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Issues:
1. Justification of canceling penalty under section 271(1)(c) of the Income-tax Act, 1961. Analysis: The case involved a contractor whose income was estimated in the past by applying a rate of net profit as no regular accounts were maintained. The relevant assessment year was 1964-65, where the assessee filed a return showing income at Rs. 13,310 but was assessed at Rs. 67,011, including share of profit in a registered firm for the first time. The Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Act, and a penalty of Rs. 15,000 was levied by the Inspecting Assistant Commissioner. The Tribunal found that the assessee had been assessed on percentage basis without submitting accounts, and the income increase was due to the inclusion of partnership firm income for the first time. The Tribunal considered that the failure to show income from the firm was an inadvertent mistake and not intentional concealment under section 271(1)(c) of the Act. It noted that the penalty imposition did not specifically mention non-disclosure of share income in the return, and the increase in income was partly due to the change in percentage basis. The Tribunal concluded that the penalty was not justified based on the facts and circumstances of the case. The Explanation to section 271(1)(c) was also discussed, with no conclusive finding on its applicability, benefiting the assessee in case of doubt. The High Court agreed with the Tribunal's decision to cancel the penalty, stating that the inadvertent omission of showing income from the firm did not warrant penalty under section 271(1)(c) of the Act. The court found no legal or factual grounds to challenge the Tribunal's decision, considering the materials and circumstances analyzed by the Tribunal. The question of law was answered in favor of the assessee, and no costs were awarded. Justice N. IBOTOMBI SINGH concurred with the decision.
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