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TMI Blog1983 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... e asst. yr. 1977-78 the return of income was filed on20th Aug., 1978declaring income of Rs. 11,240. This amount comprised: (1) Rs. 3,864 income from house property; (2) Rs. 7,318 interest income; and (3) Rs. 58 interest on securities. For the asst. yr. 1978-79 the return of income was filed on7th Sept., 1978declaring income at Rs. 10,220. This amount comprised: (1) Rs. 3,864 being income from house property; (2) Rs. 6,248 being income from interest; and (3) Rs. 112 being interest on securities. 3. A search was conducted at the residential premises of the assessee on 24/25th Nov., 1978. During the course of the search cash amounting to Rs. 1,15,062 was found and seized. Jewellery of the value of Rs. 1,32,603 was found from two lockers and residential premises. At the time of the search two refrigerators, two television sets and one stereo set were also found, the value of which was estimated at Rs. 14,700. Certain books of account which were marked 'Shri I', 'Shri II' and 'Shri III' and which were shown at serial numbers 18, 19 and 20 of Annexure 'A to the Panchnama were also seized. On inspection of these books account the sales in respect of yarn business and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansal was said to have been advanced to the HUF of Shri Madan Gopal Bansal and Sons and that amount was said to have been utilised by the family in the business recorded in the books seized and referred above as 'Shri I, II III'. The second amount was a sum of Rs. 17,899. It was explained that Shri Krishan Gopal Bansal (individual) had made a disclosure of Rs. 25,000 under the disclosure scheme of 1975 and after paying the taxes and after making the investment in Government Bonds, the balance of Rs. 17500 was deposited in a fixed deposit on30th Dec., 1975with Allahabad bank. On maturity of the said fixed deposit on 15th June, 1976 Shri Krishan Gopal Bansal received Rs. 17,099. This amount was also said to have been advanced to the family of the assessee which was utilised in the business carried on the books called 'Shri I, II and III'. The assessment for the year 1976-77 was completed on5th March, 1980. In this assessment the income from yarn business shown in the seized books marked 'Shri I, II and III' was on the basis of the assessee s own admission, added to the income of the assessee. Since the seized books of accounts did not contain the actual Trading and Profit Loss Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yarn business and loan of about Rs. 98,000 from Shri Krishan Gopal Bansal, the unexplained investment would have been only Rs. 7,000 but the unexplained investment was determined at Rs. 25,000. There was no appeal against this assessment also. 5. For the asst. yr. 1978-79 the assessment was completed on31st March, 1980and the total income was determined at Rs. 2,00,160. This amount included a sum of Rs. 1,92,000 on account of income from undisclosed cotton yarn business as also unexplained investment and interest from the same business. The sum of Rs. 1,92,000 comprised of three items: (i) Rs. 50,000 being profit at 1% estimated on sales of Rs. 50,80,000. These sales were estimated against the sales of Rs. 34,07,286; (ii) Rs. 50,000 being interest from yarn business estimated against the interest received shown at Rs. 45,428; and (iii) Rs. 92,000 unaccounted for investment in the undisclosed yarn business. For the purpose of working out the unaccounted investment in the undisclosed yarn business, the ratio of 2/30 was adopted on the estimated turnover of Rs. 50,00,000 and in this manner the investment was worked out at Rs. 35,000. After giving credit in respect of the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Paper book filed before us. It is pointed out that when even the ownership of the yarn business had not been established on the basis of the seized books of account and when the income from the said business was purely on an estimated basis, there was no question of levying any penalty for the simple reason that with a view to buy peace of mind the assessee had agreed to be taxed on certain amounts. The submission made was that the mere agreement of the assessee to be taxed on certain amounts is not adequate material for the levy of penalties and the department should have placed some positive material on record to justify the levy of penalties. Reference was made in the judgments in New Bijli Foundry vs. CIT (1976) 104 ITR 330 (P H), CIT vs. Gordhan Das Mool Chand (1979) 116 ITR 893 (Mad) and Fairdeal Motors vs. CIT 1978 CTR (J K) 60 : (1979) 117 ITR 137 (J K). It was also submitted that the initial contribution of the assessee HUF in the said yarn business was not established and without any cogent material on record and only on the basis of the assessee s own admission for being taxed on certain incomes, it could not be held that the assessee was the owner of the said bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lat, Sohinder Singh Bros. vs. CIT, CIT vs. V.L. Balakrishanan (1981) 21 CTR (Mad) 326 : (1981) 130 ITR 138 (Mad), Addl. CIT vs. Aggarwal Misthan Bhandar (1981) 131 ITR 619 (Raj) and CIT vs. Chiranjji Lal Naranglal (1981) 24 CTR (Cal) 304. He then submitted that mere estimate of income was not sufficient for levy of penalties. On this point he referred to the judgments in Bombay Hardware Syndicate vs. CIT and Addl. CIT vs. Smt. V. Kanakmmal. He also submitted that the alleged unexplained investment could not, in any case, to be made the basis for levy of penalties. On this point, he relied on the judgments in CIT vs. Jewels Paradise (1975) 101 ITR 265 (Kar), and CIT vs. Lal Babu as also CIT vs. suchitra Sen (1982) 26 CTR (Cal) 8 : (1982) 135 ITR 797 (Cal). He thus submitted that the part penalties which had been sustained by the CIT(a) should also be deleted. 9. The ld. Departmental Representative relied on the judgments in Durga Timber Works vs. CIT (1971) 79 ITR 63 (Del), CIT vs. Krishna Co. (1979) 13 CTR (Mad) 24 : (1979) 120 ITR 144 (Mad), Western Automobiles (India) vs. CIT 1977 CTR (Bom) 303 : (1978) 112 ITR 1048 (Bom), CIT vs. P.B. Shah Co. (P) Ltd. (1978) 113 ITR 587 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Explanation. The Explanation has to be construed in such a manner that it harmonizes with the principles of justice and fairness. It is unnecessary to go into the facts of each and every case cited on behalf of the parties because the question whether penalty would be exigible in a given case would depend on the facts of the case. 11. Now let us examine the facts of this case very carefully. The books of account which contained entries in respect of the yarn business were recovered from the premises of the assessee. The presumption, therefore, would be that these books of account which were recovered from the premises of the assessee belong to the assessee. If the assessee wanted to take up the position that these books of account did not belong to it, then it was for the assessee to lead necessary evidence. Instead of leading any specific evidence to prove that the books of account in which the business dealings in yarn business were recorded did not belong to it, the assessee made a categorical admission during the course of assessment proceedings that these books belonged to the assessee family. The admission was also made in the statement recorded by Shri Madan Gopal Bansa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to it, then no further proof is required to hold that the yarn business does not belong to the assessee but belongs to somebody else. The line of judgments relied on by the ld. counsel for the assessee on the point that here admission is enough for purposes of levying penalty does not help to the assessee in this case because this is not a case where the assessee has offered an explanation which it is not able to substantiate. This is a case where instead of offering an explanation the assessee has admitted the ownership of the business in respect of yarn and had agreed to be taxed on certain incomes in different years. Penalty is, therefore, clearly exigible in respect of the income from the yarn business as also the income from interest earned during the course of yarn business. Even though we hold that the penalty is exigible in respect of income from yarn business and the income from interest earned during the course of the yarn business but we do not agree with the CIT(A) that the entire income estimated from yarn business and the interest from yarn business should be subjected to penalty. 12. We will take each year separately. For the asst. yr. 1976-77 the direction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied only with reference to the interest income of Rs. 1,651 and not with reference to the interest income of Rs. 20,00. The assessee may have paid tax on higher income both in respect of business income as well as interest income but that by itself would not justify the levy of penalty in respect of that portion of income which is purely an estimated figure. 14. So far as the asst. yr. 1978-79 is concerned, the seized books of account disclosed sales of Rs. 34,37,286, the profit at 1% on these sales would amount of Rs. 34,073 against which the profit has been estimated at Rs. 50,000 by estimating the sales at Rs. 50,00,000 and by applying the net profit rate of 1%. There is no evidence that even in the seized books of account the assessee had not recorded the sales properly. We would, therefore, direct that penalty should be levied with reference to the sum of Rs. 34,073 only and not with reference to the sum of Rs. 50,000 which was estimated as the income from business. So far as the income from interest is concerned, the seized books of account disclosed interest income of Rs. 45,420 against which the IAC estimated the income at Rs. 50,000. In our opinion the income shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification for levying penalty on that amount as that amount is a purely estimated income. The unaccounted investment in the asst. yr. 1977-78 had been taken at Rs. 25,000. By taking the ratio 2:30 on the estimated turnover of Rs. 20,00,000 the investment, according to the IAC would work out to Rs. 1,35,00 and if the assessee is given credit for Rs. 28,000 being loan from Shri Kishan Gopal Bansal and Rs. 1,00,000 which had been assessed as income during the asst. yr. 1976-77, totalling Rs. 1,20,000 the balance unexplained investment would be only Rs. 7,000. Against this figure the unaccounted investment had been estimated at Rs. 25,000. In our opinion, the CIT(A) was right in holding that the sum of Rs. 25,000 should not be made the subject matter of penalty because this is purely an imaginary income. We are not inclined to hold that penalty should be held to be exigible even in respect of the sum of Rs. 7,000 because that amount also becomes merely an estimated amount. The assessee may have paid tax on the unaccounted investment of Rs. 25,000 but that by itself would not lead to the inference that on the same amount penalty should also be levied for concealment of income. We may a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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