1976 (4) TMI 28

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....4-65. The assessee-filed its return of income on October 17, 1964, showing an income of Rs. 50,146. The Income-tax Officer, however, completed the assessment at an income of Rs. 1,01,380. In doing so, he made certain additions in various trading accounts both in head office and branch and also disallowed certain expenditures claimed by the assessee as business expenditures. On appeal, the Appellate Assistant Commissioner allowed certain reliefs and the total income was reduced to Rs. 86,801. On second appeal the Income-tax Appellate Tribunal reduced the income to Rs. 70,050 in round figure. After completing the assessment the Income-tax Officer referred the matter to the Inspecting Assistant Commissioner for levy of penalty as the minimum....

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....onsideration in the instant case is whether, on the facts and in the circumstances of the present case, the Explanation to section 271(1)(c) of the Income-tax Act, 1961, hereinafter referred to as "the Act", is applicable. Explanation to section 271(1)(c) of the Act reads as follows : "Explanation.-Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as "the correct income") as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that t....

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....ncome. But the total income determined by the Tribunal finally will be reduced by the expenditure incurred bona fide by the assessee for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction. This aspect of the matter, which is clearly stated in the Explanation, has not at all been considered by the Tribunal. From the orders of the taxing authorities it is found that the assessee while showing an income of Rs. 50,146.47 claimed deductions of expenditures as follows : Rs. (i) Interest account interest debited to the account of some partners 4,582 (ii) Salary account of partners 4,587 (iii) Expenses of non-trading nature included in partners' account 2,500 (iv) Car ac....