SATISH CHANDRA, J. - (1.) THE question of law referred to us in this reference is whether the Tribunal was right in invoking the Explanation to S. 271(1)(c) of the Act and upholding the levy of penalty even though the IAC had levied the penalty under the substantive provisions under S. 271(1)(c).
(2.) THE relevant and material facts in this connection are that for the asst. yr. 1964-65, the Assessee returned an income of Rs. 1,01,358. The assessment was completed on an income of Rs. 1,33,346 it is not disputed that the ITO had disallowed expenses under various categories totalling over Rs. 17,000. Of this, the depreciation disallowed was Rs. 7,314. If the sum of Rs. 7,314 is deducted from the assessed income then the difference between the assessed income as reduced by the depreciation amount and the returned income is less than 80 per cent. The condition precedent to the applicability of the explanation is that the difference between the returned and the assessed income (as reduced by the expenses which have been disallowed) should be more than 80 per cent. This condition precedent is clearly not satisfied on the facts of the present case. The inevitable conclusion is that the explanation was not attracted at all. The Tribunal was hence not justified in invoking the provisions of the Explanation while disposing of the appeal.
(3.) WE , therefore, answer the question referred to us in the negative in favour of the Assessee and against the Department. The assessee will be entitled to costs which are assess at Rs. 200 only. *****;