Belated returns and book-based assessment can still fall under incorrect-return procedure, supporting penalty application.

Belated returns and assessment based on the assessee's books of account were treated as falling under the provision dealing with incorrect or incomplete returns, not as a best judgment assessment for failure to file returns in time. The court noted that the assessment relied on disclosed figures and produced books, and therefore did not proceed on a best judgment basis. It also held that the mutual exclusivity of the penalty explanations did not make the two assessment provisions mutually exclusive. On those facts, Explanation I to Section 36(2)(c) was validly applied and the penalty challenge failed.

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Issues: Whether an assessment made on the basis of books of account and belated returns could be treated as an assessment under Section 33(3) rather than a best judgment assessment under Section 33(5), and whether Explanation I to Section 36(2)(c) could be invoked for penalty.

Analysis: Section 33(3) applies where a return is furnished but appears incorrect or incomplete, enabling the authority to require attendance and further evidence. Section 33(5) applies where no return is furnished within the prescribed time and authorises best judgment assessment. On the facts, the returns were filed belatedly for some quarters and not filed at all for one quarter. The assessment order relied on books of account produced by the assessee and the disclosed figures, and did not proceed as a best judgment assessment. No rule barred the department from examining belated returns. The mutual exclusivity of Explanations I and II to Section 36(2)(c) did not make Sections 33(3) and 33(5) mutually exclusive.

Conclusion: The assessment was rightly treated as one under Section 33(3), Explanation I to Section 36(2)(c) was validly applied, and the challenge to the penalty failed.

Final Conclusion: The referred questions were answered against the assessee and in favour of the department, upholding the penalty basis adopted by the tax authorities.

Ratio Decidendi: Belated returns may still be examined under the provision governing incorrect or incomplete returns when the assessment is not a best judgment assessment; the penalty presumptions under the relevant explanation then apply according to the facts found.

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