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Commissioner of Income-tax Vs. G.L. Textiles - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 849 of 1972
Judge
Reported in[1977]109ITR37(All)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax
RespondentG.L. Textiles
Appellant AdvocateDeokinandan, Adv.
Respondent AdvocateR.K. Gulati, Adv.
Excerpt:
- .....in the name of smt. shrimati devi and smt. vijaya laxmi devi. on appeal before the appellate assistant commissioner, these additions were upheld, but the total income was reduced from rs. 81,786 to rs. 71,786. on further appeal before the tribunal, these additions were again upheld. thereafter, proceedings for imposition of penalty were started under section 271(1)(c) of the act. as the minimum penalty imposable was over rs, 1,000 the income-tax officer referred the matter to the inspecting assistant commissioner, the inspecting assistant commissioner issued a show-cause notice to the assessee in response to which it was stated on behalf of the assessee, that the amounts of cash credits were treated as the assessee's income merely for want of satisfactory evidence, and there was no.....
Judgment:

C.S.P. Singh, J.

1. The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has under Section 256(2) of the Income-tax Act, 1961, referred the following question for our opinion :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in cancelling the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961 ?'

2. The facts necessary for the decision of this reference may be shortly stated. The assessee is a registered firm and carried on the business ofmanufacturing of tents, etc. For the year 1964-65, it filed a return showing an income of Rs. 43,395. The Income-tax Officer assessed the income at Rs. 81,786 by making certain additions including an amount of Rs. 15,000 standing in the name of Smt. Parvati Devi and two other cash credits of Rs. 5,000 each standing in the name of Smt. Shrimati Devi and Smt. Vijaya Laxmi Devi. On appeal before the Appellate Assistant Commissioner, these additions were upheld, but the total income was reduced from Rs. 81,786 to Rs. 71,786. On further appeal before the Tribunal, these additions were again upheld. Thereafter, proceedings for imposition of penalty were started under Section 271(1)(c) of the Act. As the minimum penalty imposable was over Rs, 1,000 the Income-tax Officer referred the matter to the Inspecting Assistant Commissioner, The Inspecting Assistant Commissioner issued a show-cause notice to the assessee in response to which it was stated on behalf of the assessee, that the amounts of cash credits were treated as the assessee's income merely for want of satisfactory evidence, and there was no evidence on the record to show that these cash credits were really concealed income of the assessee. It was also urged that the creditors admitted having made the deposits and, as such, the penalty provisions of Section 271 were riot attracted. These contentions did not find favour with the Inspecting Assistant Commissioner, and a penalty of Rs. 3,900 was thereupon imposed by him. The assessee preferred an appeal to the Tribunal. The Tribunal pointed out that as respects the addition of Rs. 15,000 standing in the name of Smt. Parvati Devi, the department had accepted as genuine the deposit amount of Rs. 10,000, and the balance amount of Rs. 5,000 was added to the assessee's income for want of satisfactory evidence. Similar was the position with respect to the other cash credits. In view of this, the Tribunal held that the provisions of Section 271(1)(c) of the Act were not attracted. The penalty imposed by the Inspecting Assistant Commissioner was accordingly set aside.

3. Counsel for the revenue has raised only one contention that inasmuch as the return of income of the assessee was less than 80% of the assessed income, the Explanation to Section 271 was attracted, and the Tribunal erred in ignoring the Explanation while cancelling the penalty. The argument is misconceived. It does not appear from the record that the revenue at any stage relied on the Explanation to Section 271 for sustaining the penalty. The Inspecting Assistant Commissioner imposed the penalty after considering the explanation of the assessee on merits. The appeal before the Tribunal was not resisted by the revenue on this ground. Apart from this consideration, there is another hurdle in the acceptance of this argument. The Explanation to Section 271 does not apply merely because the returned income is less than 80% of the assessed income. It comes into play only after the assessed income is recalculated for the purpose of theExplanation by reducing it by the expenditure incurred bona fide by the assessee for the purpose of earning any income included in the total income which has been disallowed as a deduction by the Income-tax Officer. Thus, before the resort to the Explanation can be had, data by way of the expenditure incurred by the assessee for earning the income has to be available on the record before the Explanation can be applied to any particular case. Such data is not available on the record of this reference nor has the Inspecting Assistant Commissioner gone into this question. In view of these circumstances, we are unable to uphold the contention raised on behalf of the revenue. No other contention has been advanced.

4. We, accordingly, answer the question referred in the affirmative, against the department and in favour of the assessee. The assessee is entitled to its costs which is assessed at Rs. 200.


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