Cit vs Auto Bharati
2007 Latest Caselaw 405 Bom

JUDGMENT

J.P. Devadhar, J.

1. Heard the learned Counsel for the respective parties.

2. This is an application filed by the revenue under Section 256(2) of the Income Tax Act, 1961. This Court on 15-4-1998, has admitted the application on the following questions of law:

(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no penalty is imposable on the addition of Rs. 4,52,485 made by the assessing officer under Section 271(l)(c) of the Act ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in basing its conclusion on irrelevant material and in ignoring other essential material on record ?"

3. The assessment year relevant herein is 1986-87.

4. In this case during the course of assessment proceedings, the assessing officer noticed that the assessee had introduced bogus purchase bills amounting to Rs. 4,52,484.85. When confronted with this fact, the assessee filed fresh return of income declaring additional undisclosed income noticed under the bogus purchase bills. The assessing officer passed the assessment order, accepted the additional income and levied penalty under Section 271(1)(c) of the Act.

5. On appeal filed by the assessee, the Commissioner (Appeals) upheld the penalty. On further appeal filed by the assessee, the Tribunal deleted the penalty. A reference application is filed by the revenue under Section 256(1) of the Act was rejected by the Tribunal. Hence, this application is filed by the revenue under Section 256(2) of the Act.

6. In this case, the quantum addition made on the basis of the revised return filed by the assessee which represented bogus purchase bills has not been disputed by the respondent-assessee. The Tribunal deleted the penalty, inter alia, on the ground that Shri C.N.Agrawal, an employee of the assessee who had stated that the bogus purchase bills were prepared at the instance of a partner of the firm has not been offered for cross examination. The Tribunal further held that the department had not made any attempt to prove the statement of Shri Umakant Sharma, brother-in-law of the assessee to the effect that bearer cheques issued by the firm after encashment were paid to a third party. In our opinion, whether the Tribunal could delete the penalty on the aforesaid grounds is a question of law.

7. Learned Counsel for the respondent-assessee contended that even otherwise, the penalty cannot be sustained in the present case because, after the addition sustained by the assessing officer, if one calculates the gross profit in the assessment year in question, i.e., in the year 1986-87, it would come to 47.09 per cent. Whereas, in the assessment year 1989-90 the assessing officer himself has estimated the gross profit at 18 per cent. In our opinion, there being no findings recorded by the Tribunal on this aspect of the matter, it will be open to the assessee to agitate this ground at the time of hearing the reference after the statement of the case is forwarded by the Tribunal.

8. Accordingly, the application is allowed. The Tribunal is directed to forward the statement on the aforesaid questions of law.

9. Rule is made absolute in the above terms with no order as to costs.