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TMI Blog1973 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Explanation to section 271(1)(c) of the Income-tax Act, 1961 ? " In order to appreciate the question in the proper perspective, a few facts need be stated : The assessee is a private limited company dealing in cloth, cotton, photographic materials, electrical goods and glassware. The relevant assessment year is 1964-65. The assessee-firm returned an income of Rs. 29,229 for the relevant assessment year. However, it was finally assessed on a total income of Rs. 41,050. As the Income-tax Officer was of the opinion that the case of the assessee-firm would come within the mischief of the Explanation to section 271(1)(c) of the Income-tax Act, 1961, proceedings for levy of penalty were initiated and the matter was referred to the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as relating to the aforesaid amount of Rs. 8,750 said to have been incurred by the assessee for the payment of the goodwill to the transferor-firm, M/s. Pari Bechardas. It was contended by the assessee-firm before the Tribunal that if this amount was reduced from the total income assessed ultimately, the assessee-firm would not be within the mischief of the Explanation to section 271(1)(c) and, therefore, not liable to be subjected to penalty. The Tribunal while examining this contention found that during the accounting year relevant to the assessment year 1964-65, a sum of Rs 8,750 was paid on two dates, namely, March 29, 1963, and December 31, 1963, and the payment was made as " a sort of premium " for occupying the premises vacated by M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. In that view of the matter, the Tribunal set aside the order of the Inspecting Assistant Commissioner levying a penalty of Rs. 1,500 on the assessee. At the instance of the Commissioner, this reference has been made on the question referred to hiereinabove. At the time of hearing of this reference, the following two contentions were raised by Mr. Kaji, the learned advocate, appearing on behalf of the revenue : 1. The expense being capital expenditure is not one which could be reduced from the correct income for purposes of determining the question of the penalty on the ground of income having been concealed as provided in the Explanation to section 271(1)(c) of the 1961 Act. 2. The expenses were, as found by the Tribunal, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation about the expenditure which is liable to be reduced from the correct income assessed ultimately for purposes of determination of the question whether the assessee had concealed the income or not, as under : " Reduced by the revenue expenditure, incurred bona fide by him for the purposes of making or earning any income included in the total income but which has been disallowed as a deduction." In the first instance, there is no warrant to read more than what has been prescribed in the clause in the parenthesis by the legislature. Secondly, the legislature itself has suggested that, though the expenses might have been disallowed for purposes of computation of the income or profits, the same are liable to be deducted from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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