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TMI Blog1978 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the earlier profits, but here was no proof regarding the same. It was also claimed that the slips, seized were not exhaustive and there were more items which indicated the profits. The ITO did not accept the claim. However, he found that the correspondence seized also showed the profits at Rs. 81,444 but he set off the overall surplus of Rs. 81,444 in a proportion to the amount of profits or losses in each of the years according to the slips seized. As a result he came to assess the sum of Rs. 26,225 as the assessee's income from other sources from which he had met the losses in races, during the accounting year relevant for asst. yr. 1971-72. Although this was deleted by the AAC, the addition was restored by the Tribunal in its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the slips showing losses actually do not show that the losses were actually paid. It was admitted that the assessee was not able to prove that the losses were paid out of the previous monies. It was also urged that for asst. yr. 1971-72 and earlier years, the racing gains were not taxable and therefore in respect of non-taxable items the assessee was not obliged to keep any regular accounts to establish that he had met the losses from the earlier profits, cannot be said to be due to any negligence, let alone frauds, in view of the fact that the race winnings were not liable to tax upto and including the asst. yr. 1971-72. It was also urged that the IAC had ceased to have jurisdiction after 1st April, 1976 for levy of penalty by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has held that the IAC ceased to have jurisdiction to levy the penalty after 1st day of April, 1976. Reference to the Orissa High Court judgement is in connection with the support it gave to the view taken the Karnataka High Court in connection with the question of limitation. The Karnataka High Court was not called upon to decide the question of jurisdiction of the IAC and has not done so the case referred to by the learned counsel. Having regard to the Supreme Court ruling, referred to above, we sees no justification to take a view different from the one taken by us in the case of Dr. P. Naganna Gowda(4), ITA No. 319/Bang/1977-78 dt. 5th Oct., 1978. 7. Coming now to the merits for levy of penalty in our opinion, having regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliable but it was also false, the provisions of s. 271(1)(c) are clearly attracted. There is no finding in this case that the explanation given by the assessee was definitely false. In these circumstances, in our opinion, the main provision of s. 271(1)(c) are not applicable to the facts of this case. 8. This leaves for consideration the question of application of the explanation to s. 271(1)(c). In this connection the point made out by the learned counsel for the assessee viz., that during the years upto and including the asst. yr. 1971-72 the race winnings were not liable to tax at all and therefore, he was not under any obligation to keep regular books of account for racing activity is fundamentally sound. On the facts of this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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