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TMI Blog1978 (1) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and assessments were made under s. 144 of the I.T. Act, 1961. This happened for the year 1963-64 as well, with which we are concerned in the reference before us. The income returned by the assessee was Rs. 32,875. But as finally assessed by the AAC and adopted by the Tribunal, the income was fixed at Rs.2,14,402. The assessment proceedings ended here. But this is not the end of the story. Proceedings were initiated for imposing penalty in accordance with s. 271(1)(c) of the Act. Reliance was placed on the Explanation which was available and which read as follows : " Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total 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 furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y compulsion to maintain regular books of account, the assessee's submissions in this regard cannot be dismissed as untenable. In that view of the matter, no penalty would be exigible even in terms of the Explanation to s.271(1)(c). The penalty of Rs. 30,000 levied is accordingly cancelled. " It is well established by now-too well established to require any citation of authority-that the fact that the assessing authorities in assessing a person were satisfied that the return filed by the assessee did not disclose his correct income and proceeded to make a best judgment estimate and that the income was assessed on that basis would not enable us to hold that the assessee had concealed the particulars of his income or had furnished inaccurate particulars thereof in order to attract s. 271(1)(c) of the Act. The Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696 has laid down this proposition. In the absence of material evidence, therefore, where, on the facts disclosed, the assessment was made on the basis of an estimate that the bulk of the vehicles owned by the assessee should provide an income of Rs. 13,000 per vehicle per year, that would not by itself provide a ground for concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat perhaps may be the reason why the law does not insist on that degree of proof in establishing a negative fact. The assessee is called upon to prove that there has been no fraud on his part, and if he is able to establish that he has not been guilty of fraud and that he did not intend to defraud and that he did not intend to conceal his income or furnish inaccurate particulars thereof, that will be sufficient for the purpose of showing that he has not been fraudulent. In the case before us what the assessee has done is to prepare cash statements. This is seen from page 17 of the typed papers for the year in question. A glance at that statement would show that there were three main items of expenditure : Rs. 1,62,825 spent for repayment of loans to creditors, another sum of Rs. 38,000 odd utilised for the purpose of paying advance tax, and a further sum of Rs. 10,800 for personal expenses. Adding up these figures, and deducting from the total income, the agricultural income, and after deducting amounts of interest that were payable and that were paid, the net income was shown as Rs. 1,69,493. From this amount a depreciation of Rs. 1,47,018 was also claimed, and the balance was sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f wilful neglect, if he is able to establish that he has acted fairly reasonably. In this case, the assessee had, of course, been at fault in the sense that she had not been prudent in keeping regular books of account in a regular manner. That was perhaps carelessness which might run her business. But the question is whether a person has been careless to the extent of being called wilfully negligent in filing the return of income of his business taking into consideration the manner in which he or she ran his or her business. The fact that the assessee did not keep accounts and the fact that she had subjected herself to assessments made on best judgment method will not establish that she was guilty of wilful neglect in filing the return so as to attract s. 271(1)(c) of the Act. On the facts and circumstances of the case, we are unable to hold that the assessee was guilty of wilful neglect. We are now left with the only other limb of the section which speaks of a person being grossly negligent. We did observe in the beginning about the difficulty in defining gross neglect as distinct from neglect. In the context in which the word " gross " occurs in the provision, coupled as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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