COMMISSIONER OF INCOME TAX Vs. PARASAMAL BABULAL JAIN

JUDGEMENT

(1.) THE revenue has preferred this appeal challenging the order passed by the Tribunal which has set aside the penalty imposed by the Assessing Officer under section 271 (1) (c) of the Income Tax Act, 1961 ('the Act'). The assessee is a wholesale dealer in silk sarees. He had not. filed any returns. A survey was conducted in the premises of the assessee. During such survey they found that the assessee had been operating a bank account No. 1732 in Amanath Cooperative Bank, H. Siddaiah Road, Bangalore, in the name and style of M/s Chintamani Sarees. The assessee was also carrying on business under the name and style of M/s Hind Saree Collection. Both are proprietary concerns of the assessee. The said bank accounts and the amounts deposited in the said bank did not find a place in the regular books of account. However, after the said survey the assessee filed a return of income for the assessment year 2000 -01 on 25.10.2000 declaring a total income of Rs. 18,25,180/ -.

(2.) THE assessing authority took up the case for scrutiny/assessment under Section 143(3) of the Act. The assessee had claimed expenses at. 2%. However, the assessing authority reduced to 1.5%. Consequently the total assessed income became Rs. 19.89,820/ - as against the income declared by the assessee in a sum of Rs. 18,25,180/ -. The assessee accepted the order of assessment and paid taxes. It is thereafter proceedings were initiated under Section 271(1)(c) of the Act for recovery of penalty. The assessing authority held but for the DDIT (Inv) noticing the assessee maintaining a concealed bank account the assessee would not have come forward to pay the additional tax. Therefore, the assessee has clearly contravened the provisions of the Act attracting penalty leviable under Section 271(1)(c) of the Act. He levied penalty in a sum of Rs. 5,87,512/ -.

(3.) THIS appeal was admitted on 5.3.2007 to consider the following substantial questions of law :