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TMI Blog1980 (9) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... kept properly and the net profit disclosed by the assessee appeared to be low, he rejected the assessee's books of account and worked out its income by applying the .net profit rate of 11 % on the gross receipts estimated for each of the three years. In the result, the ITO assessed the income of the assessee for each of the years 1965-66, 1966-67 and 1968-69 at Rs. 69,688, Rs. 1,63,471 and Rs. 33,418, respectively. The assessee filed appeals in respect of the years 1965-66 and 1966-67 and the Income-tax Appellate Tribunal, while upholding the rejection of the accounts of the assessee, reduced the gross receipts determined by the ITO to a certain extent and after applying the net rate of 10% for calculating the profit of the assessee, the Tribunal determined the income of the assessee for the assessment years 1965-66 and 1966-67 at Rs. 55,328 and Rs. 1,15,920, respectively. As the returned income for each of the assessment years fell short of 80% of the assessed income, the ITO was of opinion that penalty under the newly added Explanation to s. 271(1)(c) of the I.T. Act was attracted in these cases. However, as the minimum penalty imposable under that section exceeded Rs. 1,000/ in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in cancelling the penalty of Rs. 5,000 imposed upon the assessee under section 271(1)(c) of the Income-tax Act, 1961, read with its Explanation ? (2) Whether there is material on the record for the finding recorded by the Tribunal that in this case, the onus that lay on the assessee in view of the Explanation to section 271(1)(c) of the Income-tax Act, 1961, had been discharged ? " Assessment year 1966-67: " (1) Whether, on the facts and in, the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in cancelling the penalty of Rs. 13,000 imposed upon the assessee under section 271(1)(c) of the Income-tax Act, 1961, read with its Explanation ?" Assessment year 1968-69: " (1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in cancelling the penalty of Rs. 9,000 imposed upon the assessee under section 271(1)(c) of the Income-tax Act, 1961, read with its Explanation? " (2) Whether there is material on the record for the finding recorded by the Tribunal that in this case the onus that lay on the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st judgment assessment) as reduced by certain expenditure, clearly indicates that an action for imposing penalty under section 271(1)(c) can appropriately be taken even in a case where the assessee is assessed on best judgment basis. In the result we find that the Income-tax Appellate Tribunal was not justified in revoking the order of penalty on the ground that section 271(1)(c) did not apply to a case where the assessee had been assessed on the basis of additions made to its returned income by estimating its sales and applying a gross profit rate thereon." The Bench then went on to observe that if the Tribunal came to the conclusion that the provisions of the Explanation to s. 271(1)(c) were attracted to the facts of the case it should proceed to dispose of the appeal after considering whether the assessee had discharged the burden placed upon it and had shown that in furnishing the particulars of its income, it had neither acted fraudulently nor was it guilty of any gross or wilful neglect. Similar question came up for consideration before this court in the case of CIT v. Kedar Nath Ram Nath [1977] 106 ITR 172, wherein this court expressed the view that the Explanation to s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n consonance with the views expressed in various Division Bench cases of this court. It does not appear' that in these cases the Tribunal at all applied its mind to the question whether or not the failure on the part of the assessee to return the aggregate income correctly did not arise from any fraud or gross or wilful neglect on its part and whether there was material on the basis of which it could, in the circumstances of the case, proceed on the basis that there had been no fraud or wilful neglect on the part of the assessee in returning the aggregate income. The Tribunal could not, without recording a finding on the aforementioned question, cancel the penalty imposed upon the assessee merely on the ground that the addition to the income had been made on the basis of estimates and that the burden that lies on the assessee is discharged the moment the assessee shows that the addition has been made on such estimate. Before parting with the case we may point out that the burden which lies on the assessee under s. 271(1)(c) to prove that the failure on its part to return the aggregate income did not arise from any fraud or gross or wilful neglect on its part, is not a burden of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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