1998 (3) TMI 21 - HC - Income Tax

Summary

Issues:
1. Validity of canceling penalty under section 271(1)(c) of the Income-tax Act, 1961 by the Appellate Tribunal.

Analysis:
The High Court of Madras was presented with a tax case petition by the Commissioner of Income-tax, Coimbatore, seeking a direction to the Tribunal to refer a question of law regarding the cancellation of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The assessee, despite being served with court process, did not engage legal representation. Consequently, the court proceeded to hear arguments from the Revenue's counsel. The rejection of the reference application was based on the Tribunal's order, which highlighted the challenges in verifying income due to the nature of the lottery sales business and the necessity of estimating income. The Tribunal dismissed the Revenue's appeal, leading to the rejection of the reference application.

The primary contention raised by the Revenue's counsel was the Tribunal's reliance on judicial notice of peculiar features in the lottery sales business to reject the reference application. The counsel argued that such judicial notice was impermissible under the law, citing sections 56 and 57 of the Indian Evidence Act, 1872. Section 57 outlines the facts of which courts must take judicial notice, including laws in force, official proceedings, and public history. The counsel contended that the Tribunal erred in taking judicial notice of business peculiarities, as it was not within the scope of permissible judicial notice under the Act.

In response to the Revenue's argument, the High Court analyzed the provisions of sections 56 and 57 of the Indian Evidence Act. The court concluded that the Tribunal's reliance on peculiar features of the lottery sales business for rejecting the reference application was not in line with the permissible scope of judicial notice under the Act. Therefore, the court directed the Tribunal to state a case and refer the question of law regarding the cancellation of the penalty under section 271(1)(c) of the Income-tax Act, 1961. The tax case petition was disposed of based on this analysis.