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TMI Blog1994 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271(1)(c) of the Act were attracted and whether the finding of the Tribunal that the assessee has not discharged the burden is against the evidence and material on record ? 2. Whether the finding of the Tribunal that the penalty was rightly imposed is reasonable and sustainable or supported by any evidence on record ? " The relevant assessment year is 1972-73. The assessee-firm filed a return of income declaring its total income at Rs. 63,830 on July 19, 1972. Copies of the trading account, the profit and loss account, etc., were filed along with the return. While scrutinising the books of the assessee, the Income-tax Officer found that the total amount of interest credited to the accounts of the partners of the firm was Rs. 66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, holding that the assessee had not discharged the initial burden cast upon it under the provisions of the Explanation to section 271(1)(c) of the Act. At the hearing of this reference, it was urged on behalf of the assessee that the Explanation to section 271(1)(c) was not attracted in the instant case because on its true construction the total income returned by the assessee would not be less than 80 per cent. of the total income assessed as reduced by the expenditure incurred bona fide by the assessee as envisaged in the said Explanation. The Explanation to section 271(1)(c) as it stood at the relevant time read as under : " Explanation.--Where the total income returned by any person is less than eighty per cent. of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for earning the same, which while making the assessment was for some reason disallowed as deduction. The Explanation for the purpose of reducing the assessed income takes care of all the expenditure incurred bona fide by the assessee and need not be confined to deductions as are claimable under sections 30 to 43 of the Act. Similar view is taken by the Allahabad High Court in Addl. CIT v. Modi Rolling Shutter Industries [1977] 110 ITR 77 and Addl. CIT v. K. S. M. Wazir Mohd. and Sons [1977] 110 ITR 798, and the Gauhati High Court in Sundaram Mahadeo v. CIT [1977] 109 ITR 39. In the instant case, the income returned by the assessee was Rs. 63,830 and it was assessed by the Assessing Officer at Rs. 1,01,674 and after appeal, finally at Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(b). Reference was made to this amount of Rs. 5,297.95 in order to show that this explained as to how the figure of Rs. 38,353 of interest paid to partners was arrived at out of the total amount of Rs. 44,030 being the amount credited to the capital account of the partners. The Tribunal had drawn an adverse inference against the assessee for not being able to explain as to how the figure of Rs. 38,353 was arrived at. If the mutuality aspect of the trans action is kept into account, then the amount of Rs. 5,297.95 being the interest paid by the partners to the firm would stand adjusted towards the interest of Rs. 44,030 credited by the firm in the partners' capital account. In view of the above discussion, we hold that the Tribunal was, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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