The judgment of the court was delivered by
CHANDRACHUD J.--The respondent in these two appeals is a
registered firm constituted by two brothers and their sons. It runs a restaurant
called " Chandravilas Hotel " in Ahmedabad. For the assessment year
1967-68, it filed a return on September 2, 1967, disclosing an income of Rs.
34,131. It was, however, assessed for that year on a total income of Rs.
1,65,422. For the assessment year 1968-69, it returned an income of Rs. 68,841
but was assessed on a total income of Rs. 2,80,457. The two assessment years are
the subject-matter, respectively, of these two appeals.
Since the income returned by the respondent was less than
80 per cent. of the income which was assessed, the Income-tax Officer, taking
the view that the respondent had concealed the particulars of its income,
initiated penal proceedings under section 271(1)(c) of the Income-tax Act, 1961.
As the minimum penalty exceeded Rs. 1,000, the Income-tax Officer referred the
matter to the Inspecting Assistant Commissioner under section 274 of the Act.
After considering the facts noted by the Income-tax
Officer in his assessment orders and after hearing the respondent, the
Inspecting Assistant Commissioner passed an order on November 13, 1969, levying
a penalty of Rs. 20,000 on the respondent in respect of the return filed for the
assessment year 1967-68. A similar order was passed on December 9, 1970, levying
a penalty of Rs. 2,12,000 for the assessment year 1968-69.
The respondent then preferred appeals to the Income-tax
Appellate Tribunal, which, by its judgments of March 18 and 20, 1972, set aside
the orders of penalty.
The Additional Commissioner of Income-tax, Ahmedabad, the
appellant before us, filed applications under section 256(1) of the Act, asking
the Appellate Tribunal to refer certain questions for the opinion of the High
Court. Those applications having been rejected by the Tribunal on the ground
that no question of law arose out of its judgments, the appellant approached the
High Court with a similar prayer. The High Court rejected the applications of
the appellant summarily against which the appellant has filed these appeals by
special leave.
Having heard learned counsel for both the sides at some
length, we find it difficult to agree with the Tribunal that none of the four or
five questions, on which a reference was sought by the appellant, arise out of
its judgments in the two cases. We would have liked to explain fully why we are
unable to agree with the reasoning of the Tribunal, but any elaboration of the
matter here is likely to prejudice the rights and contentions of the parties in
the two appeals. It is, therefore, desirable, a course to which counsel have no
objection, that if we are disposed to set aside the orders of the High Court and
the Tribunal, we do so by a brief order.
Accordingly, we direct that the High Court shall call for
a statement of case from the Tribunal in each of the two cases on the following
questions :
" (1) Whether, on the facts and in the circumstances
of the case, the finding of the Tribunal that the assessee was not guilty of any
fraud or gross or wilful neglect in returning the income, which resulted in the
income being returned at a figure lower than 80 per cent. of the income
assessed, is contrary to the weight of the record and was arrived at without
considering the entire evidence and material on the record ?
(2) Whether, on the facts and in the circumstances of the
case and in view of the provisions contained in section 271(1)(c) of the
Income-tax Act, 1961, and the Explanation thereto, the Tribunal was right in law
in cancelling the penalty imposed on the assessee ? "
After receiving the statements from the Tribunal, the High
Court shall dispose of the references in accordance with law.
There will be no order as to costs.
