9911796707
TMI Blog1994 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer (A.O.) noted from the details filed of the empty bottles that in the month of March 1985 the assessee had shown purchase of 35,032 of empty bottles @ Rs. 2 per bottle from the distillery and of 3,59,198 bottles @ Re. 1 per bottle from the market/other persons. Utilisation of 1,75,165 bottles only was shown in that month. But, at the same time the balance of 2,19,065 bottles was not reflected in the closing stock. On scrutiny of the empty bottles purchase a/c for the period from April 1984 to February 1985, the A.O. noticed that the assessee had shown supply to the distillery of more number of empty bottles than shown in the books. On looking at the gross profit declared by the assessee the A.O. noted that gross profit rate was declared at 3.6% on total sales of Rs. 6,52,53,557 which, in his opinion, was low and should have been at 4% leading to enhancement of the gross profit by Rs. 12,501. The A. O., therefore, referred the matter under section 144A of the I.T. Act, 1961 ('the Act') for instructions from his IAC. 4. Before the IAC the assessee explained that extra bottles, whenever required by the assessee, were supplied to it @ Rs. 2 per empty bottle by the distill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g asked, the assessee explained, that primarily the addition made on account of discrepancy in the empty bottle account was a trading addition only, a part of which was knocked off by the learned CIT(A). It was claimed that such an addition should not be made the basis of levy of penalty under section 271(1)(c). It was further contended that the assessee itself had disclosed the relevant facts regarding the position of purchases and utilisation of the empty bottles and nothing was detected by the A. O. to be regarded as concealed income of the assessee. At any rate the assessee had neither concealed any income nor furnished inaccurate particulars of such income. The A.O. did not accept such explanation and levied penalty of Rs. 1,23,062 under section 271(1)(c) on the basis of computation made in the following manner : 1. Tax on assessed income of Rs. 7,43,740 including addition of Rs. 2,19,065 after appeal effect and in the status of URF Rs. 4,37,972 2. Tax on returned income and disallowances etc. at Rs. 5,24,670 in the status of URF Rs. 3,14,910 3. Tax sought to be evaded Rs. 1,23,062 4. Minimum penalty @ 100% of tax sought to be evaded Rs. 1,23,062 5. Maximum penalty @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee at 53 retail shops, but the expenditure claimed fully tallied with the number of bottles received from the distillery and, therefore, there was no case at all for levy of penalty under section 271(1)(c) of the Act. In the end Mr. Jain submitted that at the most it was a case of an addition of doubtful character and the benefit of doubt should go to the assessee, notwithstanding the fact that on quantum side the addition was sustained. 10. The learned Departmental Representative, on the other hand supported the order under appeal. He vehemently urged that he assessee had been changing its stand from stage to stage of the proceedings but its pleas, so taken from time to time, were found quite baseless and rejected as such and, therefore, it should be given no benefit of such false pleas. The learned Departmental Representative further submitted that it was not a case of trading addition made on estimate basis but that a specific addition of Rs. 2,19,065 was made on account of non-disclosure of the empty bottles, stated to have been purchased in March 1985, in the closing stock and that clearly represented concealed income of the assessee. 11. In rejoinder Mr. Jain s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... create or cast penal liability. Presence of guilty intention on the part of the assessee is not essential for making addition to the total income returned by him. But in penalty proceedings such state of mind of the assessee is a relevant factor for consideration. Even In cases of absolute liability, wherein presumption of guilty mind on the part of the doer of the act replaces the presumption of innocence on his part, his right to prove his innocence, bona fides or good faith in the commission of the act, sought to be punished as a default or offence, is not taken away. Mens rea may or may not be an ingredient of a default or offence, but it always has a relevance in those actions which are intended to be visited with penal consequences, irrespective of the fact whose burden it is to prove its presence or absence in such actions. Penalty proceedings under the Act are quasi-criminal in character and the same degree or standard of proof which is required to decide civil disputes between the parties is required to decide such proceedings. Preponderance of probabilities should, therefore, dictate the decisions in such matters. Penalty is not to be imposed merely because it is lawful t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------------------------------------------------------------- April 84 1,87,597.22 52,060-2-2 1,25,300 May, " 1,97,866.22 39,575-2-0 78,669-0-0 June" 1,94,795-0-0 38,965-0-0 1,09,350-0-0 July " 1,71,734-0-1 34,349-0-1 1,41,482-0-0 Aug. " 1,60,578-0-0 32,115-0-0 1,38,150-0-0 Sept. " 2,04, 676-0-0 40,938-0-0 1,60,154-0-0 Oct. " 1,73,260-0-0 34,663-0-0 1,35,500-0-0 Nov. " 2,15,915-0-0 43,184-0-0 1,43,151-0-0 Dec. " 1,81,814-0-0 36,362-0-0 1,19,671-0-0 Jan.85 1,78,770-0-0 35,718-0-0 1,26,885-0-0 Feb. " 1,71,228-0-0 34,245-0-0 1,15,682-0-0 Mar. " 75,165-0-0 35,032-0-0 3,59,198-0-0 ------------------------ ------------------------- -------------------------- 22,13,398-4-3 4,57,206-43 17,56,192 ------------------------ ------------------------- -------------------------- 15. On a study of the above chart it may be said that at times during the period between April 1984 and February 1985 supply of empty bottles to the distillery exceeded the availability of such bottles with the assessee and at times the supply fell short. But if the purchases reflected in the last month of March 1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the consumer who might have taken it away with him or left at the shop or with the salesmen there. In any case, there was the possibility of the empty bottles becoming the property of the salesmen who might sold it to the assessee @ Re. 1 per bottle. This probability fits in the facts and circumstances of the case when the delivery of the liquor bottles from the distillery was to be taken directly to the retail shops. The salesmen at the retail shops thus could have enabled the assessee to supply more empty bottles to the distillery at the needy occasions than those reflected in the books. The assessee thus could have made the deficiency in the empty bottles purchase a/c good at the close of the accounting period. Here in order to cast a liability on the assessee for inflated purchases it was to be seen whether the salesmen helping the assessee by providing the empty bottles received or purchased by them from the consumers of loose liquor in glasses were reimbursed by the assessee or not. Unfortunately no enquiry in that respect appears to have been directed in the assessment proceedings. It was perhaps for that reason that the learned CIT(A), though deleted the addition of Rs ..... 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