TMI Blog1982 (11) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... tax sought to be evaded for the two assessment years presently in question. The Commissioner of Income-tax aggrieved by the order of the Appellate Tribunal, has obtained a reference to this court of the following question: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in restricting the penalties to 25% of the tax evaded for the assessment years 1961-62 and 1962-63 ? " The facts may now be stated in greater detail. The assessee is registered firm carrying on business in the sale of cotton yarn, silk yarn, thread balls, wool, etc., in Sadar Bazar, Delhi. The original assessments for the assessment years 1961-62 and 1962-63 were completed on total incomes of Rs. 40,000 and Rs. 53,340 respectively. Subsequent to the completion of the assessments, the department appears to have learnt that the assessee was maintaining duplicate sets of accounts which contained transactions of sale not disclosed at the time of original assessments. Proceedings were initiated under s. 133A in the course of which certain books of account and papers were handed over to the department by the assessee. Subsequently, on September 26, 1967, the assessee wrote a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 17,000 and Rs. 23,000, respectively, for the assessment years 1961-62 and 1962-63, that no prosecution proceedings were to be launched against the petitioner-firm or its partners, that " a penalty of 25% would be leviable on account of additions agreed to on the income of the firm from the assessment year 1961-62 to assessment year 1968-69, treating the firm as unregistered for penalty purposes " and that no further penalty or interest was to be charged. The assessments were completed on this footing. While completing the assessments the ITO issued notices calling upon the assessee to show cause why penalty should not be imposed under s. 271(1)(c) for the above two assessment years. The proceedings were, thereafter, referred to the IAC under s. 274(2), who also issued a show-cause notice to the assessee. It appears that during the hearings the IAC was of the opinion that the assessee was liable to penalty on the terms of the provisions of s. 271(1)(c), as amended by the Finance Act of 1968, namely, to a sum not less than, but not exceeding twice, the amount of the income in respect of which particulars had been concealed. The assessee by letter dated February 17, 1973, objecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment, it was contended that since the returns had been filed after April 1, 1968, the amended provisions of s. 27l(1)(c) applied and this being so, the Commissioner was not competent, having rejected the application of the assessee under s. 271(4A), to reduce the penalty below the minimum imposable under the amended s. 271(1)(c). Before referring to the findings of the Tribunal two aspects may be clarified at this stage. The first is that, after the assessee made the disclosure on February 15, 1968, and April 14, 1969, the proceedings had been initiated under s. 148 of the I.T. Act. In response to the notices under this section the assessee had filed returns of income for the two assessment years some time in February-March, 1970 (the exact dates are not available on record). In these returns the assessee had returned its income at the figures of Rs. 40,000 and Rs. 50,340 originally assessed for the two years. The second aspect which needs clarification is regarding the order of the Commissioner. As already mentioned the details of the settlement between the assessee and the manner in which they had to be assessed were as referred to in the assessee's letter dated December 4, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner, it was evidently meant to be kept up and hence a penalty of more than 25% of the tax evaded could not be imposed. The Tribunal also proceeded to deal with the law applicable in the matter of imposition of penalty. It referred to the decision of the Kerala High Court in the case of Hajee K. Assainar v. CIT [1971] 81 ITR 423 and to the decision of the Punjab and Haryana High Court in the case of CIT v. Bhan Singh Boota Singh [1974] 95 ITR 562, which had taken conflicting views on the issue. In view of these conflicting decisions, the Tribunal held, following the decision in favour of the assessee, that for the assessment years under appeal, penalty had to be imposed on the amount of tax sought to be evaded and not with reference to the amount of income concealed. The Tribunal, therefore, restricted the penalties to 25% of the tax sought to be evaded for both the assessment years under appeal and allowed the appeals in part. The Commissioner, aggrieved by the order of the Tribunal, has come in reference before us. On behalf of the applicant, it is submitted that the assessee in the present case had filed two sets of returns and in both of them he had concealed the income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assessee was leviable only under the provisions of s. 271(1)(c) before the amendment in 1968. That being so, it was open to the Commissioner to direct the levy of the penalty at any figure not below the minimum then prescribed, which was only 10% of the tax sought to be evaded. It was in view of this provision that the Commissioner fixed the quantum of the penalty at 25%, i.e., somewhat above the minimum. It was not open to the Department, in view of the order of the Commissioner, to levy a larger penalty upon the petitioner as the Department would be bound by the doctrine of equitable estoppel outlined in the case of Anglo Afghan Agencies, AIR 1968 SC. 718, and reiterated in subsequent Supreme Court decisions. Though the arguments before us have covered a wide ground we think that the present reference can be disposed of on a much narrower ground based on the facts of the present case. So far as the law relating to the imposition of the penalty is concerned it has been clearly enunciated by the Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1. The Supreme Court has laid down that when penalty is imposed for the concealment of particulars of income, it is the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d very much later than the voluntary disclosures made by the assessee. As already mentioned, the survey of the assessee's premises took place in 1967. The voluntary disclosure was initiated in September, 1967, and pursued in the two succeeding years. By 14th April, 1969, a full disclosure had been made by the assessee regarding the extent of the concealed income and a prayer had been made that it should be spread over a number of years. The proceedings before the IAC and the Commissioner in relation to the voluntary disclosure were going on and eventually culminated in a settlement in November-December, 1970. If we bear all these circumstances in mind it will be clear that the returns filed in February-March, 1970, cannot be said to have concealed or furnished inaccurate particulars of the income for which a penalty could be imposed, Those returns were filed only in order to comply with formal notices issued and served under s. 148 to enable the proposal for settlement that had already been initiated being implemented by assessments regularly made under the Act. Having regard to the fact that the assessee had already come forward with a voluntary disclosure agreeing to be assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in view of our above conclusion. It appears to us that it is unnecessary to go into the question regarding the nature or validity of the Commissioner's order and to what extent it can create an equitable estoppel against the Department. In view of our conclusion on the first question the view taken by the IAC, that the Commissioner could not reduce the penalty to 25% of the tax sought to be evaded, is not correct. But it is perhaps still arguable whether the Commissioner has the power to direct the ITO or the IAC to restrict the penalty to a particular figure particularly when he agrees that s. 271(4A) has no application. It can be argued that like assessment proceedings penalty proceedings are also quasi-judicial and that it is for the IAC or the ITO, as the case may be, to consider the facts of the case and to impose a penalty which they consider proper in the facts and circumstances, and that, while it may be open to the Commissioner, where the terms of s. 271(4A) are fulfilled, to reduce or waive a penalty so imposed, he has no power of reduction or waiver, in anticipation, so as to bind the discretion of the ITO or the IAC. .But, even granting this, we see no error in the co ..... 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