TMI Blog1974 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. In respect of the assessment year 1964-65, the assessee filed a return showing an income of Rs. 1,19,091 on the basis of accounts maintained by it. The Income-tax Officer was of the opinion that, having regard to the defective nature of book-keeping, the proviso to section 145(1) was applicable and, consequently, he computed income by applying a rate of 11 per cent. on the sales disclosed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt books in a defective manner and disclosed a low rate of profit. On appeal the Income-tax Appellate Tribunal set aside the order of the Inspecting Assistant Commissioner of Income-tax by observing as follows : " In our opinion, on the facts as they stand, it is not a fit case for penalty. It is no doubt true that the income as returned gave a net profit rate of only 7.1 per cent. of the turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be considered as having been returned with gross and wilful negligence. " Under section 271(1)(c) a penalty can be imposed if the income returned by an assessee turns out to be less than 80 per cent. of the income assessed if the assessee does not prove that the disparity in the income assessed and returned is not due to gross neglect or fraud. The Income-tax Appellate Tribunal has, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books should be maintained. When the assessee filed a return on the basis of accounts which are maintained in the regular course of business it cannot be said that he was guilty of gross negligence. It could not be expected from the assessee to file a return showing a higher income than what was worked out merely because the department applied a higher rate of profit in the earlier years. Thus, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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