Law: Income Tax Act, 1961

Section: 271

Income tax-- Penalty Accounts maintained by assessee but Income tax Officer rejecting book results Order of penalty is not justified. 1982 T L R 1276 (Bom.) ref. ORDER CHANDURKAR, J. The assessee, which is a wholesale dealer in plantain, and had returned the total income of Rs. 33,215 was assessed on a total income of Rs. 99,600 after the Income tax Officer had rejected the book results. In appeal, the total income was reduced to Rs. 71,450 and as the returned income was less than 80 per cent of the assessed income, the Income-tax Officer initiated penalty proceedings in view of the Explanation to section 271 (1) (c) of the Income tax Act, 1961, as in force in the relevant assessment year. 2. The Inspecting Assistant Commissioner took the view that the failure to maintain records like purchase and sale vouchers as well as vouchers for expenses constituted gross and wilful neglect on the part of the assessee within the meaning of the Explanation to section 271 (1) (c) of the Act. A penalty of Rs. 50,035 was, therefore, levied. 3. When the appeal before the Tribunal was heard the Tribunal found that a similar question in respect of plantain dealers was dealt with by it in Income tax Appeal No. 2306 of 1970 71, in which the Tribunal had taken the view that "merely because the accounts of the assessee did not commend to the Income tax Officer and that he had rejected the book results (it) would not ipso facto follow that the difference in the returned income arose due to any gross or 'wilful neglect' or 'fraud' on the part of the assessee". On that view, the Tribunal allowed the appeal and set aside the order of penalty. Arising out of this order of the Tribunal, following two questions have been referred to this Court under section 256 (1) of the Act "(1) Whether on the facts and in the circumstances of the case, the Tribunal erred in holding that even where the Explanation to section 271 (1) (c) of the Income tax Act, 1961 comes to the aid of the Revenue in raising the presumption mentioned therein for the purpose of proving the requirements of clause (c) of section 271 (1) (ibid), the burden still lies on the Revenue to prove that the difference between the…

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