9911796707
TMI Blog1980 (3) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... red to have acted without due diligence merely because it followed the demand notice as to the forum for remedy and was consequently misled. The delay is condoned and the appeal is admitted. 2. The assessee is a partnership firm consisting of four partners, namely G. Gopal, G. Babu, M. Anandan and M.V. Jankiraman. The business was in coconuts. For the year ending 31st March, 1972, the accounting year relevant to the asst. yr. 1972-73 under consideration, the assessee had declared an income of Rs. 82,610 which was rejected by the ITO, who, inter-alia, made an addition of Rs. 3,50,000 as the additional profit on suppressed turnover, besides making two separate additions under 'other sources' Rs. 21,000 in respect of credits in partners' accounts and Rs. 1 lakh credited in the name of M/s. Krishnaswamy and Holaram. The addition for additional profits was made because comparison of the assessee's accounts with M/s. Tejappa Sons of Bangalore revealed that the assessee had made a payment of Rs. 10,53,081 as against receipts of Rs. 5,84,901 accounted by the Bangalore party. The purchases made by the assessee as per these books from M/s. Tejappa Sons was only Rs. 6,58,517. Though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his letter dt. 19th Feb., 1974 that the deposits represented amounts received from parties and that the withdrawals have been utilised for effecting purchases of coconuts outside the accounts. Such receipts were to the extent of Rs. 2,36,788 on variousdates. For these reasons, the ITO added 20 per cent to the disclosed sales, as further possible sales and adopting 5 per cent gross profit on entire sales he rounded off the addition to the books results at Rs. 3,50,000. He also found that the following partners had credits in their capital accounts as under: G. Gopal 9-12-1971 Rs. 10,000 Janakiraman 28-4-1971 Rs. 1,000 Anandan 20-1-1972 Rs. 10,000 These according to the ITO, were not satisfactorily explained. There were also credits to the extent of Rs. 1 lakh on 7th Feb., 1972 in the names of two persons namely R. Krishnaswamy and H. Holaram at Rs. 50,000 each. These persons were clerks of one Seth Thakurdas Kanchand, Bankers at Trichy. The examination of these two persons revealed that they were on a petty salary and had also given completely unlikely stories about the origin of the funds and the details of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, 1978 by endorsing the view of the AAC. It is after the Tribunal's orders that the IAC to whom the penalty proceedings were referred, had proceeded with the action. 5. Before the IAC the assessee contended that the addition was based upon an estimate. It was also stated that the assessee did not have a proper opportunity to cross-examine M/s. Tejappa Sons, Bangalore. It was stated that even the other grounds for the addition are based upon disbelief of the assessee's explanation. The IAC was, however, unable to accept the assessee's explanations. He found that there was substantial basis by way of surfacing of additional suppressed income in the accounts of Smt. Saraswathi, wife of a partner, partner G. Babu and other three partners, amounting in all to Rs. 85,000. He also found that Shri Veerabadrappa, partner of M/s. Tejappa Sons, was cross-examined by the assessee's representative on 14th June, 1976 and such cross-examination did not succeed in establishing the assessee's claim. For these and the other reasons he was of the view that it was a fit case where the addition as confirmed by the Tribunal should be taken as having been established for purposes of penalty und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the subsequent year is no substitute for the statutory right which the assessee had. It was also pointed out that Shri Veerabadrappa did not know all the details of the transactions, since Mr. Tejappa, who was then living alone was familiar with all the details. He also claimed that the statement did not specifically mention the suppressions for the year under consideration. He also claimed that the complete copy of the settlement petition was not given. For all these reasons, he claimed that the transactions with M/s. Tejappa Sons could not be treated as established. According to him, the quantum order of the Tribunal was merely one of estimate. He contended that it is well established that penalty cannot follow such pure estimate cases. According to him, even the transactions in the name of Smt. Saraswathi and partner Shri Babu in the banks were not shown to be outside the books or that it had an element of income clearly shown to be as such. Under these circumstances, he claimed that the penalty is not exigible notwithstanding the fact that the addition to the extent of Rs. 1 lakh was confirmed for defects in accounts. 8. Shri T.C.A. Ramanujam, the learned Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... east doubt. He claimed that the assessee was really lucky in having the addition restricted to Rs. 1 lakh when there was clearly evidence to show that the cash credits in the names of Krishnaswamy and Holaram to the extent of another Rs. 1 lakh were bogus. In fact, that was the view of the AAC and the Tribunal though they gave the benefit of doubt to the assessee because of the possibility that the monies could have represented the borrowings from the Banker under whom they were employed or some other person. He claimed that the addition of Rs. 1 lakh itself is rather low considering the extent of bank transactions, purchase suppressions and cash credits noticed in the accounts themselves. He also pointed out that only the minimum penalty was levied. 9. We have carefully considered the records as well as the arguments. As for the jurisdiction, the return was filed on 30th Dec., 1972 and the penalty proceedings were referred by the ITO to the IAC under s. 274(2) on 10th March, 1975 while s. 274(2) was omitted by Tax Law Amendment Act, 1975 only w.e.f. 1st April, 1976. Hence, the facts are the same as for the earlier two years for which penalties were confirmed by this Tribunal. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards the accounts in the name of Smt. Saraswathi in Triplicane branch of Punjab National Bank and partner Shri Babu in the main branch of Syndicate Bank, the transactions are Rs. 1,11,580 and Rs. 2,36,788. The additional peak in the two accounts as found by the AAC was Rs. 30,000 and Rs. 34,621. The two additional peaks and the credits in the partner's accounts to the extent of Rs. 21,000 add up to Rs. 85,000 as the amount which has surfaced during the year. This is the substantial part of the addition. Even now there has been no satisfactory explanation for all these credits. In fact, the two bank accounts were clearly admitted to represent the assessee's transactions not brought into accounts. It is too late now to go back on the same. We are satisfied that there has been suppression of purchases, sales, non-recording of transactions with Bank in assessee's books and cash credits which represent the surfacing of either sales or income. In short, there has been manipulation of account books. It was under these circumstances that the account books and the statements extracted therefrom were found to be unreliable and the addition of Rs. 1 lakh confirmed. It is not a case of esti ..... 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