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TMI Blog1987 (10) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment for the year appeal, the ITO came across certain purchases out of which he picked up an item of Rs. 10,800 because the payment for it had been made in cash. The assessee was not in a position to give details of the party from whom the purchases had been made but gave the reasons for the payment in cash and the reason for making such a purchase. The reason for making the purchase was that there was scarcity of paper and the assessee needed it, and, therefore, the cash purchases were made. The ITO held these purchases as bogus and further observe that, " the profits were suppressed by the Rs. 10,800 by increasing the purchases. " He, therefore, added this Rs. 10,800 to the total income of the assessee as concealed income and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been accepted, no penalty can be imposed ". The ITO considered this reply but rejected it. According to the ITO, on account of Rs. 10,800 being treated as part of the total income of the assessee, the tax sought to be evaded was Rs. 730. According to him, the minimum and maximum penalty imposable worked out to Rs. 730 and Rs. 1,460 respectively. He was of the opinion that the maximum penalty is imposable. Therefore, he imposed the penalty of Rs. 1,460 by his order dated 30th January, 1984 u/s. 271(1)(iii) of the Income-tax Act, 1961,. This penalty order was challenged in appeal before the AAC. 4. After imposing the above penalty, the ITO realised that he had not taken into consideration the provisions of section 271(2) of the Act. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the appeal against the order u/s. 154 could come up, the ld. AAC by his order dated 12th June, 1985 held that penalty was imposable but in his opinion, "it would meet the ends of justice if the same is restricted to the amount of tax sought to be evade ". In other words, he justified the imposition of penalty up to the minimum extent of 100 per cent. In other words, the penalty of Rs. 1,460 levied by the ITO by his order dated30th January, 1984, was reduced by this appellate order to Rs. 730. After this appeal was decided on the original order made by the ITO, the assessee appeal against the order of the ITO made u/s. 154 on8-10-1984was taken up and decided by the ld. AAC on30th June 1986. In this order, the ld. AAC has noted the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing the books, which were sold. Even, the commercial results, declared by the assessee, it was contended, were better than the last year and as such, there was no justification, whatsoever, for making any addition and the ld. AAC took no time to delete the sum of Rs. 3,4,32. However, he confirmed Rs. 10,800. But that does not justify the imposition of penalty upon the assessee. 7. The ld. counsel for the assessee further submitted that the ITO originally imposed the penalty of Rs. 1,460. Thereafter he amended this and enhanced the penalty to Rs. 9,240. He submitted that the ITO apparently made the original penalty order without fully applying his mind and in a casual manner. The subsequent amendment is not justified in view of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count for the purchases were made and the material purchased was shown as part of the manufacturing and trading activities for the year under appeal. It is also clear that the net profit shown by the assessee for the year under appeal was much better than the net profit for the year under appeal was much better than by the assessee for the year under appeal was much better than the net profit for the immediately preceding asstt. year. The turnover declared by the assessee for the year under appeal showed a net profit rate of 16.3 percent as against 12.9 per cent of the last year. The assessee, thus, showed increase of about 3.5 per cent in the rate of net profit over the last year. This was apparently a better result. According to the ITO, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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