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Issues: Reference u/s 256(1) of the I.T. Act regarding concealment of income and imposition of penalty under section 271(1)(c).
The judgment pertains to a case where an unregistered firm involved in the business of manufacturing and selling oil had initially reported a loss of Rs. 2 lakhs for the assessment year 1968-69. Subsequently, assessment proceedings were conducted under section 144 of the I.T. Act, resulting in the determination of the total income at Rs. 50,000 instead of the reported loss. Penalty proceedings were initiated u/s 271(1)(c) for concealment of income, leading to a dispute over the quantum of penalty to be imposed. The Income-tax Appellate Tribunal referred the matter to the High Court seeking an opinion on whether the concealed income amounted to Rs. 2.50 lakhs as contended by the Income-tax Appellate Tribunal or Rs. 50,000. The disagreement arose between the judicial and Accountant Members of the Tribunal regarding the appropriate quantum of penalty, necessitating the involvement of a third Member for resolution. The crucial aspect of the case revolved around the interpretation of "income" as per the provisions of the I.T. Act. The court analyzed the definition of "income" under section 2(24) and emphasized that even though losses can be adjusted against income in certain circumstances, they do not transform into income themselves. Therefore, for the relevant assessment year, the determined income of Rs. 50,000 was deemed as the concealed amount by the assessee, leading to the reduction of the penalty from Rs. 2.50 lakhs to Rs. 50,000. In conclusion, the High Court affirmed that the concealed income was correctly assessed at Rs. 50,000, in line with the Tribunal's decision. The court ruled in favor of the assessee, indicating that the penalty should be reduced accordingly. The costs were directed to be borne by the revenue, with an advocate's fee of Rs. 150.
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