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TMI Blog1994 (1) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had shown opening balance of sundry creditors without giving the names and addresses at Rs. 1,04,853. It was found that the assessee had shown a payment of Rs. 75,000 to these creditors on different dates during the assessment year 1986-87. The payments were said to have been made by demand drafts but the names of the creditors were not mentioned. For the year 1985-86 the purchases were shown at Rs. 11,90,764 while the total withdrawals from the Bank were to the tune of Rs. 7.7 lakhs approximately. The Assessing Officer, therefore, asked the assessee to explain the source for the balance of purchases. The assessee then came out with a contention that the payments to the sundry creditors were not made by demand drafts but were made in cash. No details, however, were made available regarding the names and addresses of the creditors, etc. According to the assessee, purchases to the extent of Rs. 2,97,422 were credit purchases and the balance represented cash purchases which were not reflected in the bank account. The Assessing Officer while comparing the records of the assessee with the Sales-tax Department found that the assessee had disclosed purchases of Rs. 9,90,764 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The assessee is in appeal before us. 3. We have heard the assessee's counsel and the Departmental representative in this regard. It is seen that right from the assessment years 1982-83 to 1987-88 the assessee has been showing the gross profit rate between 9.44 per cent to 15.08 per cent. The net profit also varied between 4.23% to 6.78%. It is conceded that the assessee did not maintain regular books of account and no quantitative details were available. Provisions of section 145(1) were clearly applicable. In this case the assessee filed original return showing an income of Rs. 40,000 only. Later on when the department started going into the details of the bank account it found that the assessee failed to reconcile the bank account with the balances shown by him in the income-tax and sales-tax returns. Thereafter the material that has been gathered by the Assessing Officer could not be dispelled by the assessee and he had to come forward with an offer of additional income of Rs. 2 lakhs. There is no doubt that the accounts of the assessee were such that the Assessing Officer could not rely upon the same for computing the income of the assessee. The way the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come or furnished inaccurate particulars of his income in the circumstances set out in Explanation. But for such a legal fiction it could never have been said that there was any concealment or furnishing of inaccurate particulars of income. The Explanation also shifts the burden of proof on the assessee. Therefore, when the Explanation was resorted to by the CIT(Appeals) for confirming the penalty it was essential that the assessee should have been informed that the penalty proceedings against him were being commenced under Explanation to section 271(1)(c). There is no dispute that as far as this case is concerned the Assessing Officer did not initiate penalty proceedings under Explanation to section 271(1)(c). At no stage the assessee was given any opportunity of offering explanation by informing him that the proceedings for concealment were initiated under Explanation to section 271(1)(c). The Hon'ble Bombay High court further confirmed this view by their decision in the case of CIT v. Dharamchand L. Shah [1993] 113 CTR (Bom.) 214. We find that the Hon'ble Bombay High Court in the above decision observed that invariably in such cases the Revenue is not properly applying its mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings under Explanation 1 to section 271(1)(c). The decision of the Gujarat High Court in K.M. Bhatia (Quarry) v. CIT [1992] 193 ITR 379 is also not applicable to the facts of this case as here the assessee did not accept any mistake. As far as the decision of the Andhra Pradesh High Court in G.K. Padmaraju v. CIT [1959] 37 ITR 365 is concerned, we are of the opinion that it neither helps the assessee nor the Department. The facts in that case are entirely different from the facts of this case. Regarding the Madras High Court decision in CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602 we are of the opinion that the filing of revised return in this case under section 139(5) does not help the assessee. In this case the assessee filed a revised return or offered amount for taxation only after the Income-tax Officer had made detailed investigations. The decision of the Madhya Pradesh High Court in Sulemanji Ganibhai v. CIT [1980] 121 ITR 373 also does not help the assessee. It is a matter of fact that helps the Department inasmuch as the assessee failed to offer an explanation as regard to the concealment of Rs. 3 lakhs which could be supported by him by any evidence. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready made and reasons for issuing the notice under section 274 read with section 271(1)(c) were recorded by the ITO. The assessee fully knew in details the exact charge of the department against him. In this background, it could not be said that either there was non-application of mind by the ITO or the so-called ambiguous wordings in the notice impaired or prejudiced the right of the assessee of reasonable opportunity of being heard. After all, section 274 or any other provision in the Act or the Rules, does not either mandate the giving of the notice or its issuance in a particular form. Penalty proceedings are quasi criminal in nature. Section 274 contains a principal of natural justice of assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight jacket formula. For sustaining a complaint for failure of principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about proposal to levy penalty in order to enable him to explain as to why it sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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