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TMI Blog2000 (12) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the Tribunal was legally correct in cancelling the penalty of Rs.4,194, Rs.65,000 and Rs.62,000 levied by the Inspecting Assistant Commissioner under section 271(1)(c) for the assessment years 1962-63, 1964-65 and 1965-66? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that no penalty is exigible even by taking recourse to the Explanation to section 271(1)(c) of the Income-tax Act, 1961?" The background facts in a nutshell are as follows: The assessee was originally a partnership evidenced by an instrument of partnership dated September 12, 1960, which was subsequently amended and modified by another deed dated November 21, 1963. There were two partners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and application of a gross profit rate of 15 per cent. for 1962-63 and 16 per cent. for 1964-65 and 1965-66. The total income fell short of the limit prescribed and, accordingly, proceedings were initiated under section 271(1)(c), and later referred to the Inspecting Assistant Commissioner (in short "the IAC") under section 274. After verification of material on record penalties were levied. These were assailed before the Tribunal in three appeals, i.e., I.T.A.s Nos. 3978 of 1973, 3981 of 1974 and 3982 of 1974. The Tribunal recorded the following finding to hold that penalty was not leviable: "It is surprising that the Income-tax Officer made no mention of the sales disclosed in the assessee's books, which were stated to be unclosed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrived at those figures. As Shri Mohinder Singh, the managing partner, had made himself scarce, the Inspecting Assistant Commissioner could naturally not make any attempt to give him an opportunity of being heard. So, a probe into his conduct was just not possible. In this context, it will be quite impossible to hold that the failure to return the correct income did arise out of any fraud or gross or wilful neglect, calling for the levy of penalty under section 271(1)(c). On the facts of the case, we are of the view that the ratio of the Kerala High Court's decision in CIT v. Sankarsons and Co. [1972] 85 ITR 627 is clearly applicable and no penalty is exigible, even by taking recourse to Explanation to section 271(1)(c)." Applications for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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