COMMISSIONER OF INCOME TAX Vs. STANDARD MERCANTILE COMPANY

JUDGEMENT

(1.) IN this reference under Section 256(1) of the INcome-tax Act, 1961 (hereinafter to be called as "the Act"), we are concerned with the order passed by the INcome-tax Appellate Tribunal, Patna, in the penalty proceeding against the assessee. The assessee is a partnership firm. We are concerned in this reference with the assessment years 1962-63, 1963-64 and 1964-65.

(2.) THE facts, in brief, are that the assessee's 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 assessment under the Act. THE assessee was called upon to produce books of account in terms of Section 142(1)(i) of the Act. This notice was in relation to the account books which had been seized by the sales tax authorities and released to the firm later. 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.) THE observation of the Tribunal that there had been failure of the Department to show that there had been deliberate default on the part of the assessee in failing to comply with the notice under Section 142(1)(i) of the Act was equally erroneous. THE onus was on the assessee to answer the charge of having failed to comply with the notice under Section 142(1) of the Act. THE words of Section 271(1)(b) of the Act that if the Revenue is satisfied that any person has, without reasonable cause, failed to comply with a notice under Section 142(1), he shall be liable to penalty are rather crucial. It is obvious, therefore, that the assessee was required to show reasonable cause. That was a matter within the special knowledge of the assessee. THE Revenue could not have known what cause the assessee had for failure to comply with the notice. THE Appellate Assistant Commissioner categorically held that the story of loss of account books was wholly unreliable. He also held in agreement with the Income-tax Officer that " the appellant failed without any reasonable cause to comply with the terms of the notice under Section 142(1)(i) of the Act. It must be added that in the instant penalty proceeding as well, the assessee took no steps to establish that there was any reasonable cause for not complying with the notice under Section 142 of the Act. Despite the findings in the assessment and the registration proceedings, we would have been inclined to consider whether there was any reasonable cause or not, but the entire record shows that no effort worth the name was made by the assessee to show that there was any reasonable cause.