Commissioner Of Income-Tax, ... vs M/S. Kali Ram Kailash Chandra, ...
1976 Latest Caselaw 52 Del

JUDGMENT

C. S. P. Singh, J. - The income tax Tribunal Delhi Bench has in compliance of the order of this court referred to us the following question for our opinion :

"Whether on the facts and in the circumstances of the case, the Income tax Appellate Tribunal has correctly applied the Explanation to section 271(1) (c) of the Income Tax Act, 1961, and therefore whether the penalty imposed on the assessed by the Inspecting Assistant Commissioner has been rightly quashed by the Tribunal ?"

The assessed is a registered firm and carried on contract business at Rishikesh and other contract works at other places in the relevant assessment year 1965-66. It returned an income of Rs. 47,578/-. The Income Tax Officer considered the income returned low and applied a net profit rate of 12.5% on the contract receipts, and after adjustment of interest on borrowed capital and depreciation and adding interest on Government securities, assessed the income at Rs. 70,770/-. Thereafter proceedings for penalty were taken, and as the minimum penalty imposable was Rs. 1,000/- the matter was taken up to the inspecting Assistant Commissioner. He took the view that inasmuch as the returned income was less than 80% of the assesseds income, the explanation to section 271 was attracted and as the assessed laid failed to prove that he was not guilty of gross and willful neglect in returning the correct income, levied a penalty of Rs. 7,250/-. The assessed thereafter preferred an appeal before the Tribunal. From the statement of the case submitted to us by the Tribunal, it appears that in the quantum appear the income assessed was reduced to Rs. 60,770/-, on appeal the Tribunal held that the assessed had established that it was not guilty of any fraud or gross or willful neglect in returning his income. This conclusion of the Tribunal is based on the fact, that in quantum appeal, the income shown by the assessed to have been received by it from its contract business, had been accepted. Further, the Tribunal in the quantum appeal does not appear to have found any positive evidence to indicate that the assesseds accounts were not correct and complete. On these facts the Tribunal could legitimately reach the conclusion that the assessed was not guilty of any fraud or gross or willful neglect in returning the income which it did. This being so no penalty was exigible on the assessed under section 271(1)(c) of the Act.

2. We accordingly answer the question referred in the affirmative against the Department and in favor of the assessed. The assessed is entitled to his costs, which is assessed at Rs. 200/-. Counsels fee is assessed at Rs. 200/-.