COMMISSIONER OF INCOME TAX Vs. STANDARD MERCANTILE CO

JUDGEMENT

(1.) By the Court - In this reference under s. 256(1) of the IT Act, 1961 (hereinafter to be called as the Act ) we are concerned with the order passed by the ITAT Patna in the penalty proceeding against the assessee. The assessee is a partnership firm. We are concerned in this reference with the asst. yrs. 1962 -64 and 1964 -65.

(2.) The facts in brief are that the assessees books of account for the aforesaid assessment years were seized by the Sales Tax department. Later, after the assessment under that Act had been completed, the seized books of account were released to one of the partners of the firm. It will be relevant to state here that the Sales Tax authorities formed a conclusion that the assessee had done substantial clandestine business which had not been disclosed in the regular books of account in the proceeding for the assessment under the Act. The assessee was called upon to produce books of account in terms of s. 142(1)(i) of the Act. This notice was in relation to the account books which has been seized by the Sales Tax authorities and had been produced by the firm. The assessee failed to produce the books of account on the plea that while the books were being taken to the residence of one of the partners they were lost in the taxi in which they were being brought. This stand of the assessee did not find favour with the revenue in the assessment proceeding.

(3.) Parallel to the assessment proceeding, another proceeding was initiated in regard to the registration of the firm in terms of s. 182 of the Act. The benefit of registration was extended to the assessee by the Tribunal. That matter came up before us for reference in Taxation Case Nos. 57 to 60 of 1976, which was disposed of by us on 1 -4 -1985 and we held that the assessee having failed to produce the books of account it had forfeited right to favourable treatment in terms of s. 186(2) of the Act. Parallel to the assessment and the registration proceeding there was the present penalty proceeding in terms of s. 271(1)(b) for non -compliance with the notice issued under s. 142(1)(i) of the Act, which has given rise to the present reference.