COMMISSIONER OF INCOME TAX Vs. C R NIRANJAN

JUDGEMENT

(1.) 1.THANIKKACHALAM J.In compliance with the directions under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"), in T. C. P, No. 232 of 1976 dated November 2, 1976, the Tribunal referred the following questions for our opinion."(1) Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 271(1)(c) of the Income-tax Act, 1961, read with the Explanation thereto, the Appellate Tribunal was right in reducing the penalty from Rs. 2, 53, 351 to Rs. 45, 737 on the ground that the loss returned by the assessee should not be added to the income finally assessed for the purpose of levy of penalty ?(2) Whether, on the facts and in the circumstances of this case, the Appellate Tribunal had materials to hold that the addition of Rs. 29, 000 representing unexplained credit should not be treated as the concealed income of the assessee ?" * The assessee is an individual doing contract business.

(2.) THE previous year relevant to the assessment year 1969-70 ended on March 31, 1969. Originally, the assessee filed a return with a loss of Rs. 1, 14, 330. THE Income-tax Officer, after discussing with the assessee's representative, determined the income as "nil" from the business activity and brought to tax a sum of Rs. 5, 110 being the share income from a firm in which the assessee was a partner. THEreafter, the assessee filed an appeal against the disallowance of the loss and the Appellate Assistant Commissioner set aside the assessment and directed the Income-tax Officer to redo the same. That assessment was made on May 31, 1971. During the course of examination of the accounts, the Income-tax Officer found that the books contained many defects such as erasures, overwritings and interpolations.

(3.) THE fact remains that while confirming the penalty levied under section 271(1)(c) of the Act read with the Explanation, the Tribunal reduced the penalty from Rs. 2, 53, 351 to Rs. 45, 737 on the ground that the loss returned by the assessee should not be added to the income finally assessed for the purpose of levying penalty. According to the Revenue, loss should be considered as income and penalty is exigible even on loss also.