HIGH COURT OF
Commissioner
of Income-tax
v.
Ratnasi Deoji Patel (HUF)
J.P. Devadhar and B.P. Dharmadhikari, JJ.
IT Application Nos. 81, 84, 85 and 87 of 1994
April 16, 2007
Section 256,
read with section 271(1)(c), of the Income-tax Act, 1961 – High Court -
Reference to – Assessment years 1982-83
to 1985-86 – Pursuant to a search, assessee filed returns declaring search –
Assessing Officer complete assessment and also levied penalty under section
271(1)(c) by involving Explanation 1,4(a) and 5 thereto – Assessee’s
case that note books seized during course of search was books of account
maintained by it in regular course of business and therefore, Assessing Officer
was not justified in levying penalty – Commissioner (Appeals) as well as
Tribunal deleted penalty – Whether questions of law as to whether Tribunal was
justified in holding that note-books found in possession of assessee were books
of account and, consequently, in canceling penalty, did arise out of order of
Tribunal – Held, yes
During the course of a search action carried out in the residential premises of the assessee HUF, as also the business premises, certain incriminating documents including a note book were found. It was also noticed that the assessee had made huge investments by lending money on promissory notes construction of house property, etc. but had not filed any return of income for the assessment years in question. Thus, he issued notice under section 148 for the assessment years 1982-83 to 1984-85 and notice under section 139(2) for the assessment year 1985-86. In response, the assessee filed the returns of income declaring the income which was noticed from the seized note-books. The Assessing Officer accepted the amount offered by the assessee and completed the assessments, In addition, he also, levied penalty under section 271(1)(c) by invoking Explanations 1, 4(a) and 5 to section 271(1)(c). On appeal, the Commissioner (Appeals) cancelled the penalty. The revenue’s appeal, the upheld the Commissioner (Appeals)’s order, and also rejected reference application filed by the revenue under section 256(1).
On application under section
256(2):
The returns were
not filed by the assessee prior to the date of search. During the course of
search an exercise book was seized, wherein it was noticed that the assessee
had made investment in promissory notes and also in the construction of a
house. The assessee relied upon the decision of the Apex Court in the case of CBI
v. V. C. Shukla, AIR 1998 SC 1406, and submitted that the note books
seized during the course of search was books of account maintained by the
assessee in the regular course of business and therefore, Explanation 5 to
section 271(1)(c), invoked by the Assessing Officer was not justified.
The Bombay High Court in the case of Sheraton Apparels v. Asst. CIT [2002]
256 ITR 20/123 Taxman 238 (Bom.) held that the, books recorded facts, but not
maintained for computation of income, could not be said to be books of account.
Therefore, the questions of law as to whether, on the facts and in the
circumstances of the case, the Tribunal was justified in holding that the
exercise books found in the possession of the assessee, though they were not
books of account but in the strictest sense of the terms, they were books of
account and further as to whether, on the facts and in the circumstances of the
case, the Tribunal was justified in affirming the order of the
Commissioner(Appeals) in canceling the penalty levied by the Assessing Officer
under section 271(1)(c) did arise out of the order passed by the
Tribunal. [
Case review
In the result, the application was
to be allowed and the Tribunal was to be directed to forward the statement of
the case.