TMI Blog1974 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is in the affirmative, whether the Commissioner of Income-tax had waived the penalty imposable on the assessee for the assessment year 1964-65 ? " In order to understand the scope and ambit of the references, it may be necessary to state a few facts which have culminated in the order of the Tribunal making references to this court at the instance of the assessees. In Income-tax Reference No. 6 of 1973, Messrs. Fairdeal Motors v. Commissioner of Income-tax, the assessees were registered as a firm under the Act with the following partners sharing profits in the ratio shown against each : Shri Bashir Ahmad 25% Shrimati Shama Mir 25% Shri Abdul Rashid 15% Shrimati Hajra Begum 19% Shri Ghulam Qadir 8% Shrimati Fatima Begum 8% There was another concern known as New Bharat Transporters which was supposed to be a branch of the Fairdeal Motors, but whose income was not included or shown by the assessee-firm, Fairdeal Motors. The present reference arises out of the income of the assessee for the assessment years 1964-65 and 1965-66. The main grievance of the assessee was actually against the order of the Inspecting Assistant Commissioner who imposed penalties on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions:--- (i) A minimum penalty of 20% will be imposed under section 271(1)(c) on Messrs. Fairdeal Motors in respect of the income of New Bharat Transporters which is now agreed to be a branch of the former for the years 1963-64 to 1967-68. (ii) A minimum of 20% will be imposed under section 271(1)(c) on Shri Bashir Ahmad in respect of the income of Nav Bharat Transporters which is now agreed to be the proprietary concern of Shri Bashir Ahmad for the years 1964-65 to 1967-68. (iii) In arriving at the income of Messrs. New Bharat Transporters the story of hiring of truck from the minor children of Shri Bashir Ahmad and Shrimati Shama Mir will not be accepted and the entire income including the alleged payment to the minors will be treated as the income of Messrs. Fairdeal Motors. You are requested to furnish the written concurrence of Shri Bashir Ahmad, Shrimati Shama Mir and Messrs. Fairdeal Motors to the terms set out in this letter by the 16th instant and also to produce the books of Nav Bharat Transporters and New Bharat Transporters immediately before the Income-tax Officer." The terms and conditions contained in this letter were categorically accepted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in deliberately concealing their income. It was contended that during the penalty proceedings no inquiry was made into this aspect of the matter as held by this court in Sadiq Ali's case and other cases of the Supreme Court which this court followed. On the other hand, the standing counsel for the revenue submitted that as this point raised by the assessees has not been referred by the Tribunal to this court and could not by any stretch of imagination he said to be contained or included in the questions of law formulated by the Tribunal, this court cannot go into this point. Mr. Sharma, however, cited a large number of authorities in support of the proposition that even if a point of law is not directly mentioned in the questions framed by the Tribunal, but is indirectly included or contained within its ambit it can be raised before the High Court. It is not necessary for us to refer to the authorities cited by the counsel for the assessees, because there can be no dispute with this proposition. The main point is whether the question of wilful neglect or deliberate concealment can be held to be included either expressly or impliedly in the questions of law framed by the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessee to be exercised by him for applying to the High Court in order to call for a reference from the Tribunal within a period of six months from the date of such refusal. It is, therefore, manifestly clear that if no application is made to the High Court, the right conferred by this statute on the assessee became time-barred and cannot be revived indirectly by asking the High Court to consider this question on a reference made by the Tribunal on other points. We are fortified in this view by a decision of the Supreme Court, in Kamlapat Motilal v. Commissioner of Income-tax, wherein their Lordships of the Supreme Court observed as follows : " The learned advocate for the assessee has, however, made a grievance of the rejection of the assessee's petition under sub-sections (4) and (5) of section 66 of the Income-tax Act by the High Court. He has contended that the first question and the third question were inter-connected and even though the Tribunal had refused to refer the first question, it was open to the High Court to ask the Tribunal to state a case on the first question also. We are unable to agree. Section 66(4) states clearly that if the High Court is not satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in N. V. Khandvala v. Commissioner of Income-tax, wherein Kania J. (as he then was), speaking for the court, observed as follows : " When a statement of case, with the question of law framed by the Tribunal, is filed in court for disposal, if a party is aggrieved and wants to contend that certain further facts ought to be stated, or certain questions of law should be raised, he can make an application by way of notice of motion. That should be heard along with the case stated by the Tribunal for the court's opinion. At that time the court will consider whether the statement of case is complete for the question of law raised by the Tribunal." In this case the learned judge has indicated the procedure by which an aggrieved party can be allowed to raise additional facts before the High Court by a notice of motion to be filed at the proper stage. Heavy reliance was placed by the learned counsel for the assessee on this case. This case, however, does not apply to the facts of the present case because in that case the facts which were sought to be raised were included in the questions of law referred to by the Tribunal but had not been taken into account by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal." From a perusal of this decision it would be clear that the point was allowed to be raised because it was implicit in the question of law framed by the Tribunal. No authority has been cited before us where a point of law raised before the Tribunal was expressly rejected and the Tribunal refused to make a reference to this court, and yet without complying with the procedure laid down in section 256(2) of the Act the High Court allowed the point to be raised before it in the reference made by the Tribunal on other questions. Finally, it seems to us that the question whether the penalty was actually exigible or not would depend upon certain investigation of facts from which an inference of deliberate concealment or wilful negligence could be drawn. These facts had first to be pleaded and proved and could not be raised for the first time before the High Court, because the High Court was not competent to go into questions of fact. If the assessees would have pleaded and raised th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch income, voluntarily and in good faith, made full and true disclosure of such particulars ; (b) has co-operated in any enquiry relating to the assessment of such income ; and (c) has either paid or made satisfactory arrangements for payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year." It would be seen that this section was introduced by the Income-tax Amendment Act of 1965 passed on March 12, 1965. This is undoubtedly a beneficial provision and as it is meant to give relief to the assessees it would apply to proceedings which were pending on the date when the amendment came into force. It seems to me that the main object of enshrining this salutary provision in the Act was to facilitate voluntary disclosures of concealed income by holding out temptation to the assessees by giving them substantial relief against penalties which they otherwise would have incurred. In other words, the cardinal object of the Amendment was to unearth black money and get hold of concealed incomes by persuading big and affluent assessees to surrender their incomes or assets which they had concealed in their returns. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich applies to this case makes the penalty exigible in cases where the assessee has concealed the particulars of his income at the time of filing the return. This appears to be the combined effect of sections 139 and 271(1)(c). Thus, when the assessee filed his return by concealing the particulars of a concern which according to him was a part of his firm, he clearly fell within section 271(1)(c) and the penalty was attracted not when it was levied but at the time when the assessee filed his return. In the instant case it is common ground at the assessees had filed their return in which the income from the New Bharat Transporters and interest were admittedly not shown The assessees, therefore, incurred the liability to pay penalty the moment they filed their return before the Income-tax Officer. It is also common ground that the agreement with the Commissioner was entered into by the assessees after they had filed their return and when they realized that certain omissions had been made. Moreover, I am fortified in my opinion by the language of section 271(4A)(ii)(a) particularly the words, " and in the case referred to in clause (ii) of this sub-section, has prior to the detect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints covered in these proposals are concerned......" It would be seen from the tone and tenor of the letter that there is no tacit admission of guilt by the assessees, but they merely wanted to benefit from the provisions of section 271(4A) with a view to buying peace of mind and shorten litigation with the income-tax department. It was in this spirit that the assessees accepted the proposals of the Commissioner and the conditions imposed by him. The Commissioner was undoubtedly satisfied that the proposal which was made to him was made voluntarily and in good faith and that the assessees had in fact disclosed the income which they had not shown in their returns, namely, the receipts of the New Bharat Transporters as also interest accruing thereon and had further agreed to treat the New Bharat ransporters as part of the firm of Fairdeal Motors. Thus, all the conditions mentioned in section 271(4A)(ii)(a) had been fulfilled and it was now left to the discretion of the Commissioner to reduce or waive the amount of penalty. ln these circumstances I do not agree with the Tribunal that the conditions specified in section 271(4A) were not at all satisfied in this case. The other po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is whether by virtue of the order the Commissioner of Income-tax in fact reduced or waived the penalty below the minimum provided for in the statute or restricted it to 20% attributable to income from the New Bharat Transporters. From a persual of the letter of the Commissioner (supra) it would appear that the Commissioner, in view of the frank and fair admissions made by the assessees, wanted to take a very lenient view of the matter, and while reducing the penalty the Commissioner has clearly mentioned that a minimum penalty of 20% would be imposed on the Fairdeal Motors only in respect of the income of New Bharat Co. for the assessment years 1963-64 and 1967-68. It is manifest that the Commissioner had ample powers under section 271(4A) of the Act either to waive the penalty completely or to give substantial relief to the assessee by reducing the penalty, and, to this extent, therefore, the amendment of section 271(4A) must be deemed to have modified the provisions of section 271(1) which prescribes the mode and manner of penalties. If the Commissioner had made it clear in his order that the penalty would be liable not on the income of the firm but only on the income which ..... 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