1981 (2) TMI 131

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..... income shown from the foreign liquor business at Rs. 4,259 estimated the income from foreign liquor shop at Rs. 8,000. The IAC further observed that in respect of country liquar business, the assessee had declared net loss of Rs. 3,626 on total sale of Rs. 1,13,394 and claimed expenses at Rs. 1,17,020. But the ITO estimated sales of 2 1/2 time of the licence fee paid and applied a net profit rate of 12 1/2 per cent on the sales estimated. Hence, the ITO initiated penalty proceedings and referred the matter to the IAC. The IAC on his turn issued a show cause notice in response to which the assessee contended that as against the returned income of Rs. 8,314 the assessment had been finalised after appeal effect at Rs. 28,216 and it had been ar .....

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..... levy of penalty a whatever additions have been made in the two trading accounts, they are on the basis of estimates only and no gross or wilful negligence has been shown by the Revenue against the assessee. Besides the above, we may observe that so far as the estimate of income in respect of country liquor shop is concerned, the assessee kept the books prescribed under the Excise Act and on the basis of those books the income was shown by the assessee and that is a monopoly belief that entries made are based on the actual state of affairs. So far as the income shown from the foreign liquor shop is concerned, the ld. Counsel for the assessee contended that the same was based on the results accepted in the last year wherein the income of Rs. .....

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..... assessment, nevertheless, a finding has to be recorded that the difference between the income returned and the income assessed is due to the fraud or gross and wilful neglect on the part of the assessee. The IAC did not recorded any such finding though he relied on the Explanation and the circumstances that the rate of profit given by the assessee was too low. If it be accepted that the assessee was only a whole-sale dealer, as has been found by the Tribunal, then the rate of profit disclosed by the assessee i.e. 7 per cent could not be said to be ridiculously low. The Tribunal also found that though there might be justification for making an addition in the assessment, there was no justification for imposing penalty, because the Revenue ha .....

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