High Court affirms Tribunal's decision on penalty under Income-tax Act.

Commissioner Of Income-Tax, Patiala I Versus Dev Raj

Commissioner Of Income-Tax, Patiala I Versus Dev Raj - [1975] 98 ITR 76 Issues:
1. Whether the Tribunal was justified in holding that the assessee was not liable to penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The case involved a commission agent engaged in foodgrain dealings who initially reported an income of Rs. 15,883 for the assessment year 1968-69. However, the Income-tax Officer assessed the income at Rs. 71,220, citing various additions such as household expenses, salary, income-tax, wealth-tax, charity, gaushala account, and wrong claim of bad debt. Subsequently, penalty proceedings were initiated under section 271(1)(c) due to the significant variance in the reported and assessed income. The Inspecting Assistant Commissioner imposed a penalty of Rs. 55,337, reasoning that the income returned was less than 80% of the income assessed. The Tribunal, on appeal, considered the items were inadvertently omitted, as they were disclosed in the profit and loss account submitted with the return. The Tribunal differentiated between "inadvertent mistake" and "gross negligence" or "wilful neglect," ultimately deleting the penalty.

The primary question referred to the High Court was whether the Tribunal's decision to absolve the assessee from penalty under section 271(1)(c) was legally justified. The High Court opined that the Tribunal could reasonably hold either view regarding the omission, as no explanation was sought from the assessee regarding the omission of the disclosed items. The High Court noted that even legal professionals were unaware that certain deductions like wealth-tax and income-tax were impermissible. Additionally, considering the assessee's limited literacy in Urdu, the court found no fault with the Tribunal's decision. Consequently, the High Court ruled in favor of the assessee, affirming the Tribunal's decision to delete the penalty under section 271(1)(c) of the Income-tax Act, 1961.