Law:

Section:

Section 274(2) [as it stood prior to omission with effect from 1-4-1976] of the Income-tax Act, 1961 - Penalty - Reference to IAC - Whether ITO should quantify amount of concealed income before he refers case to IAC - Held, no Facts In the course of the assessment proceeding's for the assessment year 1970-71, the ITO found in the books seized from the assessee-firm that the sales recorded in the rough cash book had not found any place in the regular cash book. Therefore, he came to the conclusion that the assessee had suppressed the sales. After applying the rate of 50 per cent to the sales, the ITO made an addition of over Rs. 1 lakh to the profits of the assessee. On second appeal, the Tribunal applied the rate of 30 per cent to the estimated sales and, accordingly, reduced the addition made by the ITO. However, in the meanwhile the ITO initiated penalty proceedings and in his view as the penalty imposable was in excess of Rs. 25,000 he referred the matter to the IAC. Before the learned IAC, in penalty proceedings, it was submitted on behalf of the assessee that the books of account of the assessee for the first 6 months' period out of the accounting period were impounded by the commercial taxes authority and as such the assessee was unable to complete the books of account, which resulted in variation in the sales as shown by the assessee and ultimately determined by the taxing authority. However, the IAC imposed penalty holding that the assessee had failed to explain that there was any fraud or gross or wilful neglect on the part of the assessee in not returning the assessed income and imposed penalty of Rs. 52,000. It was contended by the assessee before the Tribunal that it was the duty of the ITO to have quantified the income in respect of which he was satisfied that the assessee had concluded the particulars of the same. The Tribunal held that the ITO was right in referring the case to the IAC before quantifying the amount of concealed income. On reference : Held The statute has to be interpreted in the way it is framed as that indicates the intention of the Legislature when the Act was enacted. It is clear from the wording of the provision of section…

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