JUDGMENT
B.N. Kirpal, J.
1. This is a reference under Section 256(1) made by the Income-tax Appellate Tribunal arising out of the penalty proceedings which have been initiated against the assessed.
2. Briefly stated, the facts are that, in respect of the assessment years 1962-63, 1963-64, 1964-65 and 1967-68, with which we are concerned in these references, the assessed was carrying on a business. It was alleged by the Income-tax Officer that there was a business which was being carried on by the assessed benami in the name of Shri Raghubir Saran and that borrowings from a concern, M/s. Hari Ram Ajit Kumar, represented adjustments of funds belonging to the assessed-firm. The Inspecting Assistant Commissioner initiated penalty proceedings by issuing a show-cause notice under Section 274(2) read with Section 271(1)(c) of the Act. In reply thereto, the assessed contended that it was not liable to pay any penalty as it was not carrying on any benami business. It is not necessary for us to go into the merits of the reply in detail but it is sufficient to say that the assessed had moved an application before the Inspecting Assistant Commissioner for summoning certain witnesses on its behalf. The Inspecting Assistant Commissioner did not summon the witnesses, which was sought for by the assessed and penalties were levied under Section 271(1)(c) for each of the four aforesaid assessment years, the amounts being Rs. 15,000, Rs. 10,300, Rs. 2,09,946 and Rs. 11,614, respectively.
3. An appeal was filed to the Income-tax Appellate Tribunal against the levy of the aforesaid penalties. Reliance was placed on an earlier decision of the Tribunal where, in similar circumstances, an order levying penalty had been set aside because witnesses had not been examined. The Tribunal, however, in the present case, did not set aside the orders of penalty even though it came to the conclusion that the Inspecting Assistant Commissioner was not justified in rejecting the request for examination of witnesses. Being conscious of the fact that Section 275 of the Income-tax Act, 1961, prescribed a limitation for the imposition of penalty as held by the Kerala High Court in the case of Addl. CIT v. K.S.G. Panicker, Kerala Produce Exporting Co. [1974] 97 ITR 525, the Income-tax Appellate Tribunal chose not to set aside the penalty orders but directed the Inspecting Assistant Commissioner to issue summons/interrogatories to each witness and, after examining them, to give a report along with his observations.
4. The assessed thereafter filed applications under Section 256(1) and the Tribunal stated the case and has referred the following question to this court:
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal acted intra vires their jurisdiction in keeping the matter pending and calling for a remand report from the Inspecting Assistant Commissioner and did not set aside the impugned orders thereby virtually enhancing the period of limitation for the Inspecting Assistant Commissioner to complete the penalty proceedings?”
5. On behalf of the assessed, learned counsel has submitted that the aforesaid question postulates that the Tribunal has the power to call for a remand report. The question which is referred is a very limited one. All this court has been called upon to give its opinion on is whether there was a proper exercise of the discretion by the Tribunal when it chose to ask for a remand report instead of setting aside the impugned orders of penalty.
6. Mr. Ahuja submits, and this appears to be so from a perusal of the question referred, that we are not called upon to decide whether the Income-tax Appellate Tribunal had, while hearing an appeal relating to the imposition of penalties jurisdiction to ask for a remand report.
7. The submission of Shri Ahuja is that the remand report has been sought for by the Tribunal because of an extraneous reason. The Tribunal was conscious of the fact that if the orders imposing penalty were set aside, then because of the aforesaid decision of the Kerala High Court, a fresh order of penalty may not be passed because of the provisions of Section 275 of the Act. There was a danger that the period of limitation would expire and the assessed would not be subjected to an order of penalty. Learned counsel submits that this is an extraneous consideration and the Tribunal should have followed its earlier order when, in another case, it had set aside a similar order of penalty.
8. It is an admitted case that, when the Tribunal was hearing the appeal, two options were open to it, (1) to set aside the orders of penalty and (2) it could ask for a remand report from the Inspecting Assistant Commissioner. It is true that the Tribunal was conscious of the fact that, if the penalty orders were set aside, prejudice may be caused to the Revenue because of the provisions of Section 275 of the Act. The Tribunal correctly opted for asking for a remand report.
9. We do not find that any illegality has been committed by the Tribunal. Once it is conceded that two options are open, then it is for the Tribunal to decide as to which option it should adopt on the facts and circumstances of the case. In this connection, it will be helpful to refer to the provisions of rule 29 of the Appellate Tribunal Rules, 1963. The said rule is concerned with the production of additional evidence before the Tribunal. The said rule is as under :
“29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or if the income-tax authorities have decided the case without giving sufficient opportunity to the assessed to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”
10. From the aforesaid, it is clear that the Tribunal, for the reasons mentioned in the said rule, can admit oral or documentary evidence before itself. One of the circumstances under which additional evidence can be produced before the Tribunal is where sufficient opportunity has not been given to the assessed by the income-tax authorities. In the present case, the grievance of the assessed was that witnesses have not been examined. The Tribunal agreed with the assessed and was of the opinion that the Inspecting Assistant Commissioner should have examined the witnesses. Having come to this conclusion, it was open to the Tribunal to record the evidence of the witnesses by virtue of the powers vested in the Tribunal by the aforesaid rule 29. If the Tribunal had done so, then notwithstanding the provisions of Section 275 of the Income-tax Act, no fault could have been found.
11. In our opinion, all that the Tribunal has done in the present case is that instead of recording the evidence itself, it has delegated that power to the Inspecting Assistant Commissioner who has been directed to record the evidence and submit a remand report. If it would be a proper exercise of discretion in recording the evidence itself under the provisions of rule 29 of the Appellate Tribunal Rules, 1963, we fail to understand how the discretion can be said to have been improperly exercised, when the Tribunal, instead of recording the evidence itself, entrusts that duty to a subordinate officer and asks for a remand report. Ultimately, on the basis of the additional evidence which is recorded, it is the Tribunal which will have to decide whether the levy of penalties was justified. In our opinion, the Tribunal was right in not setting aside the impugned penalty orders.
12. For the aforesaid reasons, the said question is answered in the affirmative and in favor of the Revenue. There will, however, be no order as to costs.