TMI Blog1990 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in law in holding that the Income-tax Officer had jurisdiction to impose penalty under section 271(1)(c) of the Income-tax Act, 1961, since the order was passed by him after April 1, 1976, the date with effect from which section 274(2) was omitted from the Act ? (2) Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in law in taking the view that the Explanation to section 271(1)(c) of the Income-tax Act, 1961, was attracted in this case ?" We shall take up Income-tax Reference No. 104 of 1983 first. The assessee, Gopi Krishna and Co., is a registered firm. There is another firm, Bal Krishna and Co., operating from the same premises. Indeed, Gopi Krishna and Bal Krishna are brothers. Gopi Krishna died. His son, Vinod Kumar, is the main partner of the assessee-firm. The assessee-firm is dealer in gold and silver ornaments and silver coins. In its return for the assessment year 1974-75, the assessee declared an income of Rs. 2,402. The assessment was, however, completed on a total income of Rs. 69,570. Three items were added, out of which two are rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's account books showed only 825 silver coins. It also disbelieved the statement of R. N. Mani and found that as the trend of silver price was declining, he would not have handed over the silver coins to the assessee for sale, and also because he had no need for money at that time. It also observed that, while handing over the coins, no receipt was taken and there was no settlement of commission to be charged, nor was any receipt taken from R. N. Mani acknowledging payment of Rs. 15,000 to him. No other material was produced by the assessee to prove the payment of the said amount. So far as the silver bars are concerned, the Tribunal observed that the assessee had alleged that they were out of its stock but it was not possible to believe it. It found that both the transactions were outside the account books and there were no good reasons to differ from the finding of the Appellate Assistant Commissioner in that behalf. Accordingly, the Tribunal dismissed the appeal. Thereupon, the present reference was obtained. Sri V. B. Upadhyaya, learned counsel for the assessee, contended that the findings of the Tribunal are vitiated by taking into consideration irrelevant and inadmissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an irrelevant or inadmissible circumstance and an erroneous reasoning. It may be that the Tribunal's reasoning is erroneous, but that does not fall within the principle enunciated in Dhirajlal's case [1954] 26 ITR 736. Now let us look at the factual picture. The question before the Tribunal was whether the assessee had entrusted silver bars and old silver coins to Hari Narain Prasad for being taken to Varanasi for sale and whether he was robbed on the way, as alleged by the assessee. This in turn involved the question whether the silver bars were from out of the stock of the assessee and whether the silver coins were entrusted by R. N. Mani, advocate, to the assessee for sale on commission. Before the Income-tax Officer, statements of the three persons were recorded, namely, Hari Narain Prasad, Vinod Kumar and R. N. Mani. The F. I. R. lodged by Hari Narain Prasad was also produced. The Income-tax Officer perused the account books of the assessee. All the three authorities were not prepared to believe the statement of R. N. Mani that he entrusted 2,500 old silver coins to the assessee for sale. Several reasons were given in this behalf, namely : (i) No receipt was taken by R. N. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1922 (corresponding to section 256 (2) of the present Act). The issue before the Supreme Court was whether a question of law arose from the order of the Tribunal within the meaning of section 66(2). In that connection, it was held that where the finding of the Tribunal is arrived at on material which is irrelevant, or which is partly relevant and partly irrelevant and it is not possible to say to what extent its mind was affected by the irrelevant material used by it in arriving at its finding, it must be held that the finding is vitiated. It was also observed that where the Tribunal draws upon its. imagination and makes use of a number of surmises and conjectures in reaching a finding, such finding should also be held to be vitiated, though it is true that where the satisfaction is arrived at subjectively, courts have said that, if such satisfaction is arrived at partly on relevant and partly on irrelevant material, it is not possible for the court to predicate to what extent the mind of the authority has been influenced by irrelevant material and, therefore, the entire satisfaction is vitiated, and this proposition is not generally applied to cases where the satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner prior to the deletion of the said sub-section. Similarly, the deletion of the Explanation to section 271(1)(c) with effect from April 1, 1976, also does not make any difference because it would be applicable to the assessment years during which it was in operation. The Tribunal has found that the assessee has failed to rebut the presumption arising from the said Explanation, and we cannot say that the finding of the Tribunal is either perverse or is vitiated by any misdirection in law. Reliance is placed upon the decision of this court in CIT v. G. L. Textiles [1977] 109 ITR 37 in this behalf. But that was a case where the Explanation was not invoked or relied upon before the Tribunal and was invoked for the first time at the stage of reference. The Bench held that the said Explanation comes into play only if the assessed income is recalculated for the purpose of the Explanation by reducing it by the expenditure incurred bona fide by the assessee for the purpose of earning the income and included in the total income which has been disallowed as a deduction by the Income-tax Officer. No such plea has been put forward here. There is no occasion to apply the said princi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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