1975 (12) TMI 92 - AT - Income Tax

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Estimation of income and sales by the Income Tax Officer (ITO).
3. Alleged concealment of income and furnishing of inaccurate particulars by the assessee.
4. Non-production of account books for a specific period.
5. Validity and sufficiency of evidence provided by the assessee regarding the loss of account books.
6. Independent consideration of evidence in penalty proceedings.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue in this case is the imposition of a penalty of Rs. 32,300 under Section 271(1)(c) of the Income Tax Act, 1961, by the Inspecting Assistant Commissioner (IAC). The penalty was levied on the grounds of alleged concealment of income and furnishing of inaccurate particulars by the assessee.

2. Estimation of Income and Sales by the ITO:
The assessee, a registered firm, filed a return of loss amounting to Rs. 4,990 for the assessment year 1970-71. The ITO, due to the non-production of books for the period 1st April 1969 to 12th May 1969, completed the assessment under Section 144 of the Act. The ITO estimated the sales at Rs. 2,88,000 and applied a gross profit rate of 20%, resulting in an estimated profit of Rs. 57,600. This estimation was upheld by the Appellate Assistant Commissioner (AAC) and later modified by the Tribunal, which applied a gross profit rate of 17.5%, reducing the addition.

3. Alleged Concealment of Income and Furnishing of Inaccurate Particulars:
The ITO was of the opinion that the assessee had concealed income and furnished inaccurate particulars, leading to the referral of the matter to the IAC for penalty proceedings. The IAC concluded that there was gross or willful neglect on the part of the assessee, as the books for the period in question were not produced, impeding the correct determination of income.

4. Non-production of Account Books:
The assessee argued that the non-production of account books for the period 1st April 1969 to 12th May 1969 was due to their loss. The books were allegedly seized by the Sales-tax Authorities and subsequently lost on 24th March 1970. The assessee lodged a police report, and the police confirmed the loss. The IAC, however, did not accept this explanation and imposed the penalty, assuming fraud or gross neglect.

5. Validity and Sufficiency of Evidence Provided by the Assessee:
The assessee provided detailed explanations and evidence, including police reports and statements, to substantiate the loss of the account books. The Tribunal noted that the evidence presented by the assessee was plausible and reasonable, showing that the books were indeed lost. The Tribunal emphasized that the Revenue did not provide any positive material to refute the assessee's claims or prove deliberate non-production of the books.

6. Independent Consideration of Evidence in Penalty Proceedings:
The Tribunal highlighted that penalty proceedings are independent of assessment proceedings. The IAC, however, relied solely on the findings from the assessment proceedings without independently considering the evidence presented during the penalty proceedings. The Tribunal cited the case of R. Srinivasan & Co. vs. CIT Madras, which states that penalty orders should not be based solely on assessment findings but should consider all available evidence afresh.

Conclusion:
The Tribunal concluded that the assessee successfully rebutted the presumption of concealment of income by providing sufficient evidence and plausible explanations for the loss of account books. The Tribunal found no material evidence from the Revenue to prove that the assessee deliberately failed to produce the books or concealed income. Therefore, the penalty under Section 271(1)(c) was deemed unjustified and was canceled. The appeal by the assessee was allowed, and the impugned penalty order was annulled.

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