COMMISSIONER OF INCOME TAX Vs. K N SINGH

JUDGEMENT

(1.) THIS is a reference called by this Court on an application made by the Revenue for calling the statement of the case from the Tribunal on the following question of law :

(2.) BRIEF facts giving rise to this reference are that assessee was a country liquor contractor. He had also a ganja bhang shop at Pandwadi. A return of income for the asst. year 1973 74 was filed declaring an income of Rs. 29,470 and for the asst. year 1974 75, a return of income was filed declaring income of Rs. 61,360. However, no books of accounts or any other material were placed by the assessee before the ITO as none was maintained. Returns of income were, however, filed on the basis of entries in Ex. P5 register maintained by the excise department. During the course of assessment, the ITO found that Ex. P5 certificate filed by the assessee was incorrect. He obtained the record from the excise department and found that certificate filed by the assessee appeared to be incorrect and it was forged. However, the ITO did not place any reliance on the certificate Ex. P5 filed by the assessee and estimated the assessable income by taking the sales at two and half times of the licence fee paid and applied a net profit rate of 15 per cent thereon. On this basis, he worked out the assessee's income for the asst. year 1973 74 at Rs. 89,680 and for the asst. yr. 1974 75 at Rs. 1,26,900 and also initiated penalty proceedings under S. 271(1)(c) for both the assessment years.

(3.) AGGRIEVED by the aforesaid order of penalty, the matter was taken up before the Tribunal. The Tribunal after examining the matter came to the conclusion that though the explanation given by the assessee was not accepted by the ITO, however, at the same time, the ITO did not conclude the total income of the assessee on the basis of certificate obtained by him from the excise department and he had assessed the income on the basis of sales and record of the excise department. Therefore, it was found by the Tribunal that on the basis of the facts, it cannot be said that there was fraud or gross or wilful neglect on the part of the assessee in disclosing his total income in the returns of income; and, accordingly, the Tribunal set aside the levy of penalties.