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Issues involved: Interpretation of penalty under section 271(1)(c) of the Income-tax Act based on the facts and circumstances of the case.
Summary: The High Court of ALLAHABAD considered a case involving a Muslim waqf for the assessment year 1969-70 where there was a dispute between the mutawalli and the manager resulting in the non-production of accounts before the Income-tax Officer. The assessment was completed based on best judgment assessment, disallowing various expenses claimed by the assessee, leading to a significant difference between the income returned and the income assessed. Subsequent appeals resulted in a final income determination of Rs. 2,22,017, with a penalty of Rs. 1,90,000 levied by the Inspecting Assistant Commissioner under section 271(1)(c) of the Income-tax Act. Upon appeal, the Tribunal found that no penalty was justifiable as there was no concealment of income or wilful negligence by the assessee. The Tribunal reasoned that the disallowance of certain expenses by the Income-tax Officer was the primary reason for the income discrepancy, and in such circumstances, the penalty under section 271(1)(c) could not be imposed. The High Court concurred with the Tribunal's decision, emphasizing that the facts of the case supported the conclusion that the penalty was unwarranted. Therefore, the reference was answered in favor of the assessee and against the Revenue, with no costs imposed.
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