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Commissioner of Income-tax Vs. Babu Ram Ram Kishan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 333 of 1974
Judge
Reported in[1979]116ITR410(All)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax
RespondentBabu Ram Ram Kishan
Appellant AdvocateAshok Gupta, Adv.
Respondent AdvocateNone
Excerpt:
- - 5. shri ashok gupta, counsel for the revenue, contended that the tribunal erred in holding that in a case where an assessment is a best judgment assessment, the provisions of imposition of penalty laid down under section 271 did not apply. it is not correct that the tribunal held that the penalty is not imposable in a case where the assessment is a best judgment assessment......271(1)(c) of the act. thereupon, the iac issued a notice under section 271(1)(c) calling upon the assessee-firm to explain as to why penalty be not imposed on it for submission of the grossly inadequate returns. the firm submitted a reply and offered an explanation which, it appears, was to the effect that the assessee was not guilty of any fraud or gross or wilful neglect. the explanation offered did not find favour with the iac of income-tax. consequently, he rejected the same and imposed the penalty in all the three years.3. against the orders of the iac of income-tax, the assessee-firm went in appeal to the tribunal. after a review of the entire circumstances and the materials on record, the tribunal held that the explanation offered by the assessee-firm that it could not furnish.....
Judgment:

Satish Chandra, J.

1. At the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal has referred the following question of law for our opinion:

'Whether, on the facts and in the circumstances of the case, there was material on record to justify the finding of the Tribunal that the asses-see could not be charged with the guilt of gross or wilful neglect and that penalty could not be levied under the Expln. to Section 271(1)(c) of the I.T. Act, 1961 ?'

2. The relevant facts which led to the said reference lie in a narrow compass. The respondent is a firm dealing in preparation and sale of sweetmeats at Moradabad, For the years 1966-67, 1967-68 and 1968-69, the firm submitted returns. The ITO found that the assessee disclosed a lower rate of gross profit. On this finding, the ITO applied a higher rate of gross profit whereby the income of the assessee had exceeded the limit specified in the Expln. to Section 271(1)(c) of the Act. Thereupon, the IAC issued a notice under Section 271(1)(c) calling upon the assessee-firm to explain as to why penalty be not imposed on it for submission of the grossly inadequate returns. The firm submitted a reply and offered an explanation which, it appears, was to the effect that the assessee was not guilty of any fraud or gross or wilful neglect. The explanation offered did not find favour with the IAC of Income-tax. Consequently, he rejected the same and imposed the penalty in all the three years.

3. Against the orders of the IAC of Income-tax, the assessee-firm went in appeal to the Tribunal. After a review of the entire circumstances and the materials on record, the Tribunal held that the explanation offered by the assessee-firm that it could not furnish the proper returns as the firm was not maintaining vouchers and receipts was worthy of reliance. The Tribunal hence held that the penalty imposed by the IAC was unjustified. In this view of the matter, the appeal was allowed and the penalty was cancelled.

4. The CIT thereafter filed an application under Section 256(1) for making a reference to the High Court of the question which arose for decision. The application was rejected by the Tribunal. Thereupon he preferred an application under Section 256(2) of the I.T. Act, 1961, which was allowed and the High Court directed the Tribunal to draw up a statement of the case and refer the aforesaid question of law for the opinion of this court.

5. Shri Ashok Gupta, counsel for the revenue, contended that the Tribunal erred in holding that in a case where an assessment is a best judgment assessment, the provisions of imposition of penalty laid down under Section 271 did not apply. According to his submission, as the Tribunal fell into error in taking the said view, it also misconstrued the circumstances and wrongly found that the explanation offered by the assessee-firm was satisfactory and worthy of acceptance. We are unable to find any merit in this submission. It is not correct that the Tribunal held that the penalty is not imposable in a case where the assessment is a best judgment assessment. As a matter of fact, the Tribunal, after examining the evidence, came to the conclusion that in view of the explanation of the assessee that since it was not maintaining vouchers for purchases, that was not the case (sic) for not submitting the correct return for the entire income. It may be remembered that the petitioner is a sweetmeat seller and, in these circumstances, the Tribunal was fully justified in accepting the explanation offered by the assessee-firm and in concluding that, as the explanation was reasonable, the assessee was not guilty of fraud or gross or wilful neglect within the meaning of Section 271(1)(c).

6. In the result, we answer the question referred to us in the affirmative, in favour of the assessee and against the department. Since no one appears to oppose this reference, we make no order as to costs.


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