COMMISSIONER OF INCOME TAX Vs. APSARA TALKIES

JUDGEMENT

(1.) IN this reference, by way of case stated, the question for our consideration is whether the Tribunal was justified in cancelling a penalty of Rs. 1,01,000 levied on an assessee by an IAC under s. 271(1)(c) of the I.T. Act, 1961 ("the Act").

(2.) THE assessee in question is a firm of four partners. THEy run a cinema theatre in Vellore. THE theatre was built from the firm's funds. THE partnership accounts disclosed the expenses of construction at Rs. 4,41,284. THE ITO obtained an independent estimate of the construction cost of the theatre from his Departmental Valuer. That estimate put the figure at Rs. 5,67,300. Relying on the valuer's estimate, the officer held that the theatre must have cost more to build than was shown in the accounts. He further held that the expenses not shown in the accounts must have come out of some source of income not disclosed by the assessee to the Department. On the same basis, the IAC later imposed a penalty on the assessee under s. 271(1)(c), holding that there was concealment of income on the assessee's part to the extent that the expenses in its construction account fell short of the figure of cost as estimated by the Department Valuer. THE IAC relied in this connection on the Explanation to s. 271(1)(c).

(3.) FOR the reasons we have stated above, our answer to this question of law is in the affirmative and against the Department.