1972 (5) TMI 2

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..... tion 256(1) of the Income-tax Act, 1961, and the question referred by the Income-tax Appellate Tribunal, Cochin Bench, is : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the order of penalty passed by the Inspecting Assistant Commissioner under section 271(c) read with the Explanation thereto ? " The assessee is a firm of two partners .....

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..... of the closing stock as returned by the assessee. Penalty proceedings were initiated under section 271(1)(c) of the Income-tax Act, 1961, in regard to this sum of Rs. 2,76,698. In response to the notice issued under section 271(1)(c) the assessee explained that the difference in the closing stock valuation was due to the difference in the method adopted by the assessee, that the same method had be .....

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..... ect on the part of the assessee. The assessee has merely adopted a method of valuation followed by the predecessor firm and accepted by the department." Section 271(1)(c), together with the Explanation, reads as follows : " 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person ... (c) has concea .....

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..... income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section. " It is agreed that this is .....

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..... eglect on the part of the assessee. We see no reason to come to a different conclusion on the facts. To our mind, it appears that the assessee could not have been guilty of fraud or gross or wilful neglect if he was only adopting the same method of accounting as was done by the department. In the result, we answer the question referred to us in the affirmative and in favour of the assessee. Parti .....

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