Madhya Pradesh H.C : Whether the Tribunal, in the facts and under the circumstances of the case, was justified in restoring the penalty?

High Court Of Madhya Pradesh

Nandlal Jaiswal & Co. vs. CIT

Section 271(1)(c)

A.K. Mathur, C.J. & S.K. Kulshreshtha, J.

MCC No. 358 of 1992

9th July, 1996 

Counsel Appeared

G.N. Purohit, for the Assessee: Abhay Sapre, for the Revenue


This is a reference under s. 256(1) of the IT Act, 1961 and the following question of law has been referred by the Tribunal for answer by this Court : “Whether the Tribunal, in the facts and under the circumstances of the case, was justified in restoring the penalty?”

2. The assessee firm derived its income from truck plying, flour mill and timber business. The assessee failed to comply with the terms of the notice under ss. 143(2) and 142(1) of the Act. Therefore, assessment was completed under s. 144 of the Act, determining the total income at Rs. 63,160 as against the returned income of Rs. 16,000. Income from truck plying was estimated at Rs. 25,000 and income from timber business was also estimated at Rs. 33,710. The net income from flour mill was estimated at Rs. 4,000. As no books of accounts were produced, genuineness of the shares could not be verified. Registration was, therefore, refused. Since the assessed income was more than 80 per cent, penalty under s. 271(1)(c) of the Act was also separately imposed. Aggrieved by this order of penalty, the assessee approached the AAC on appeal and the AAC directed to grant registration of the firm and reduced the total income by Rs. 8,750 Rs. 3,750 out of timber business and Rs. 5,000.00 out of truck plying income. However, the assessee did not file second appeal before the appellate authority.

In response to the penalty notice under s. 271(1)(c), the assessee filed a written reply. The assessee’s only argument was that the addition was on account of estimate of sales and GP rate. The assessee, therefore, prayed for dropping of the penalty proceedings. The ITO rejected the contention and imposed the penalty under s. 271(1)(c) treating more than 80 per cent of the income assessed and levying the penalty. Thereafter the matter was taken in appeal before the AAC who reversed the finding of the ITO. The Revenue then filed an appeal before the Tribunal which found that the penalty of Rs. 15,050 under s. 271(1)(c) of the Act was justified. Hence the assessee approached the Tribunal for making a reference and accordingly the aforesaid question has been referred for answer by this Court.

We have heard learned counsel for the parties and perused the record. The question which has been referred is essentially a question of fact and no question of law arises in this case. However, Shri Purohit, learned counsel for the assessee, urged that the ITO has referred to an unamended provision, treating it that the assessed income was 80 per cent of the returned income; that the provision was deleted long back and, therefore, the ITO should not have proceeded in the matter and imposed the penalty of Rs. 15,050 under s. 271(1)(c) of the Act. The ITO might have made a reference to an unamended provision on the basis of facts which were relevant and the Tribunal has found that the penalty was justified with reference to the existing provision. We are of opinion that simply by referring to a wrong provision of law which is non-existent, it could not be said that penalty could not be imposed under the existing provision. In the present case, penalty could be levied under s. 271(1)(c) of the Act. The Tribunal was justified in upholding the penalty and restoring the order of the ITO. Hence the question is answered in favour of the Revenue and against the assessee.

[Citation : 232 ITR 540]

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