P.K. Balasubramanyan CJ.

The Income Tax Appellate Tribunal, Patna, has referred the following question to this court under section 256(1) of the Income Tax Act

"Whether on the facts and in the circumstances of the case, the imposition of penalty under section 271(1)(c) of the Income Tax Act amounting to Rs. 2,20,000was legal and valid".

2. During the course of the assessment for the assessment year 1985-86, the assessing officer noticed that a sum of Rs. 2,96,575 was shown by the assessee as an amount due to sundry creditors, but that the said amount was not an amount payable by the assessee, but the said amount was one which was already received by the assessee and credited to its bank account, though, the certificate for deduction of tax at source had not been received. The assessee had earlier filed a revised return continuing to show the sum of Rs. 2,96,575 as due to sundry creditors. After the aspect was highlighted by the assessing officer, the assessee filed yet another revised return accepting the receipt of the sum of Rs. 2,96,575 as having been received on 27-7-1984. The assessee did not account for the other receipt totalling Rs. 46,464 which also formed part of the gross receipt of the assessee. Ultimately, the assessing officer completed the assessment adding a sum of Rs. 2,96,575 and a sum of Rs. 46,464 as the income of the assessee. The said assessment became final, the assessee not having appealed against it.

3. The assessing officer initiated penalty proceedings under section Rs. 3,43,239. The assessee resisted the penalty proceedings by submitting that he had included the sum of Rs. 2,96,575 as income in his revised return and the assessing officer had completed the assessment accepting that position and no occasion for the imposition of penalty based on that addition existed in the case. The sum of Rs. 46,464 could not be brought into account by the assessee due to non-receipt of the certificate of the tax deducted at source and the assessee had not concealed that income wilfully. The assessing officer held that the assessee had declared the income in the revised return only after the detection of the same by the assessing officer and in that situation, penalty was liable to be imposed on the assessee under section 271(1)(c) of the Act. The penalty of Rs. 2,20,000 was imposed. The assessee appealed before the Commissioner (Appeals). The assessee contended that he intended to account for the amount on completed projected basis since he had undertaken a new project of erection of sulphuric acid plant in the year 1983. Accordingly, the receipt of Rs. 4,44,815 during the calendar year 1983 and Rs. 2,96,575 during the calendar year 1984 had been shown in the sundry creditors account instead of being credited to the receipt account. In the year 1985, the project was completed and the entire receipt of Rs. 9,55,653 including the amounts received earlier, had been duly shown as income for the assessment year 1986-87. Thus, the amount of Rs. 2,96,575 was not included in the return for the assessment year 198586. But since, the assessing officer questioned the entry, the assessee had offered the amount for taxation during the relevant accounting year itself in the revised return in order to avoid any controversy. As regards the sum of Rs. 46,464 it was sought to be explained that the assessee received only an advance for the work against the running bills. In the meantime, TDS certificate had not been received and it alone could have reflected the details of the recoveries. Failure to include the amount in the return could not be attributed to any effort at concealment of the income. The books of account of the assessee had been audited and all the amounts received finally had been accounted for in the books. The Commissioner (Appeals) accepted these contentions of the assessee and verified the profit and loss accounts for the assessment year 1986-87 and accepted the case that the total receipt had been accounted