9911796707
TMI Blog1979 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... from the 1st April, 1964 ? " The assessee is a registered firm and the assessment year is 1966-67. For the return of the aforesaid period, the ITO made an estimated addition of Rs. 20,000 in the mustard oil account, Rs. 7,200 in the arhat account and Rs. 9,000 under s. 68 of the I.T. Act respectively. The assessee had shown Rs. 9,000 as deposit of Rs. 1,500 each from the six partners. In the absence of necessary and conclusive evidence regarding the nature of these deposits, the same were added as income of the assessee. In rejecting the assessee's case of deposit, the ITO took certain circumstances into consideration. In appeal before the AAC of Income-tax, the assessee disputed the aforesaid additions. The additions of Rs. 20,000 and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mustard oil account which was not disclosed. Hence, it was concluded that the assessee had falsified its accounts and what it had kept out of its trading accounts had been reintroduced in the books in the shape of deposits in the names of the six partners. The IAC, therefore, held that the assessee had all along endeavoured to conceal its income by giving false explanation. Therefore, the assessee had not discharged the onus cast upon it to show that it was not due to any fraud or gross or wilful neglect on its part. The provisions of s. 271(1)(c) of the I.T. Act was evidently attracted and a penalty of Rs. 10,000 was imposed. Aggrieved by the aforesaid order the assessee went up before the Tribunal which, by its order dated 29th June, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible to infer from the falsity of the assessee's explanation that the receipt necessarily constituted an income of the assessee. It was further observed that it was necessary for the department to prove that it was his income which he had concealed or in respect of which he had deliberately furnished inaccurate particulars. This view was followed by our High Court in a number of cases but in some cases the Madras and Allahabad High Courts took a different view. In the case of CIT v. Anwar Ali [1970] 76 ITR 696, the Supreme Court laid down the law holding the Patna and the Bombay views to be the correct views. In doing so they followed the earlier decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 271(1)(c) is still on the department which has to to prove that the particulars furnished were inaccurate to the knowledge of the assessee at the time of the return or must be deemed to be inaccurate to his knowledge in the eye of law because the act was done with wilful or gross neglect. It seems, therefore, that under s. 271(1)(c) before penalty can be imposed the revenue must establish that the return furnished was inaccurate to the knowledge of the assessee or was the result of wilful or gross neglect on its part. Mere negligence in furnishing the particulars which are found to be inaccurate will not be enough and the neglect must be either wilful or at least gross, that is to say, the act or omission was patently wrong in the eye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act was patently wrong in the eye of law and was the result of wilful or gross neglect. By asking for the benefit of telescoping the assessee was not admitting having furnished false accounts but was merely trying to buy peace. In the case of CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC), the Tribunal had held that to avoid protracted appeal proceedings, a compromise was entered into between the assessee-company and D.J.C. Ltd. whereby a certain sum would be assessed in the assessee's hands and omitted from the assessment of D.J.C. Ltd., the latter undertaking to meet the tax liability in respect of such inclusion, the balance of benefit being retained by the company. Such an arrangement was possible because D.J.C. Ltd. was one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of the penalty was not justified inasmuch as the revenue had not discharged its onus by showing that the failure to return the correct income was the result of any fraud or gross or wilful neglect on the part of the assessee. Submission on behalf of the revenue that the effect of telescoping of the income was that the assessee accepted that it had concealed its income cannot be accepted. In support of this submission reliance was placed upon the case of Durga Timber Works v. CIT [1971] 79 ITR 63 (Delhi). In that case, when the assessee was asked to adduce evidence to establish cash credits and explain the source of investment of Rs. 14,100 it admitted that the amount could be treated as its concealed income and included in its total ..... X X X X Extracts X X X X X X X X Extracts X X X X
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