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TMI Blog1973 (11) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... see is a registered firm carrying on business in utensils and yarn. The case is with regard to assessment year 1964-65. In the assessment year 1964-65, the assessee filed a return showing an income of Rs. 25,925. The assessment, however, was completed on a total income of Rs. 42,546. Additions were made mainly to the yarn account and the utensils account. The Income-tax Officer was of the opinion that the gross profit rate in the utensils account was low and that there were defects in the account books. He estimated the profits at 10 per cent. in respect of utensils as against the rate of 9 per cent. disclosed by the assessee. This resulted in an addition of Rs. 5,649. In the yarn account also the Income-tax Officer estimated the profits at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of certain estimates. In view of the Explanation taken by it, the Tribunal held that a penalty was not justified in the circumstances of the case and allowed the assessee's appeal. The Explanation to section 271(1)(c) may be quoted : " Explanation.--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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was not accepted by the Income-tax Officer who, however assessed the income on general estimates. The Tribunal found that the accounts were regularly maintained and return was submitted bona fide on the basis of such regularly maintained accounts, then even though the assessed income was more than eighty per cent. of the returned income, it could not be held that for that reason only the assessee was guilty of any fraud or any gross or wilful neglect in submitting the return. The Tribunal further considered the facts of the particular case and came to the conclusion as follows : " We are of opinion that in a case of this type an assessee cannot be said to be grossly or wilfully negligent merely because his return is based on his own bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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