SUDARSHAN SILKS AND SAREES versus COMMISSIONER OF INCOME TAX, KARNATAKA

Citation: [2008] 6 S.C.R. 456 · Decided: 11-04-2008 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

(2008] 6 S.C.R 456 
A 
SUDARSHAN SILKS AND SAREES 
v. 
COMMISSIONER OF INCOME TAX, KARNATAKA 
(Civil Appeal Nos. 5204-5207 of 2002) 
B 
APRIL 11, 2008 
[ASHOK BHAN AND DALVEER BHANDARI, JJ.] 
Income Tax Act, 1961: 
s.256 - Reference jurisdiction - Scope of- Question as 
c to perversity of findings of facts recorded by Tribunal - Neither 
raised nor referred to High Court for its opinion - Held: 
Jurisdiction of High Court in reference application is to answer 
question of law that are referred to it - Since finding of fact 
recorded by Tribunal not challenged as being perverse, 
D question of law did not arise. 
s.271(1)(c) - Penalty - Levy of - For concealment of 
income- Held: In facts and circumstances of the case, penalty 
not leviable. 
E 
The Department's case was that the appellant was 
maintaining double set of books and was accounting for 
only 50% of sales in the regular set of books, thus was 
guilty of concealment of income. The assessee came 
forward with an offer of additional income and filed a 
F 
revised return. This was accepted and after verification, 
the assessment was completed. In the course of 
assessment proceedings, penal action under s.271(1)(c) 
of the Income Tax Act was initiated. The assessing Officer 
chose to levy maximum penalty under s.271(1)(c). On 
appeal, the CIT (Appeals) set aside the orders of 
G Assessing Officer holding that in the facts and 
circumstances of the case, no case for levy of penalty 
under s.271(1)(c) was made out. The Tribunal upheld the 
I 
findings recorded by CIT (Appeals). Revenue thereafter 
filed a reference application under s.256(1) of the Act. The 
H 
456 
SUDARSHAN SILKS AND SAREES v. COMMISSIONER 
457 
OF INCOME TAX, KARNATAKA 
Tribunal referred the question to the High Court for its A 
opinion as to whether on the facts and in the 
circumstances of the case Tribunal was right in law in 
upholding the orders of the CIT(A) cancelling the penalty 
levied u/s.271 (1 )(c). 
) 
High Court held that the findings recorded by the 8 
Tribunal and CIT (Appeals) were perverse, which no 
reasonable person could have taken and accordingly 
accepted the reference and held that in the facts of the 
case the penalty under s.271 (1)(c) is clearly exigible. 
Hence the present appeal. 
C 
Allowing the appeals, the Court 
HELD: 1. The question of law referred to the High 
Court for its opinion was, as to whether the Tribunal was 
right in upholding the findings of the CIT (Appeals) in D 
cancelling the penalty levied under s.271(1)(c) of the 
Income Tax Act, 1961. Question as to perversity of the 
findings recorded by the Tribunal on facts was neither 
raised nor referred to the High Court for its opinion. The 
Tribunal is the final court of fact. The decision of the E 
Tribunal on the facts can be gone into by the High Court 
in the reference jurisdiction only if a question has been 
referred to it which says that the finding arrived at by the 
Tribunal on the facts is perverse, in the sense that no 
reasonable person could have taken such a view. In 
F 
reference jurisdiction, the High Court can answer the 
question of law referred to it and it is only when a finding 
of fact recorded by the Tribunal is challenged on the 
ground of perversity, that a question of law can be said to 
arise. Since the frame of the question was not as to G 
whether the findings recorded by the Tribunal on facts 
were perverse, the High Court was precluded from 
entering into any discussion regarding the perversity of 
the finding of fact recorded by the Tribunal. [Para 16] 
[466-E, F, G, H; 467-A, B] 
H 
A 
B 
c 
458 
SUPREME COURT REPORTS 
[2008] 6 S.C.R. 
K. Ravindranathan Nair v. Commissioner of Income Tax 
(2001) 247 ITR 78 (SC); T Ashok Pai v. Commissioner of 
Income Tax (2007) 292 ITR 11 (SC); CIT v. Mukundray K. 
Shah (2007) 290 ITR 433 (SC); Century Flour ills Ltd. v. CIT 
(2001) 247 ITR 276 (SC) - relied on. 
2. In the facts and circumstances of the case, penalty 
under s.271(1)(c) was not exigible. [Para 17] [467-8, C] 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 
5204-5207 of 2002. 
From the final Judgment and Order dated 06.10.2001 of 
the High Court of Karnataka at Bangalore in l.T.R.C. Nos. 684-
687 of 1998. 
WITH 
D 
Civil Appeal Nos. 5208-5209 of 2002. 
Dhruv Mehta, Harshvardhan Jha, Yashraj Singh and 
Gulshan Sharma (for Mis. K.L. Mehta & Co.) for the Appellant. 
K. Radhakrishnan, Neera Gupta (for B.V. Bairam Das) for 
E the Respondent. 
The Judgment of the Court was

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