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TMI Blog1989 (5) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed income much less any finding as to the existence of a conscious concealment on the part of the appellant ; the Commissioner (Appeals) erred in upholding the Income-tax Officer's finding that there was deliberate suppression of sales ; a legal error also crept in the order impugned before us holding that since losses were being returned during the earlier three years and the income was estimated after rejecting the books, appellants were fully aware that the loss returned for the assessment year in question was false and the first Appellate Authority also erred in disregarding the appellant's plea as to the liability to the imposition of penalty in respect of the interest of Rs. 3,05,525 on 'kist security deposit'. In the other appeal the summum bonum of the assessee case centres round the plea that they were liable to file a statement of estimates of advance tax only if they were having an assessable income and the authorities below erred in tying the appellant with a legal fiction that since the assessments made on estimate basis had been confirmed up to the Appellate Tribunal, appellants stand as having failed to file estimates of advance tax without 'reasonable cause'. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquors was arrived at by considering comparable cases from same business. 8. The Income-tax Officer also pointed out that the assessee failed to disclose in its return interest income amounting to Rs. 3,05,525 received by them on advance kist amounts. Eventually the assessment for the year under account was completed on a total income of Rs. 27,13,850 oh 12-3-1986 i.e. with gross additions of Rs. 41,41,660. 9. This was followed by a notice u/s. 271(1)(c) read with sec. 274 of the Act. An explanation was filed by the assessee stating wherein that the profit on arrack was estimated without verifying the accounts and that a miscellaneous petition for recalling the order sustaining the estimated income was pending before the Tribunal. Incidentally the second point taken does not hold good any more as the miscellaneous petition has in the meantime been dismissed by the Tribunal. 10. The Income-tax Officer took the view that the facts and circumstances of the case amply suggested that the assessee was not maintaining any books of accounts ; they have failed to produce them despite persistent demand by the department. Even when the Managing Partner of the appellant firm was summo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was difficulty in communication and also there were less prosperous clients. He stated that the income should be estimated at a lower figure. I would not like to discuss the statement of the Income-tax Officer as to whether the learned counsel for the appellant had agreed for the estimate as the learned counsel for the appellant had stated that at no stage of time he had agreed to this estimate. However, I find that in the immediately previous year also the estimate was made at Rs. 2.50 per litre which is one adopted by the Income-tax Officer in this year. As I find that the rate of Rs. 2.50 per litre is reasonable and is also the one which was accepted by the appellant itself in the earlier year, I would refuse to interfere on this ground." On estimation of income from Indian made foreign liquor, the Commissioner took the following view : " (ii) Estimate of income from Indian made foreign liquor : The income here has been estimated at Rs.1,09,487. As in the arrack business the appellant did not give any details and, therefore, the Income-tax Officer proceeded to estimate the income on the basis of comparable cases cited by him in the assessment order. I find that u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foregoing paragraphs, the Income-tax Officer held that the claim of 'real loss' advanced by the assessee was baseless and unfounded. He took the view that the assessee thus failed to furnish statement of advance tax payable by it in accordance with the provisions of clause (a) or sub-sec. (1) of section 209 of the Act and imposed a penalty of Rs. 1,00,000. 15. Aggrieved against both these orders the appellant firm is in appeal before us under section 254 of the Act. 16. We first take up the main appeal pertaining to the imposition of penalty under section 271(1)(c), the fate of the other appeal almost dependent on the former's decision. 17. As is evident to anyone the style and genre followed by the assessee in respect of their taxation bodes ill and smack of a clear intention to defraud the revenue. Every citizen doubtlessly is vested with the physical and constitutional discretion to arrange his affairs in the manner he pleases but not in a way it offends the laws made by the 'State'. 18. It rather raises a furious storm in one's mind to think that an assessee who returned a loss as huge as of Rs. 42,78,638 in its return for the assessment years 1980-81 to 1982-83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 986 the Managing Partner stated that it is not possible to furnish the details in a business like this." To this part of the statement of the Managing Partner of the appellant firm Shri Ramamani strenuously contended that it should be interpreted as a request emanating from the assessee to get more time for the production of account books. This is seriously opposed by the learned Departmental Representative who contended that a plain interpretation of the above observation leads to the irresistible conclusion that the Managing Partner expressed his inability to furnish details " in a business like this ". Given a very careful thought to the controversy we find ourselves absolutely unable to fall in line with the interpretation put by the learned counsel. The assessee filed a return for the year under account on 30th July 1983 and the assessment completed on 12-3-1986. The first appeal preferred by the assessee was decided on 15-12-1986 and the second appeal on the 6th May 1987. At no point of time the assessee produced the relevant records and, therefore, the authorities had to take recourse to the estimates. In fact the past conduct of the assessee also goes a long way in negat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income should be estimated at a lower figure. I would not like to discuss the statement of the Income-tax Officer as to whether the learned counsel for the appellant had agreed for the estimate as the learned counsel for the appellant had stated that at no stage of time he had agreed to this estimate. However, I find that in the immediately previous year also the estimate was made at Rs. 2.50 per litre which is one adopted by the Income-tax Officer in this year. As I find that the rate of Rs. 2.50 per litre is reasonable and is also the one which was accepted by the appellant itself in the earlier year, I would refuse to interfere on this ground. (ii) Estimate of income from Indian made Foreign Liquor : The income here has been estimated at Rs. 1,09,487. As in the arrack business the appellant did not give any details and, therefore, the Income-tax Officer proceeded to estimate the income on the basis of comparable cases cited by him in the assessment order. I find that ultimately the net income is about half per cent of the total turnover which, in my view, is extremely reasonable in the appellant's case. Therefore, in this case also, I would uphold the estimate of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the assessee had deliberately underestimated his income and this was not a, case of mere furnishing of inaccurate particulars." It is evident from the above that the sine qua non for the imposition of a penalty is the deliberate understatement of income from an assessee. 25. In another case the High Court of Madras in Addl. CIT v. E. Bhoopathy [1978] 113 ITR 188 it was observed that the Income-tax Officer was led to make the estimate as the assessee did not produce any books of accounts. Further the assessee himself having accepted the estimate of 20% made by the Income-tax Officer and not having been able to show that the estimate made by him was bona fide or proper, there is clear scope for finding that the assessee has concealed particulars of his income or filed inaccurate particulars thereof during the years under consideration and the difference between the assessed income and the returned income would represent concealment and hence the levy of penalty was found to be justified. 26. Applying the ratio of these two cases, it is clearly borne out that the assessee grossly underestimated his income for the year under account by showing huge loss of Rs.14,27, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before us which we will, like to highlight is that it is well nigh impossible to believe that such a huge business could be run by the assessee without maintenance of books. Now these books are not produced by the assessee despite several opportunities provided to them. The assessee also failed to substantiate the claim of loss made by them for the year under account and this was the reason why the Income-tax Officer took help from comparable cases to arrive at the estimate of income from Indian Made Foreign Liquor and estimated profit from sale of arrack for the current year on the basis of profit estimated during the earlier assessment year accepted by the assessee at the assessment stage itself. 30. Explanation 1 to section 271(1)(c) of the Income-tax Act, 1961 as applicable to the relevant assessment year reads as under : " Explanation 1 -- Where in respect of any facts material to the computation of the total income of any person under this Act,--- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistance Commissioner or the Commissioner (Appeals) to be false, or (B) such person offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been impossible for them to visualise in the earlier part of the year that despite their running such a huge business they will not be earning any income. During the immediately preceding year i.e. 1982-83, the assessees were assessed to a positive income of Rs. 12,14,380 as against loss of Rs. 33,75,778 returned by them. Interestingly, this difference of Rs. 45,90,158 had also become final against the assessee as they did not contest the estimates of their income at Rs. 12,14,380. The explanation offered by the assessee that they were liable to file statement of advance tax only if they were having assessable income does not hold any substance. Incidentally this submission is also rendered further futile as the assessees were finally assessed on an income of Rs. 27,13,850 for the earlier year. In the result, we are fully satisfied that the assessee failed to furnish a statement of the advance tax payable by them in accordance with the provisions of section 209A(1)(a) of the Act without any reasonable cause whatsoever. The order impugned before us confirming the penalty does not suffer from any legal blemish. No interference is called for. The assessee fails. 34. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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