AGARWAL F C Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following two questions of law as arising out of the consolidated order of the Tribunal in respect of the asst. yrs. 1963 -64, 1964 -65 and 1965 -66 have been referred by the Tribunal under s. 256(1) of the IT Act, 1961 (hereinafter referred to as "the Act"):

(2.) BEFORE the ITO the assessee stated that he had not maintained any regular books of account and, therefore, the returns had been filed on estimate of certain net profits on sales. The ITO completed the assessments by estimating the sales at slightly higher figures and by adopting the rate of net profit as shown by the assessee in the revised returns. The ITO was of the view that while filing the returns the assessee had concealed his income and had not deliberately disclosed his correct income. The ITO, therefore, initiated penalty proceedings under S. 271(1)(c) of the IT Act and referred the matter to the IAC under S. 274 of the Act. After considering the facts and circumstances of the case the IAC came to the conclusion that the assessee had concealed his income and had not been able to discharge the onus of showing that the difference between the income shown in the original returns and the income assessed had not arisen as a result of any fraud or gross or wilful neglect on the part of the assessee. The IAC held that for the asst. yr. 1963 -64, the original return had been filed after April 1, 1964, and, therefore, the provisions of the Explanation to S. 271(1)(c) applied to the case. In respect of the other two years the provisions of the Explanation were ipso facto attracted. The IAC also noticed the very wide difference between the income shown in the original returns and the income which had been admitted in the revised returns. No explanation has been given before the IAC regarding the basis on which the original returns had been filed. The IAC held that the penalty under S. 271(1)(c) was leviable in all the three years and accordingly he levied penalties of Rs. 90,000, Rs. 80,000 and Rs. 20,000 for the asst. yrs. 1963 -64, 1964 -65 and 1965 -66, respectively. The assessee preferred three appeals before the Tribunal in respect of the three assessment orders and by a common order the Tribunal allowed the appeals partly.

(3.) IT is very conspicuous to notice that in the original return for 1963 -64, the total income was shown as Rs. 30,750 but in the revised return for the same year the total income was shown as Rs. 2,74,189, for the year 1964 -65 the total income in the original return was Rs. 36,315 whereas in the revised return for the same year it has been shown as Rs. 3,35,181 and for the asst. year 1965 - 66, the total income in the orginal return was shown as "Nil income" whereas in the revised return for the same year it has been shown as Rs. 81,030. Section 271(1)(c) reads as follows: