9911796707
TMI Blog1980 (6) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... arlu, Warangal, and (iii) M/s. Dayakara Rao. M/s.T.L. Jagammadham and Sons and M/s. Parsi Venkateswarlu were said to have sold kirana and allied articles to the appellant. M/s. K. Dayakara Rao was said to have sold Coca Cola, Fanta and other soft drinks. It came to the notice of the ITO that the appellant did not record certain purchases from these parties. He discussed at length these omissions both in assessment order and the order of penalty. In his opinion, the omissions noticed were only illustrative and not exhaustive. The appellant maintained a salary register and register of employees in Form No. (N). The names of the employees and their attendance was marked in the former register and the payments made to the employees were acknowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompelled to retire from 31st March, 72. The purchases omitted to be recorded in the books of the appellant firm were diverted by the manager elsewhere. For these unmeritorious acts of the manager and the working partners, the firm should not be held responsible for omissions of the purchases, if any. This was the gist and purport of the explanation offered by the appellant to the penalty notice. The ITO found this explanation to be untenable. He held that it was humanly impossible for the manager to consume all the purchases or direct elsewhere such purchases that were said to have been omitted to be recorded in the books of the appellant firm in a short period of 10 days. He further found that there was no evidence to show that the erring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the present case. This decision contains a comprehensive summary of all the decisions which have a bearing on this topic. IN CIT vs. Koduri Papa Rao (2), the Andhra Pradesh High Court summed up the legal position relating to the true nature and character of the penalty and the onus of proof thus at page 837: "Where the explanation offered by the assessee has been found to be false and there is no other material or evidence except the conduct of the assessee in giving false explanation regarding the source of the amount in dispute, no penalty can be levied as it cannot be said that the only inference that can be reasonably and safely drawn on such facts is that the receipt constituted the taxable income of the assessee. The findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These are the principles entrenched in the decision of the Andhra Pradesh High Court in China Krishnamurthy's case (1), to which reference was made at the very outset. 3. Having said so much about the legal position, let us revert to the facts of the present case. It is true that the ITO found on verification of the transactions that the appellant failed to record a good number of transactions in the books of account which were detailed in the assessment order. He rejected the books of account as unworthy of acceptance. In that view, he made an addition and that addition was reduced by Rs. 3,000 by the AAC for the asst. yr. 1972-73. The Tribunal sustained the said addition in further appeal. The omission in the purchases a was sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking the provisions of the Explanation. In CIT vs. Patna Timber Works (5) the Patna High Court held that the mere denial of the assessee or its representative at the time of the argument before the IAC was sufficient to shift the onus to the Department which thereafter has to place further materials to show that over and above the materials in the assessment order, there are facts and circumstances on which the failure of the assessee to return the correct income could be attributed to the act of fraud or gross or wilful neglect. This decision has been cited with approval by the Andhra Pradesh High Court in China Krishnamurthy's case. We are satisfied that in the present case the Department has failed to establish the circumstances on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Before us, the ld. Chartered Accountant has made the following submissions: (a) there was neither concealment of income nor turnover; (b) some of the purchases pointed out did not relate to the appellant firm at all; (c) to the knowledge of the appellant, though in the bills the name of the appellant was shown, there was no guarantee that the appellant purchased goods and consumed. The purchases might have been for accommodating others; (d) the turnover involved was negligible which was alleged to have been omitted. In view of these circumstances, the learned Chartered Accountant has pleaded that the penalty levied was onerous. We have discussed the law and the facts for the relevant asst. yr. 1972-73 at some length and we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
