COMMISSIONER OF INCOME TAX Vs. MAHESH TRANSPORT SERVICE

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated June 28, 1980, in respect of the assessment year 1975-76 :

(2.) THE brief facts of the case are that the assessee is a Hindu undivided family and is deriving income from plying buses and has shown loss of Rs. 13,036 in the return submitted to the Income-tax Officer. THE final assessment was made on the figure of Rs. 19,842, THEre was a difference of Rs. 32,875 and, besides this, in the course of the assessment proceedings, the Income-tax Officer found that the assessee had not maintained any log book for day-to-day running of the buses. No consumption register for fuel and spare parts was maintained on a day-to-day basis and no vouchers have been produced before the Income-tax Officer and only purchase and sale of tyres was shown by the assessee. THE vouchers for the sale of such tyres were also not produced and, therefore, the net profit rate of 20 per cent. subject to depreciation on total receipts of Rs. 1,69,462 was made resulting in an addition of Rs. 87,705. THE Income-tax Officer also observed that generally the rate applied is from 30 per cent. to 40 per cent. but since the assessee has plied the buses on kachha roads, the rate of profit of 20 per cent. was applied. THE Income-tax Officer initiated penalty proceedings under Section 271(1)(c) of the Income-tax Act read with the Explanation thereto. As the total income returned was less than 80 per cent. of the total income assessed, the assessee was deemed to be guilty of concealment of income or of furnishing of inaccurate particulars of such income, unless he proved that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the quantum appeal, the percentage of 20 per cent. applied was upheld, but the receipts were reduced to Rs. 1,31,000 resulting in the reduction of Rs. 7,692 and the said order was upheld by the Income-tax Appellate Tribunal and had become final.

(3.) THE additions which are made in the assessment order, which is final even on the basis of best judgment assessment, have to be made on certain principles and once that assessment order is upheld finally, then it was the duty of the assessee to have submitted his explanation that there was no fraud or any gross or wilful neglect on his part. THE word "neglect" refers to negligence, which should be of utter want of care and diligence. If a particular thing is required to be done then a case of negligence may arise if it is not done due to want of care or due to negligence. It is in the facts of each and every case in which it has to be examined as to whether there was any neglect on the part of the assessee or not. THE word "fraud" involves mens rea. THE words "gross and wilful neglect" also have the same character. THE circumstances leading to the framing of the assessment and the explanation which the assessee may give are relevant factors to come to this conclusion. Before applying the ratio of Anwar Ali's case [1970] 76 ITR 696 (SC), it was necessary for the Income-tax Appellate Tribunal to come to the conclusion that the initial burden which was on the assessee on account of the Explanation has been discharged and they are satisfied with that. THE Income-tax Tribunal has proceeded in the reverse gear and has held that penalty cannot be levied unless it is established that the additions made represented the assessee's own income earned in the relevant previous year which was suppressed in order to defraud the Revenue. THE income, which is based on estimation, is the assessee's own income and if there is a difference between the assessed income and the returned income of more than 20 per cent. in accordance with the Explanation, then the assessee has to explain and discharge its burden that the difference of the income is not on account of any fraud or any gross or wilful neglect on his part. THE interpretation of law which makes the subject as law abiding has to be taken rather than by which the assessee may be allowed just not to keep the hooks of account or proper vouchers and flout the law. In the case of the assessee, in the quantum appeal, it was held by the Tribunal that the assessee has not maintained proper accounts.