9911796707
TMI Blog1975 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable income at Rs. 54,196 by applying a flat rate of profit of 12.5 per cent. on the total receipts. The Income-tax Officer also initiated proceedings for imposition of penalty under section 271(1)(c), which provides that the Income-tax Officer may impose penalty if an assessee has concealed the income or has furnished inaccurate particulars thereof. As the minimum penalty imposable was more than Rs. 1,000, the matter was referred to the Inspecting Assistant Commissioner of Income-tax as required by section 274(2) of the Act. The Inspecting Assistant Commissioner of Income-tax levied a penalty of Rs. 5,000. On appeal the penalty has been set aside by the Income-tax Appellate Tribunal on the ground that the assessee could not be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer 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 that sub-section. The Explanation, however, does not apply to all the cases of suspected concealment but applies only where the income returned is less than 80 per cent. of the income assessed minus the expenses incurred bona fide and disallowed by the Income-tax Officer as a deduction. There is no finding that this requirement was satisfied in the instant case. In fact, the Inspecting Assistant Commissioner of Income-tax di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice as also before the Inspecting Assistant Commissioner of Income-tax. The Inspecting Assistant Commissioner refused to accept this plea on the ground that the record did not disclose that there was any such understanding between him and the Income-tax Officer. This approach is obviously wrong, because the understanding was oral and it could not find place in the records. Having regard to the normal human conduct we cannot understand how an assessee would agree to an enhanced assessment unless he had been motivated by a cogent reason. The motive is obvious, namely, that he got an understanding from the Income-tax Officer to escape penalty. We are satisfied that the petitioner's agreement to be assessed at a higher flat rate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e induced the assessee to surrender the cash deposit so as to avoid penalty which could be as high as one and a half times the tax sought to be evaded. It is possible that the surrender was made in order to escape the penal liability. " In our opinion, the present case is of a similar nature. Here also, we are satisfied that the assessee must have agreed to enhanced assessment in order to escape penalty. The admission made by the assessee was not voluntary or free. Since we have held that the Explanation to section 271(1)(c) is not applicable, a reference to it shall be omitted and the question will have to be re-drafted. We accordingly re-draft the question of law as : " Whether, on the facts and in the circumstances of the case, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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