RAJASEKHARAN NAIR V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner is an assessee to income-tax on the files of the second respondent against whom a prosecution exhibit P-7, namely, C. C. No. 63 of 1987, on the file of the Additional Chief Judicial Magistrate (Economic Offences), Ernakulam, has been launched. THE allegation is of commission of offences under Sections 276C(1) and 277 of the Income-tax Act, 1961. THE case is pending.

(2.) THE assessment year concerned is 1977-78. Alleging that the petitioner had not correctly posted all his receipts in the account books, an amount of Rs. 5,50,000 was added to the income returned. Details thereof are given in exhibit P-7. THEre was also an addition of Rs. 58,443.93 on account of alleged sales of rationed articles, which, according to the assessing authority, had not been effected by the petitioner on the dates mentioned. THE order of assessment was followed by levy of penalty under Section 271(1)(c) of the Act, which was taken in appeal before the Income-tax Appellate Tribunal by I. T. A. No. 860/(Coch) of 1990. THE Tribunal allowed the appeal and set aside the penalty.

(3.) EVEN apart from this, the Tribunal noted that penalty was to be levied only if there was no explanation or the explanation given was proved to be false or remained unsubstantiated. The Tribunal went into the question as to whether the explanation given by the petitioner was false and came to the conclusion that the falsity of the explanation offered by the petitioner had not been established. The Tribunal reiterated the position that the petitioner agreed to the additions on condition that no penalty proceedings will be initiated against him. This was the understanding of both the petitioner and of the Assessing Officer and, therefore, the levy of penalty was not sustainable. The appeal was, therefore, allowed.