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Commissioner of Income-tax Vs. K.L. Mangal Sain - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 642 of 1972
Judge
Reported in[1977]107ITR598(All)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax
RespondentK.L. Mangal Sain
Appellant AdvocateR.R. Misra, Adv.
Respondent AdvocateS.D. Agarwal, Adv.
Excerpt:
- .....the difference between the income returned and the correct income did not arise from any gross or wilful neglect on his part. on this view he held that the assessee was liable to penalty and imposed the penalty of rs. 6,200.4. on appeal before the tribunal it was urged on behalf of the assessee that it has been established that it was not guilty of fraud or gross or wilful neglect. it was submitted on behalf of the assessee that the book version was rejected and profit was determined by applying a flat rate for want of proper verification. the tribunal held that these facts may constitute sufficient material for making certain addition in the assessment but it does not follow that there was any fraud or gross or wilful neglect on the part of the assessee. the mere fact that the book.....
Judgment:

Satish Chandra, J.

1. For the assessment year 1965-66 the assessee's book version was rejected on the ground that the expenses and receipts were not verifiable for the truck business and the day-to-day yield record showing quantitative details of timber was not maintained in respect of forest business. The book version was also rejected because it showed low margin of profit. Certain expenses claimed by the assessee were also disallowed. As against the returned income of Rs. 55,556 the Income-tax Officer computed the correct income at Rs. 98,083.

2. The assessee went up in appeal. The Appellate Assistant Commissioner confirmed the finding with regard to the rejection of the account books but he reduced the correct income to Rs. 76,659.

3. The Income-tax Officer initiated penalty proceedings and referred the matter to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner held that for not maintaining the record and quantitative details of timber for forest and by not keeping the receipts in truck account and because the expenses in mostly all accounts were not detailed and vouched, the assessee-firm committed gross negligence and has not discharged the onus of proving that the difference between the income returned and the correct income did not arise from any gross or wilful neglect on his part. On this view he held that the assessee was liable to penalty and imposed the penalty of Rs. 6,200.

4. On appeal before the Tribunal it was urged on behalf of the assessee that it has been established that it was not guilty of fraud or gross or wilful neglect. It was submitted on behalf of the assessee that the book version was rejected and profit was determined by applying a flat rate for want of proper verification. The Tribunal held that these facts may constitute sufficient material for making certain addition in the assessment but it does not follow that there was any fraud or gross or wilful neglect on the part of the assessee. The mere fact that the book version has not been accepted could not lead to any finding to the effect that there was any fraud or gross or wilful neglect on the part of the assessee. On this view the penalty order was cancelled.

5. At the instance of the Commissioner of Income-tax, the Tribunal has referred the following question of law for the opinion of this court:

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has quashed the penalty order imposed by the Inspecting Assistant Commissioner on a correct application of the Explanation to Section 271(1)(c) of the Income-tax Act 1961 ?'

6. The Explanation aforesaid placed the burden upon the assessee to prove that there was no gross or wilful neglect, where the returned income wasless than 80% of the correct income. A perusal of the order of the Tribunal leads us to the conclusion that it proceeded on the basis that the burden of proof was upon the assessee. The only fact proved was that the assessee had not maintained the accounts regularly, for which reason they were rejected. The correct income was estimated by applying a flat rate. On these facts the Tribunal held that it could not be said that the assessee was guilty of fraud or gross or wilful neglect.

8. In our opinion, the Tribunal applied the Explanation from a correct viewpoint. It did not place the burden of proof upon the department. In this view the question referred to us is answered in the affirmative and against the department. The assessee will be entitled to costs which we assess at Rs. 200. The fee of the learned counsel for the department is also assessed at the same figure.


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