Law:

Section:

Section 274(2) of the Income-tax Act, 1961 - Penalty - Reference to IAC - Assessment year 1962-63 - Hearing of assessment case of petitioner for this year went on for several months - Large number of days were spent in scrutinizing books of account of petitioner - ITO had formed view that not only was assessee concealing a large number of relevant books of account, but there were various interpolations and discrepancies in books which were produced and which could not be explained to satisfaction of ITO - Amount of that concealed income came to Rs. 7,41,000 as mentioned in order of assessment - Assessee contended on writ appeal that Assessing Officer could not reach satisfaction required under section 274 before assessment order was passed in which final calculations with regard to concealed income had been made - Whether assessee's contention could be upheld - Held, no - Whether ITO was justified in issuing penalty notice two days before assessment order was actually passed and conditions precedent for exercise of jurisdiction under section 274(2) could be said to have been fulfilled - Held, yes FACTS For the assessment year 1962-63, the impugned notice under section 274 read with section 271 was issued 2 days before the order of assessment was made. The assessee contended on writ appeal that the Assessing Officer could not reach satisfaction required under section 274 before assessment order was passed in which final calculations with regard to concealed income had been made. HELD The hearing of the assessment case of the petitioner for this year went on for several months. Large number of days were spent in scrutinizing the books of account of the petitioner. As already noted, some of the books of account had been impounded. The ITO had formed the view that not only was the assessee concealing a large number of the relevant books of account, but there were various interpolations and discrepancies in the books which were produced and which could not be explained to the satisfaction of the ITO. The last hearing of the assessment case took place on the 25-3-1967. Taking all these things into consideration, it would be perfectly legitimate to presume that by the…

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