1986 (3) TMI 128 - AT - Income Tax

Summary

Issues:
Dispute over deletion of Rs. 97,221 made by ITO for unaccounted sales, penalty, and overcharging in liquor sales.

Analysis:
The Revenue raised a dispute concerning the deletion of Rs. 97,221 by the CIT(A) for unaccounted sales, penalty, and overcharging in liquor sales. The ITO had observed that the penalty levied by the Excise & Taxation Dept. was not reflected in the books of accounts, and the assessee was found guilty of adulteration, overcharging, and opening vends on dry days. The ITO made the addition of Rs. 97,221 based on these findings. The CIT(A) deleted the entire addition, leading to the dispute with the Revenue.

During the proceedings, the departmental representative argued that the assessee had been penalized by the Excise & Taxation Department for the offenses, and the CIT(A) erred in deleting the addition entirely. The assessee's counsel contended that while overcharging was proven, other charges regarding penalties were not directly attributable to the assessee, as the penalties were paid by 'ahatawalas' and 'karindas'.

After reviewing the submissions, the Tribunal found that the entire addition should not have been deleted by the CIT(A). The assessee admitted to the faults but provided a questionable explanation, indicating that the penalties were paid by 'Karindas' and 'Ahatawala'. The Tribunal highlighted the discrepancies in the assessee's explanation and the established charges of overcharging, despite attempts to shift responsibility to 'Karindas'.

The Tribunal acknowledged the reduction in penalties but upheld the charges, particularly overcharging, which was accepted by the assessee's counsel. The Tribunal rejected the assessee's argument that they were not directly involved in the offenses, emphasizing the established charges and penalties. The Tribunal concluded that an addition was warranted but reduced it to Rs. 75,000 from Rs. 97,221, considering the estimate involved in unaccounted sales and adulteration.

Ultimately, the Tribunal partially allowed the Revenue's appeal, sustaining the addition of Rs. 75,000 for the established charges of overcharging and penalties, despite reducing the original amount due to the estimation involved in certain offenses.