D.K Kapur, J.:— The present petition under section 256(2) of the Income-tax Act, 1961, seeks a reference of the following question:
“Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that the failure on the part of the ITO to specify the particular item/items of the additions on which penalty under s. 271(1)(c) may be levied was such as to vitiate the validity of the penalty proceedings under s. 271(1)(c)?”
2. The question has arisen because the assessee who had declared an income of Rs. 1,16,490 was assessed by the Income-tax Officer on an income of Rs. 1,64,212 which was reduced in appeal to Rs. 1,46,490.
3. According to the Department, the assessee had certain concealed income which can be determined from the fact that household expenses had been underestimated and travelling expenses of family and club expenses as well as medical expenses which had been reimbursed had not been shown properly. This is what has led to the addition made to the returned income.
4. This was followed by penalty proceedings under section 271(1)(c) which led to an order by the Income-tax Officer imposing a penalty of Rs. 33,382. An appeal by the assessee led to the cancellation of the penalty on the ground that the basis of the penalty proceedings had not been disclosed to the assessee who was put in a difficult position to defend the matter under section 274(1) and in the absence of a reasonable opportunity of being heard, the objection regarding the penalty was well-founded and, therefore, the same had to be cancelled.
5. An appeal was taken by the Department against the cancellation of the penalty and cross-objections were filed by the assessee on the ground that the learned Commissioner in appeal should have given a finding on merits also. Both the appeal and the cross-objection failed. This has led to the application before us.
6. The Tribunal had also rejected the application under section 256(1) on the ground that the finding by the Tribunal regarding lack of reasonable opportunity was a finding of fact and the judgment in Guduthur's case, [1960] 40 ITR 298 (SC) was distinguishable as found by the Tribunal.
7. Learned counsel for the Department contended that a question of law does arise as proposed, because the additions made to the income by the Income-tax Officer during the assessment proceedings were additions known to the assessee and, therefore, he had a reasonable opportunity of defending each one of them. It may hardly be mentioned that in order to constitute a penalty under section 271(1)(c), what is required is a concealment, either of the income or of the particulars thereof. In order to enable such a penalty to be imposed, it is necessary to determine which is the income concealed or which are the particulars not disclosed. It is on this aspect of the question that the Tribunal held that the jurisdictional fact necessary to constitute an offence had not been disclosed. The Tribunal stated in the order as follows:
“At this stage, it would also be relevant to note that in the instant case, penalty was imposed by the ITO not regarding any particular receipt as such but only on the footing that the household expenditure was estimated by the ITO at Rs. 35,000 (the said estimate having been reduced by the Tribunal to Rs. 24,000) and the withdrawals by the assessee for household expenditure came to Rs. 8,343 only. Inasmuch as the addition was made as being income from undisclosed sources, the source of income could not be said to have been identified and thus there could arise no question of any inaccurate particulars of income having been furnished. In these circumstances, we do not consider that the learned Commissioner went wrong when he did not remand the matter to the ITO for fresh decision. The Department fails.”
8. Actually, the Commissioner in his order had come to the conclusion that the assessee did not have a reasonable opportunity of being heard in accordance with section 274. In other words, both the Commissioner of Income-tax (Appeals) as well as the Tribunal were of the view that the assessee did not get a proper chance to defend the penalty proceedings. Though this seems at first sight to be an exaggeration, it can be explained in the following way.
9. If a person is accused of a particular offence of which particulars are given to him, he has a chance of giving his defence thereto. If he is generally accused of some offence of an unknown type, he cannot easily defend himself. The additions which were made during the assessment proceedings in this case were based on certain surmises, conjectures and deductions regarding possible household expenses and other expenses incurred by the assessee. In penalty proceedings, it was not only necessary to inform the assessee of the particular concealment but also accessary for the Department to prove positively that there was such in concealment. In such a case, it becomes the duty of the Department to inform the assessee of the particular concealment that had taken place so that he could defend the case. This has led to the cancellation of the penalty order both by the Commissioner as well as the Tribunal which has merely affirmed the Commissioner's order.
10. It was contended by Mr. Wazir Singh that the proper course in such; a case was to remand the case for re-decision. We would not like to-say anything on-this matter because if the principles governing quasicriminal matters are applied, there are some cases in which a re-trial can be ordered and others in which the trial has to be set aside completely. As to, which category this case falls, we would not like to decide when we are only considering whether a question of law arises from the order or not. However, we may point out that the learned counsel for the assessee has brought to our notice that section 251(1)(b) does not allow the Commissioner of Income-tax or the Appellate Assistant Commissioner to remand a penalty case.
11. We have also been referred to the case of Guduthur Bros. v. Income Tax Officer, Special Circle, Bangalore , [1960] 40 ITR 298 (SC) in which the Appellate Assistant Commissioner set aside the Income-tax Officer's order under section 28(1)(a) of the 1922 Act. There also there was no remand to the Income-tax Officer. We think we should not say anything about the application of the said judgment to the facts of the presents case because there is a great variation between the provisions of the 1922 Act and the 1961 Act, specially on the question of time-limit and other aspects of penalty cases. We do not think this is a case in which we should call for a reference as it is a mere decision in this case that the penalty has not been imposed in accordance with proper procedure, or in consonance with natural justice, which is a question of fact and not of law. We would accordingly reject the application. No costs.