Law:

Section:

Section 276C, read with section 277, of the Income-tax Act, 1961 - Offence and prosecution - Wilful attempt to evade tax, etc. - Assessment years 1979-80 - Assessee was a managing partner of a partnership firm - During course of assessment proceedings of firm, ITO found that in return of firm, duly signed and rectified by assessee, amount of refund of market fee was directly taken to capital account instead of crediting it to profit and loss account which lead to concealment - Assessee explained that refund was not included since it was liability and would have to be returned back to market committee in view of ordinance issued by Governor - ITO, after considering contention of assessee, added amount towards income observing that in case sum was refunded by assessee to market committee, then it would be allowed as necessary deduction in year/years in which amount was paid back - In addition to penalty being imposed, assessee was also convicted under sections 276C and 277 - Whether since amount in question had in fact been shown in books of account and there being a valid explanation of assessee it could not be said that there had been wilful attempt to evade tax particularly when assessee was advised by an advocate to take it to capital account instead of crediting it in profit and loss account - Held, yes - Whether therefore, case of offence under sections 276C and 277 was not proved as against assessee and, consequently, he was to be acquitted - Held, yes FACTS The assessee was a managing partner in a partnership firm. A prosecution was launched against him for offences under sections 276C and 277 on allegations that return of the firm duly signed and verified by the assessee showed the income of Rs. 68,100 but during the course of assessment it was found that there were two refunds of the market fee amounting to Rs. 1,28,001.45 and of Rs. 83,195.66; that though Rs. 1,28,001.45 had been duly accounted for in its profits and loss account, however, instead of crediting in the profit and loss account, Rs. 83,195.66 was directly taken to the capital accounts of the partners and, therefore, that refund of Rs. 83,195.66 which was to be shown as income, had been…

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