COMMISSIONER OF INCOME TAX Vs. DAS BROTHERS

JUDGEMENT

(1.) THE following question of law has been referred to the High Court for decision by the Tribunal, Gauhati Bench, under S. 256(1) of the IT Act, 1961, hereinafter referred to as "the Act" :

(2.) THE assessee is a firm carrying on business in biris and some other articles. For the asst. yr. 1968 -69 it filed a return showing an income of Rs. 38,200. The return was accompanied by a copy of the trading account, profit and loss account and the balance -sheet. During the course of examination of books of account the ITO noticed some defects in the account books. The attention of the assessee was drawn to the defects by a letter dated August 14, 1969, and it was asked to explain the various points regarding the defects. On September 22, 1969, the assessee filed a revised return showing an enhanced income of Rs. 46,992 and on the same date it also submitted a letter to the ITO explaining how the mistakes in the account came into existence. The ITO completed the assessment after making the following additions :

(3.) THE ITO initiated penalty proceedings and referred the matter to the IAC as the minimum penalty leviable exceeded Rs. 1,000. Accordingly, notice was issued to the assessee by the IAC asking the assessee to show cause why penalty for concealment of income should not be levied. The IAC in the penalty proceedings held that the assessee had concealed substantial amounts of its income and, therefore, he levied a penalty of Rs. 50,000 under S. 271(1)(c) of the Act. Against the penalty order passed by the IAC the assessee appealed to the Tribunal. The Tribunal cancelled the penalty order and allowed the appeal. On the above facts briefly stated the above mentioned question of law has been referred. From the statement of the case as well as from the order of the Tribunal we find that the Tribunal considered the four items of additions made by the ITO for the purpose of considering whether the penalty levied in the instant case was sustainable in law or not. As the facts stand, it is not disputed by the assessee that this case attracts the Explanation to S. 271(1)(c) of the Act and the Tribunal approached the case on that basis holding that the burden lay on the assessee to prove that the failure to return the correct income did not arise out of any fraud or gross or wilful negligence on the part of the assessee. Regarding the addition of Rs. 10,000 in the biri account the Tribunal, after considering the materials on record, has observed as follows :