NAVJIVAN OIL MILLS vs. COMMISSIONER OF INCOME TAX

ITR/147/1986HC GujaratGJHC24010771198619 July 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA9 pages
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What did the High Court hold?

The High Court answered the first question in the negative, in favour of the assessee and against the revenue. The Court held that the Tribunal was not justified in confirming the penalty of Rs. 10,400 under Section 271(1)(c) based on the Explanation. The Court reasoned that the seized material should be accepted as a whole, and further estimates made by the Income Tax Officer were not supported by cogent material. Therefore, the failure to return correct income could not be attributed to fraud or gross wilful neglect. The Court found that the assessee had rebutted the presumption raised by the Explanation to Section 271(1)(c) by pointing to facts on record. The Court also noted that the assessment order itself stated that the facts for the year were similar to the preceding year, and an unreported decision of the High Court in the assessee's own case for the earlier year had sustained the order in view of CIT vs. Vinaychand Harilal. The second question was not pressed by the assessee. The reference was disposed of accordingly.

What were the facts?

The assessee, Navjivan Oil Mills, a registered firm, is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) for assessment year 1973-74. The ITAT had confirmed a penalty of Rs. 10,400 imposed under Section 271(1)(c) of the Income Tax Act, 1961. The dispute arose from additions made to the assessee's income based on seized documents during a sales tax search. The Assessing Officer added Rs. 20,000 for concealed capital and Rs. 13,000 as probable profit on estimated sales. The Appellate Assistant Commissioner (AAC) deleted the Rs. 20,000 addition and reduced the profit addition to Rs. 10,400. Both the assessee and revenue appealed to the ITAT, which confirmed the AAC's order. Subsequently, a penalty of Rs. 10,400 was levied, invoking Explanation to Section 271(1)(c).

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the levy of penalty of Rs. 10,400 imposed under Section 271(1)(c) of the Income Tax Act, 1961? (Question of law) 2. Whether, the Tribunal was justified in invoking Explanation to Section 271(1)(c) and in holding that the additions in question were not covered by proviso to Section 145 of the Act? (Question of mixed law and fact) Assessee's contentions: The assessee argued that the penalty order was based on the same facts as the preceding year, for which the ITAT had cancelled the penalty. The assessee contended that the seized material should be read as a whole and further estimates made therefrom were not permissible without cogent material. The assessee also argued that the presumption under Explanation to Section 271(1)(c) could be rebutted by pointing to materials on record, which they had done. Revenue's contentions: The revenue relied on the fact that there was a difference of more than 20% between the returned and assessed income, attracting the first limb of the Explanation to Section 271(1)(c). The revenue cited decisions in CIT vs. Somnath Oil Mills and CIT vs. Jamnadas and Co. to support its case.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 145

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 147 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO ------------

The order continues below.

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