COMMISSIONER OF INCOME TAX Vs. AJAY DAL MILL

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income -tax Act 1961, wherein the following questions have been framed : '(i) Whether, on the facts and in the circumstances of the case, the Tribunal's finding regarding revised return dated October 15, 1976, having been filed before detection of discrepancy by the Income -tax Officer was perverse in view of such discrepancy having been pointed out by the Income -tax Officer on an earlier date, namely, September 10, 1976 ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the question of the provisions of the Explanation below Section 271(1)(c) being attracted in the case had to be decided not with reference to the income declared as per the original return, but with reference to the income declared as per the revised return ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in cancelling the penalty imposed under Section 271(1)(c) of the Act ?'

(2.) IN spite of service of notice nobody appeared for the assessee. On behalf of the applicant, Shri Bharatji Agrawal, senior advocate, appeared.

(3.) WHILE considering the issue of imposition of penalty under the Explanation to Section 271(1)(c) of the Act, it was held that the proceedings were penal in character and the Department has to prove the case. The Income -tax Officer rejected the explanation and held that he deliberately furnished inaccurate particulars of income by suppression of sale proceeds of 'Masoor' purchased on February 27, 1974, and hence the penalty to the tune of Rs. 16,115 was imposed, and the Explanation added by the Finance Act, 1964, with effect from April 1, 1964, was held to be applicable. The said Explanation reads as under : 'Explanation. - -Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under Section 143 or Section 144 or Section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of Clause (c) of this sub -section.'