COMMISSIONER OF INCOME TAX Vs. HOTEL CLASSIC

JUDGEMENT

(1.) THIS I. T. R. is on reference by the Income Tax Appellate tribunal, Cochin Bench, under Section 256 (1) of the Income Tax Act. The questions referred are as follows: "1. Whether, on the facts and in the circumstances of the case, and in the light of Explanation 1 to Section 271 (1) (c), the tribunal is right in law and fact, in cancelling the penalty? 2.Whether, on the facts and in the circumstances of the case, is not the order of the Tribunal vitiated for not considering the case in the light of Explanation 1 to Section 271 (1 ) (c) and placing the burden of proof on the Revenue?&quot The facts of the case are as follows

(2.) THE assessment year is 1989-90. During the previous year, the assessee was carrying on the business of running a Bar attached hotel at Trivandrum . On 28. 8. 1989, the assessee had shown a loss of Rs.2,16,430 /- under the head "business". THE Assessing officer noticed various defects in the books of accounts produced by the assessee. Further, there were also credits which were not proved. In view of the discrepancies in the accounts, the Assessing Officer rejected the same and estimated the income at Rs. 50 ,000 / -. He also levied the penalty of Rs.2 ,66,430 /- under Section 271 (1) (c) which actually represented the difference between the returned loss of Rs. 2,16,430/- and the assessed income of Rs. 50,000/ -.

(3.) SRI. Raveendranatha Menon , learned counsel for the Income Tax Department brought to our notice Explanation 1 to Section 271 (1 ) (c)of the Income Tax Act and contended that the burden is on the part of the assessee to explain as to why penalty should not be levied. He also contended that under Section 271 (1 ) (c) of the income Tax Act, on the basis of the income concealed penalty can be levied. Learned counsel for the assessee submitted that the tribunal held that it does not know on what basis the income of Rs. 50 ,000 /- was fixed.