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Commissioner of Income-tax Vs. Musaddi Lal Singh - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 723 of 1972
Judge
Reported in[1977]106ITR672(All)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax
RespondentMusaddi Lal Singh
Appellant AdvocateR.R. Misra, Adv.
Respondent AdvocateS.D. Agarwal, Adv.
Excerpt:
- - the explanation to section 271(1)(c) merely provides that where the returned income is less than 80% of the income actually assessed, it would unless proved otherwise be presumed that the failure to return the correct income was due to fraud or gross or wilful neglect on the part of the assessee. on the finding recorded by the tribunal it appears that the assessee had satisfied the tribunal that the neglect, if any, on its part was neither fraudulent nor gross or wilful......of the department that the present one was not a case where the assessee had been wilfully and grossly negligent in supplying the particulars of its income. the appellate tribunal found that the term 'gross or wilful neglect 'covers cases where the assessee files its return without caring to ascertain (whether deliberately or recklessly) that it is based on correct facts. it further observed that if the books, as were maintained by the assessee in this case, appeared to have been maintained honestly and it honestly believing that maintenance of such books was sufficient for true ascertainment and estimation of its profits, filed its return on their basis, it could hardly be said that the assessee had been grossly or wilfully negligent in filing its return. in substance the finding of.....
Judgment:

H.N. Seth, J.

1. The Income-tax Appellate Tribunal (Delhi Bench) has stated the case and 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 correctly applied the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, and was right in law in cancelling the penalty order ?'

2. The assessee is a registered firm carrying on business as a country liquor contractor. The assessment year in question is 1964-65. The corresponding previous year ended on March 31, 1964. As against the returned income of Rs. 15,539 the Income-tax Officer determined the total income of the assessee at Rs. 58,510. This included a sum of Rs. 52,000 representing net profit from liquor business arrived at by applying a profit rate of 8% on the estimated sale turnover of the assessee, amounting to Rs. 6,50,000, In appeal, the assessment was confirmed by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal, however, modified the assessment and estimated assessee's total income as Rs. 41,669.

3. Subsequently, the Inspecting Assistant Commissioner, acting under Section 271(1)(c) of the Income-tax Act, imposed a penalty of Rs. 11,000 on the assessee. The assessee thereupon filed an appeal before the Tribunal and contended that it had filed its return correctly and honestly. It kept regular books of account including cash book, ledger, journal, excise registers with complete quantitative stock and excise register which was periodically checked by the excise department officers. The only defect for which its books were not accepted was that cash sales made by the assessee, in loose bottles, were not verifiable. It was asserted that in these circumstances it could not be said that the assessee was grossly or wilfully negligent in furnishing the details of its income. Before the Income-tax Appellate Tribunal, it was conceded on behalf of the department that the present one was not a case where the assessee had been wilfully and grossly negligent in supplying the particulars of its income. The Appellate Tribunal found that the term 'gross or wilful neglect 'covers cases where the assessee files its return without caring to ascertain (whether deliberately or recklessly) that it is based on correct facts. It further observed that if the books, as were maintained by the assessee in this case, appeared to have been maintained honestly and it honestly believing that maintenance of such books was sufficient for true ascertainment and estimation of its profits, filed its return on their basis, it could hardly be said that the assessee had been grossly or wilfully negligent in filing its return. In substance the finding of the Income-tax Appellate Tribunal is that considering the circumstances of the case the assessee has made out a case that it was neither grossly nor wilfully negligent in filing its return. The Explanation to Section 271(1)(c) merely provides that where the returned income is less than 80% of the income actually assessed, it would unless proved otherwise be presumed that the failure to return the correct income was due to fraud or gross or wilful neglect on the part of the assessee. On the finding recorded by the Tribunal it appears that the assessee had satisfied the Tribunal that the neglect, if any, on its part was neither fraudulent nor gross or wilful. In our opinion the Tribunal has correctly applied the law laid down in the Explanation to Section 271(1)(c) of the Income tax Act to the facts of the present case. We, accordingly, answer the question referred to us in the affirmative and in favour of the assessee. As no one has appeared on behalf of the assessee, we direct the parties to bear their own costs. The fee of the counsel for the department is assessed at Rs. 200.


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