TMI Blog1978 (8) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... applied to this case, the Income-tax Appellate Tribunal is right in law in cancelling the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 ? " The assessee was doing business in foodgrains, tobacco and rubber. The assessment year with which we are concerned is 1969-70, the accounting year being the financial year 1968-69 ending with 31st March,1969. On an examination of the accounts, the ITO found two credits in the folio opened for M/s. Kottayam Rubber Company to the following effect : Rs. (1) 9-12-1968 3,129 (2) 12-12-1968 2,500 ---------------- Total 5,629 ----------------- These credits were wiped off by debit entries on December 25,1968, for Rs. 3,000 and on March 31, 1969, for Rs. 2,629. The office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The question has been referred to us under s. 256(2) of the Act. Section 271(1) of the I.T. Act, as it stood at the relevant time, read : " 271. Failure to furnish returns, comply with notices, concealment of income, etc.--(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-- (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." The section has been amended with effect from April 1, 1976. But as the amendment is immaterial for the purposes of this case, we are leaving it out. The order of imposition of the penalty with which we are concerned is dated November 15, 1973. It would be noticed that under the section all that is requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at concerns the quantum of the penalty leviable against the assessee who had been found guilty of concealment of income under section 271(1)(c). Sub-clause (iii) of the section lays down the principle to be applied in respect of the said matter. As per that sub-clause an assessee whose case falls within clause (c) may be directed to pay by way of penalty a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. It was contended by the assessee's learned advocate that the 'income' referred to in this sub-clause should be taken to mean the 'total income' of the assessee as determined by the Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, could never be the intention of the legislature. We are fortified in our conclusion by the remarks made by their Lordships of the Privy Council in Commissioner of Income-tax v. S. M. Chitnavis [1932] 2 Comp Cas 464; LR 59 IA 295, 297 ; AIR 1932 PC 178. That case is on all fours with the present case inasmuch as it particularly relates to bad debts. Those remarks are: 'Although the Act nowhere in terms authorises the deduction of bad debts of a business, such a deduction is necessarily allowable. What are chargeable to income-tax in respect of a business or the profits and gains of a year; and in assessing the amount of the profits and gains of a year account must necessarily be taken of all losses incurred, otherwise you would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the assessee in this case. In the present case, the liability of the assessee for being subjected to the imposition of a penalty under section 271(1)(c) stands concluded by the finding recorded in that behalf by the Tribunal and the question raised before us relates only to the quantum of the penalty that may be levied under sub-clause (iii) of the said section. The answer to the said question depends on the interpretation to be placed on the said sub-clause. " There are decisions which recognise that for purposes of the I.T. Act even a " nil " assessment has to be regarded as an assessment in the eye of law. See Esthuri Aswathiah v. CIT [1961] 41 ITR 539 (SC) and CIT v. Bidhu Bhusan Sarkar [1967] 63 ITR 278 (SC), both decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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