TMI Blog1978 (4) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... m undisclosed sources. On appeal, the AAC, on the basis of certain data relating to circulation figures of the publications of the assessee as supplied to the Audit Bureau of Circulation, held that business income of Rs. 6,92,771 had not been accounted for in the books of the assessee. He held further that the said sum of Rs. 1,63,000 added as income from undisclosed sources was a part of such unaccounted business income. The AAC enhanced the assessment by Rs. 5,29,771. Assessee's further appeal to the Tribunal being dismissed for default, this assessment became final. Penalty proceedings under s. 28 of the Act was initiated by the ITO in respect of the said sum of Rs. 1,63,000 included by him under the head "Other sources". In the said proceedings, the assessee contended that after the AAC's order, the said sum of Rs. 1,63,000 could not be treated as income from undisclosed sources and the enhancement by the AAC was not the subject-matter of the penalty proceedings. The penalty proceedings were, therefore, not maintainable. The ITO rejected the contentions of the assessee and passed an order on the 8th August, 1963, levying a penalty of Rs. 2,70,000. He took into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty in respect of the understatement of business income was bad in law ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the ITO was not competent to initiate or levy penalty in respect of the enhancement made by the AAC ? " Mr. Pranab Pal contended that the said questions as proposed by the Commissioner must be held to have been rejected by the Tribunal. The Tribunal has framed and referred to this court entirely new questions which were never asked for or proposed by the Commissioner and the court should refrain from answering the questions. Mr. B. L. Pal, learned counsel for the revenue, contended on the other hand that this court has power to reframe the questions referred so as to pinpoint the real issue. In support of his contentions Mr. B. L. Pal cited a decision of the Supreme Court in CIT v. Smt. Anusuya Devi [1968] 68 ITR 750 (SC). Mr. Pranab Pal in reply cited CIT v. Burmah Shell Oil Storage and Distribution Co. of India Ltd. [1978] 115 ITR 891 (Cal), where it was reiterated by this court that the Tribunal has no power to refer any question of law suo motu. Mr. B. L. Pal finally submitted that he wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be any dispute that the assessee concealed particulars of its income or deliberately furnished inaccurate particulars thereof and the penalty imposed by the ITO could not be bad in law. Mr. Pranab Pal contended on the other hand that the ITO had not questioned the correctness of the business accounts from undisclosed sources of which Rs. 1,63,000 would be assessed as such during the financial year 1952-53. The AAC was, therefore, not competent to enhance the business income except possibly to the extent of Rs. 2,50,000. Mr. Pranab Pal contended further that neither the findings nor the jurisdiction of the Tribunal have been challenged. Except the order of the AAC in the quantum appeal no other evidence was relied on or adduced in the penalty proceedings by the revenue. This evidence having been rejected by the Tribunal there was no other evidence before the Tribunal to sustain the penalty. The finding of the ITO as to the nature of the added sum of Rs. 1,63,000 was accepted and the finding of the AAC that the same was "income from business" was rejected by the Tribunal. In support of his contentions Mr. Pranab Pal cited CIT v. Anwar Ali [1970] 76 ITR 696 (SC) and CIT v. Kho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs by him but not by any other authority. s. 271 of the I.T. Act, 1961, according to Mr. Pranab Pal, did not bring about any material change in the law. Mr. Pranab Pal contended that in the instant case, the ITO initiated penalty proceedings in respect of an item of income under a particular head which was deleted in appeal but levied penalty in respect of another concealed item of income which was enhanced in appeal but under another head. This the ITO had no jurisdiction to do. In support of his above contentions Mr. Pranab Pal cited CIT v. Shadiram Balmukand [1972] 84 ITR 183 (All), where the ITO included certain amounts in the assessment of the assessee as undisclosed income and initiated proceedings for levy of penalty in respect thereof. In appeal, the AAC also included a sum of Rs. 46,601 as income from undisclosed sources. The ITO imposed a penalty of Rs. 10,000 taking into account the inclusion made by the AAC. The Tribunal set aside the order of penalty as not being severable as between the two assessments. On a reference, the Allahabad High Court held that the language of sub-s. (1) of s. 28 indicated that the authority imposing penalty can do so only upon being sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er disappeared when the Appellate Assistant Commissioner held in the assessment proceedings that there was no suppression of income by the assessee. " Mr. Pranab Pal last cited CIT v. Dwarka Prasad Subhash Chandra [1974] 94 ITR 154 (All). In this case, the ITO initiated proceedings for penalty under s. 271(1) of the I.T. Act, 1961, and referred the matter to the IAC. In the meantime, on appeal by the assessee before the AAC against the assessment, the income assessed by the ITO was enhanced by Rs. 21,560. The IAC made an order levying penalty of Rs. 60,582 taking into consideration not only the findings of the ITO but also the enhancement directed by the AAC. On appeal, the Tribunal reduced it only to the extent of the concealed income discovered by the ITO. On a reference, the Allahabad High Court took the view that the IAC had no jurisdiction to impose penalty on the findings of the AAC. Mr. B. L. Pal, however, contended that though the ITO originally initiated the penalty proceeding in respect of the said sum of Rs. 1,63,000 as concealed income of the assessee from "Other sources" yet he was competent to take into account in the proceedings for penalty the subsequent decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce their case any further. They have little application to the facts before us. In the instant case, we are not concerned with an appeal from assessment but the power and jurisdiction of the ITO in penalty proceedings. The Allahabad High Court in the cases of Shadiram Balmukand [1972] 84 ITR 183 and Dwarka Prasad Subhas Chandra [1974] 94 ITR 154 and the Gujarat High Court in the case of Lakhdhir Lalji [1972] 85 ITR 77 have held that when the original basis of initiation of the penalty proceeding is altered or modified by the appellate authority, the authority initiating the penalty proceedings has no jurisdiction thereafter to proceed on the basis of the findings of the appellate authority. These cases have neither been distinguished by Mr. B. L. Pal nor has he cited any authority to the contrary. We respectfully follow the said decisions. The AAC in the case before us admittedly modified the original assessment and held that the said sum of Rs. 1,63,000 was not concealed income of the assessee from "Other sources" as held by the ITO but was concealed "Business income" and also enhanced the business income of the assessee on other evidence. Therefore, it was no longer open to the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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