HIGH COURT OF DELHI 

ORDER 

BY THE COURT : 

This is a petition under section 256 (2) of the IT Act, 1961 (for short the Act) seeking a direction to the Tribunal, Delhi, to draw up a statement of the case and refer the following question for the opinion of this Court : 

"Whether the Hon'ble Tribunal was justified in law in upholding the order of CIT(A), canceling the penalty under section 271(1) (c) at (of) Rs. 4,29,520?".

2. The business premises of the assessee were searched on 30th April, 1987, by the officers of Directorate of Revenue Intelligence, which resulted in the recovery of cash amounting to Rs. 6,36,000, which was seized. On requisition the amount was remitted to the IT Department. During the course of assessment proceedings for the asst. yr. 1988-89, when the assessee was required to explain the source of the said cash, it was stated that the said cash was the sale proceeds of cloth sold by the assessee between the period from 16th March, 1987, to 3rd April, 1987. It was claimed that the sale was made out of the cloth purchased by the assessee from one Banarsi Das Shankar Lal of Secunderbad through an agent S.R. Textiles. The assessee was asked to furnish evidence in support of its said stand. However, after seeking a few adjournments, the assessee filed a revised return declaring a total income of Rs. 6,40,300, instead of Rs. 95,859, declared earlier. The return was captioned "without prejudice" and in the accompanying letter it was stated that the assessee was surrendering Rs. 5,50,442 as business income for the asst. yr. 1988-89 and requested that penalty and prosecution proceedings may not be initiated. Assessment was completed on the basis of the said revised return. 

3. Proceedings under section 271(1) (c) of the Act were initiated against the assessee for concealing the particulars of its income. After hearing the assessee, the AO imposed a penalty of Rs. 4,29,520 upon the assessee. 

4. Aggrieved by the penalty order, the assessee filed an appeal to the CIT(A), who deleted the penalty, holding that the revised return was filed by the assessee to buy peace of mind and avoid litigation. Revenue's appeal to the Tribunal against the order of the CIT(A) was unsuccessful. While affirming the order of the CIT(A), the Tribunal observed that the AO had not detected any concealment and merely because the assessee had surrendered the amount in the revised return, penalty under the said section cannot be levied. The Tribunal finally held as follows : 

"Availability of cash with the assessee is fully supported by entries of purchases and sales in the books of accounts, the AO in order to verify claim of purchases wrote letter dt. 2nd November, 1987, to the seller Banarsi Das Shankar Lal. Vide their reply dt. 7th November, 1987, they confirmed sales made to the assessee through S.R. Textiles. With the letter the party annexed complete details of transport of goods sold. The AO did not refute claim of the seller by bringing any adverse material on record. He examined Rajinder Prasad, prop. of S.R. Textiles at the back of the assessee. The General observations like abnormal purchases and sales in March, 1987, etc. etc. cannot sustain charge of concealment. The surrender of income made in the revised return has already been explained and CIT(A) in our consideration opinion rightly accepted the explanation of the assessee. There is, therefore, nothing on record to show that explanation of assessee relating to availability of cash was not bona fide or false. The charge of concealment of income or furnishing of inaccurate particulars of income has not been established." 

5. It is vehemently argued by Mr. Sanjeev Khanna, learned senior standing counsel for the Revenue, that the above said question is a question of law and the Tribunal ought to have referred the same to this Court for opinion. Relying on CIT vs. Lal Chand Tirath Ram (1997) 140 CTR (P&H) 583: (1997) 225 ITR 675 (P&H) : TC S50.4000, it is submitted by Mr. Khanna that the assessee having failed to substantiate its stand by adducing evidence, by producing the parties to whom the cloth was allegedly sold, the assessee failed to discharge the onus cast on it under Expln. 1 to section 271(1) (c) and, therefore, the Tribunal erred in law in deleting the penalty. 

6. We are unable to agree with learned counsel for the Revenue. From the afore-extracted paragraph of the Tribunal's order, it is evident that while accepting the explanation given by the assessee with regard to the availability of cash as bona fide, the Tribunal has also found as a fact that availability of cash with the assessee is fully supported by the entries of purchases and sales in the books of account. The question proposed by the Revenue does not lay a specific challenge to the correctness of these findings arrived at by the Tribunal. That being so, the stand of the Revenue that the assessee has failed to discharge the initial onus under Expln. 1 cannot be accepted. 

We are, therefore, of the view that on the facts found by the Tribunal, which remain unchallenged, the question as framed, is not a question of law fit for reference to this Court. The petition is accordingly dismissed but with no order as to costs.

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