UMASHANKAR HALL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is a registered firm carrying on business in cloth. During the course of the assessment proceedings for the assessment year 1970-71, the ITO found that there were a number of under-totallings of both cash and credit sales to the extent of Rs. 19,467 in all. THE assessee had filed its return on the basis that the totallings were correct. When the ITO noticed that there were such under-totallings in the course of the assessment proceedings, he initiated proceedings under s. 271(1)(c) of the I.T. Act, 1961 (hereinafter referred to as "the Act), and on realising that the minimum penalty imposable exceeded one thousand rupees, he referred the case to the IAC of Income-tax by his letter dated February 27, 1971. THE letter reads as follows:

(2.) PRIOR to this reference, the ITO had issued a notice to the assessee on February 24, 1971, under s. 142(1) of the Act calling upon the assessee to produce certain documents and accounts on March 9, 1971. After the accounts were produced, the ITO completed the assessment proceedings on March 31, 1971, including Rs. 19,467.06 to the income disclosed and completed the assessment. The IAC thereafter issued notice to the assessee and after taking into consideration the explanation given by the assessee imposed a penalty under s. 271(1)(c) in a sum of Rs. 20,000. In appeal, the order of the IAC was confirmed by the Tribunal after rejecting the contention of the assessee that the initiation of the proceedings under s. 271(1)(c) of the Act before the assessee produced the books of account pursuant to the notice dated February 24, 1971, issued under s. 142(1) of the Act was without jurisdiction and also that the imposition of penalty was not warranted in the circumstances of the case. At the instance of the assessee, the Tribunal has referred under s. 256(1) of the Act, the following question of law: