Punjab & Haryana H.C : Whether, on the facts and in the circumstances prevailing for the asst. yrs. 1969-70 and 1970-71, the Tribunal was justified in cancelling the penalties imposed of Rs. 1,86,163 and Rs. 2,26,617 by following its earlier order in respect of the similar penalties imposed for the asst. yrs. 1967-68 and 1968-69 and thus concluding that the assessee was not guilty of any wilful concealment of its income?

Counsel Appeared

R.P. Sawhney i/b Mahabir Ahalawat, for the Petitioner : N.K. Sood, for the Respondent

G.S. SINGHVI, J. :

Pursuant to the direction given by the High Court on 18th Nov., 1977 in ITC No. 113 and ITC No. 114 of 1977, the Tribunal, Amritsar referred the following question for the opinion of the High Court :

“Whether, on the facts and in the circumstances prevailing for the asst. yrs. 1969-70 and 1970-71, the Tribunal was justified in cancelling the penalties imposed of Rs. 1,86,163 and Rs. 2,26,617 by following its earlier order in respect of the similar penalties imposed for the asst. yrs. 1967-68 and 1968-69 and thus concluding that the assessee was not guilty of any wilful concealment of its income?”

The assessee is a private limited company carrying on business in the manufacture of electrical switches and plugs. The company was incorporated on 22nd April, 1964. It took over the business which was being carried on in the name of M/s. Kay Engineering Co. On 1st April, 1965, the company appointed M/s. Kay Engineering Sales Corporation as their sole selling agent. It was agreed that the sole selling agent will receive commission at the rate of 5% on the net sale of the products manufactured by the company after deducting trade discount, freight, sales- tax, distributor’s commission etc. For the asst. yr. 1969-70, the assessee claimed benefit of commission of Rs. 1,86,163 allegedly paid to sole selling agent. For the asst. yr. 1970-71, the assessee claimed that commission amounting to Rs. 2,26,617 was paid to the sole selling agent. The ITO did not allow the deduction in respect of the commission allegedly paid by the assessee to the sole selling agent. He also initiated penalty proceedings under s. 271(1)(c) of the IT Act, 1961 (for short, ‘the Act’) and referred the case to the IAC under s. 274(2) of the Act. The said authority imposed penalty equal to the amount of commission claimed by the assessee for the asst. yrs. 1969- 70 and 1970-71. The appeals filed by the assessee were allowed by the Tribunal vide its order dt. 7th Aug., 1976. While accepting the appeals of the assessee, the Tribunal placed reliance on its earlier order dt. 24th March, 1976 passed in the respect of the asst. yrs. 1967-68 and 1968-69.

At the commencement of the hearing, Shri N.K. Sood, learned counsel for the assessee brought to our notice the fact that the main case relating to the amount of commission paid to the sole selling agent was still pending before the authorities constituted under the Act because the Tribunal has remanded the case to the appellate authority and after a fresh decision was rendered by the appellate authority, the Tribunal again remanded the case to the said authority by accepting the appeals preferred by the assessee. He submitted that when the question of deduction of commission is still pending consideration before the appellate authority no question of law relating to the power of the competent authority to impose penalty deserves to be considered by the Court and these petitions should be decided without answering the question posed by the Tribunal. On the other hand, learned counsel for the Department argued that in view of the order dt. 18th Nov., 1977 passed by this Court it is not now open for the Court to decline to answer the question of law referred to it by the Tribunal. He, however, conceded that the issue relating to the quantum of commission payable to the sole selling agent is pending adjudication before the appellate authority.

In view of the admitted fact that the issue relating to the quantum of commission payable to the sole selling agent of the assessee, is still undecided, determination of the question of law called for by this Court would be a futile exercise. In our considered opinion, the question referred to this Court by the Tribunal on 23rd Feb., 1978 does not deserve to be answered because in fact no such question arises in the facts and circumstances of this case.

For the aforementioned reason, we dispose of these petitions without answering the question of law referred to by the Tribunal. However, it is made clear that once the appellate authority decides the matter afresh in the light of the directions given by the Tribunal, the parties shall be entitled to avail remedies available to them by way of further appeals and then by filing applications under s. 256(1) or 256(2) of the Act.

[Citation 224 ITR 82]