COMMISSIONER OF INCOME TAX Vs. MANU ENGINEERING WORKS

JUDGEMENT

(1.) IN this case, at the instance of the Revenue, the following question has been referred to us for our opinion :

(2.) THE facts giving rise to this reference are as follows : We are concerned with the asst. year 1970 71. The assessee is a registered partnership firm and is engaged in the business of manufacturing of fans, electric motors, washing machines, etc. In the assessment made by the ITO for the year 1970 71 under S. 143(3) of the IT Act, 1961, an addition of Rs. 21,691 was made by the ITO on the ground that the gross profit disclosed was not acceptable because of certain defects found in the accounts maintained by the assessee. As a result of the addition, the income assessed by him came to Rs. 57,726 as against the assessee's returned income of Rs. 36,035. In view of the difference between the assessed and returned incomes exceeding the permissible margin of twenty per cent, the ITO held that the assessee's case fell within the mischief of the Explanation to S. 271 (1)(c). He, accordingly, initiated penalty proceedings and as the minimum penalty leviable exceeded Rs. 1,000, he referred the matter to the IAC, as required by S. 274 of the Act.

(3.) WHEN the IAC took up the hearing of the penalty proceedings, the facts concerning the understatement on account of double debit of the value of the opening stock and the enhancement of the income were brought to his notice. The IAC took note of the fact that the assessee had concealed its income or furnished inaccurate particulars of such income and its failure to return the correct income had arisen from fraud or gross or wilful neglect on its part, because if the assessee had been a little careful, it would have definitely come to know of the fact that the opening stock had been debited twice to the P & L a/c. The IAC, therefore, held that penalty was attracted both under the main section and under the Explanation to S. 271(1)(c) and imposed penalty of Rs. 26,000 on the assessee.