. Bansal & Co., further specifically agreed before the Inspecting Assistant Commissioner for the levy of the impugned penalty. One of the very important considerations for the assessee agreeing to this penalty was that the Commissioner of Income-tax decided that prosecution should not be launched in this case. If the Commissioner of Income-tax knew at the time of settlement proceedings that the assessees would go back from the agreed penalty, we do not know what would have been his reaction regarding the prosecution proceedings.”
6. The Tribunal was of the view that since the penalty levied in this case was an agreed penalty, it was not inclined to interfere. It is in these circumstances that the question of law referred to in the earlier part of the judgment has been referred to us.
7. After hearing the learned counsel for the parties, we are of the opinion that the Tribunal was right in law in not going into the question whether the penalty was, in law, the minimum penalty leviable under Section 271(1)(c) of the Act. As is clear from the note of the Commissioner dated January 1, 1971, the minimum penalty in respect of the concealed income was Rs. 30,988. This was agreed upon by the assessee. Subsequently, M/s. B. D. Bansal & Co., Chartered Accountants, Amritsar, gave in writing to the IAC, Amritsar, and requested that a penalty of 20% of the tax sought to be evaded in respect of the amount of Rs. 8,388 and 100% in respect of the concealed income of Rs. 30,988 minimum penalty may be levied. It would thus be seen that in addition to the amount of Rs. 30,988 being agreed to as the amount of penalty, it was specifically mentioned in the agreement that 100% in respect of the concealed income of Rs. 30,988 be levied as penalty. The contention, of Mr. Bhagirath Dass, learned counsel for the petitioner, that since a sum of Rs. 32,188 was levied as minimum penalty, the Tribunal ought to have gone into the question whether it was the minimum penalty or not, is without any merit. The Tribunal came to the conclusion that one of the very important considerations for the assessee’s
agreeing to this penalty was that the Commissioner decided that prosecution should not be launched in this case. The Tribunal observed that if the Commissioner knew at the time of settlement proceedings that the assessee would go back from the agreed penalty, in that case it is not known as to what would have been his reaction regarding the prosecution proceedings. As already observed, it was on the agreement of the assessee. which agreement mentioned the figure as well as the rate of penalty, and on the basis thereof that the amount of penalty in question was imposed. The Tribunal, therefore, rightly placed reliance on a decision of the Bombay High Court in Jivatlal Purtapshi v. CIT [1967] 65 ITR 261 for the proposition that the order based on an agreement cannot give rise to grievances and the same cannot be agitated in appeal.
8. For the reasons recorded above, we answer the question in the affirmative, in favour of the revenue and against the assessee. There will be no order as to costs.
