COMMISSIONER OF INCOME TAX Vs. RIZUMAL PHERUMAL

JUDGEMENT

(1.) AT the instance of the Revenue, the following two questions have been referred to this Court.

(2.) THE assessee filed a return of income for the asst. year 1969 70 on June 28, 1969, declaring a total income of Rs. 52,799 on the basis of its books of account. The assessee had entered into a transaction with regard to the purchase of a house and had made a payment of Rs. 2,000 by way of earnest money to the vendor. The sale transaction, however, did not materialize and the amount of Rs. 2,000 was forfeited by the vendor. The assessee adjusted this amount of Rs. 2,000 by debiting it to its trading account.

(3.) THE Tribunal took the view that the penalty levied on the assessee had to be cancelled mainly on the ground that in accordance with S. 274(2) as it stood on June 28, 1969, when the return was filed by the assessee, the ITO did not have jurisdiction to levy the penalty, and the Tribunal placed reliance on the decision of the Madras High Court in CGT vs. C. Muthukumaraswamy Mudaliar (1975) 98 ITR 540(Mad) and another decision of the same High Court in Continental Commercial Corporation vs. ITO (1975) 100 ITR 170(Mad). The additional ground on which the order of penalty was set aside was that the show cause notice issued to the assessee was ambiguous and uncertain with regard to the nature of the charge against the assessee, and the notice being vague, the assessee did not have reasonable opportunity of being heard. Out of these findings recorded by the, Tribunal, the two questions reproduced earlier fall for consideration.