Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1964-65 - Tribunal on a finding that income returned by assessee was less than 80 per cent of assessed income applied provisions of Explanation and upheld levy of penalty - Whether having regard to fact that assessee had claimed certain expenses which were disallowed and about which there was no finding in order of Tribunal that those expenses had not been incurred bona fide and same if reduced from total income determined by Tribunal would result in returned income being more than 80 per cent Tribunal was not legally correct in conclusion that Explanation was applicable to facts of instant case and penalty under section 271(1)(c) was leviable - Held, yes FACTS The assessee-filed its return of income. The ITO however, complied the assessment at a higher income. In doing so, he made certain additions in various trading accounts both in head office and branch and also disallowed certain expenditures claimed by the assessee as business expenditures. On appeal, the AAC allowed certain allowed reliefs and the total income was reduced. On second appeal, the Tribunal further reduced the income. After completing the assessee the ITO referred the mater of the IAC for levy of penalty as the minimum penalty leviable, according to him, exceeded Rs. 1,000. That was done because the returned income in the instant case fell short of 80 per cent of the assessed income and hence, the default was covered by the new Explanation interested by section 40 of the Finance Act, 1964. The IAC after having heard the petitioner levied a penalty under section 271(1)(c). On appeal, Tribunal held that it could not be said that the assessee did not commit any gross or willful neglect in not showing the item of charity and the interest in the return, that such expenses claimed by the assessee without mentioning in the return itself came within the purview of the Explanation to section 271(1)(c) and that even assuming that there were certain other items also, which could not form part of the subject-matter of penalty under the Explanation to section 271(1)(c) if there were some items which did…

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