Law: Income Tax Act, 1961

Section: 256(2)

Income-tax-- Penalty--Concealment of income-Returns of income filed on basis of estimates-Modest addition made by I. T. O. to returned version--­No finding that estimates of income by assessee were fraudulent or there was deliberate under-estimation of income-Penalty for conceal­ment of income not valid in law. JUDGMENT KANIA, J.-.This is a reference under section 66 (2) of the Indian I. T. Act, 1922, and section 256 (2) of the I. T. Act, 1961. The assessment years with which we are concerned are assessment years 1955-56 to 1957-58 and 1960-61 to 1965-66. The relevant facts giving rise to this reference are as follows B. S. Badve, the karta of the HUF of S. T. Badve of Malegaon, derive income in the previous years relevant to the aforesaid assessment year, from the exhibition of films in two theatres, from running a flour mill and also from the weaving of cloth oil 15 power-looms. The assessee claim to have maintained an account till March 21, 1959, when there was a fire in the premises where the books were kept and all the account books were­ destroyed by the fire. Thereafter, the assessee did not write account books. The returns in respect of the income of the aforesaid assessment years were filed on the basis of estimates. In the case of the cinema theatres, the asseseee showed the receipts which were verified. According to the asses­see's estimate, the net income from the cinema business was 9 % of the receipts. In the case of power looms, the assessee showed the income at Rs. 800 per power loom. Similarly, the income from the flour mill was based on an estimate by the assessee. The ITO, while making the assess­ments, rejected the estimate of income given by the assessee in respect of the income from the cinema business and powerlooms. In respect of the cinema business, the ITO estimated the income at 15 % of the net receipts in respect of the years and 13 % of the net receipts in respect of some other years against the estimate of 9% given by the assessee. In the case of powerlooms, the ITO raised the estimate of income to Rs. 1,000 per powerloom as against Rs. 800 shown by the assessee. So far as th­e flour mill is concerned, the estimate given by the…

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