1975 (8) TMI 33

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....refore, penalty levied under section 271(1)(c) is valid ? " The statement of the cage discloses the following facts : The assessee is a partnership firm having, seven partners during the Accounting year, which, is 2019 R.N. The names of the partners are-- 1. Ladhuram Ajitsaria 17% 2. Madanlal Ajitsaria 12% 3. K. P. Ajitsaria 12% 4. Sitaram Ajitsaria 13% 5. Laxminaranayan Ajitsaria 16% 6. Puranmal Ajitsaria 17% 7. Dindayal Ajitsaria 13% The firm was carrying on business in various miscellaneous articles with head office at Gauhati and branches at Tinsukia, Calcutta and Gauhati. The assessee-firm filed the return on October 10, 1963 showing an income of Rs. 1,06,798. The Income-tax Officer found that the followin....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....fide intention of reducing the taxable income. In view of this, he further held that the provision of section 271(1)(c) were attracted, and he imposed a penalty of Rs. 15,000. Against the penalty order the assessee preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal found that the assessee furnished inaccurate particulars of its income and it was within its knowledge that the particulars furnished were not correct. The Tribunal pointed out that it was not possible to accept that the partners and the firm were separate entities in so far as the consciousness about the real state of affairs was concerned, and that the partners knew that the claim for interest was not genuine, and that they also knew that these amounts b....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... in the accounts in the names of the above parties were moneys belonging to the said four partners of the firm. These facts are not disputed. The question that arises for determination is whether the assessee-firm is liable to penalty under section 271(1)(c) of the Act because in its return it showed these interest amounts as paid to some other parties instead of the four partners mentioned hereinabove. The Tribunal in its appellate order has observed as follows : " We have carefully considered the facts of the case and the arguments of the learned representative of both the sides. In our view, on facts it must be held that the assessee furnished inaccurate particulars of his income and it was in his knowledge that the particulars fur....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s. On this proposition of law the Tribunal came to the decision that the assessee-firm was liable to penalty under section 271(1)(c) of the Act. We are, however, unable to accept this proposition of law as propounded by the Tribunal. Under section 2(31) of the Act, "person" has been defined as follows : " (31) ' person ' includes-- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. " Under the Income-tax Act a firm is an entity which is liable to pay tax. A firm is an assessee ap....