9911796707
TMI Blog1995 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... be the basis for levy of penalty under section 271(1)(c) ? " In essence, it has to be seen whether the Tribunal is justified in confirming the deletion of penalty, which was levied originally under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), on the ground that the assessee "has concealed the particulars of his income", as found in the first part of the abovesaid section 271(1)(c). The facts found are as follows : The assessee was doing transport business. The original assessment for the assessment year 1979-80 was completed on a total income of Rs. 81,370 on June 30, 1979. Likewise for the assessment year 1980-81, the assessment was completed on September 30, 1980, on a total income of Rs. 53,610. Subsequently, there was a raid in the premises of assessee in February, 1981. During the course of the search, trip-sheets were seized, which showed suppression of collections from buses, of Rs. 42,334 for the assessment year 1979-80 and Rs. 1,01,787 for the assessment year 1980-81, collections of 33 days in 1979-80 and of 54 days in 1980-81 were fully suppressed. During the course of the discussion, the assessee admitted the suppression, but r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-81, respectively, by his two separate orders, both dated July 30, 1983. On appeal, the first appellate authority agreed with the case put forward by the assessee and cancelled the penalty in both the assessment years. The Tribunal also concurred with the first appellate authority. The reasoning of the Tribunal may be seen from the following observations of it, in its order dated April 30, 1985 : The Commissioner of Income-tax (Appeals) cancelled the penalty on two grounds, one of them being, if the addition is based on estimate, the provisions of section 271(1)(c) will not be attracted. Regarding the abovesaid ground, in CIT v. E. V. Rajan [1985] 151 ITR 189 (Mad), it has been no doubt held that the view that if the addition to the income returned is based on an estimate, penalty proceedings will not stand attracted appears to be not only inconsistent with section 271(1)(c), but also with the decisions rendered in Cement Distributors Pvt. Ltd. v. CIT [1966] 60 ITR 586 (Mad) ; A. K Bashu Sahib v. CIT [1977] 108 ITR 736 (Mad) ; CIT (Addl.) v. E. Bhoopathy [1978] 113 ITR 188 (Mad) ; Rathnam and Co. v. IAC [1980] 124 ITR 376 (Mad) and CIT v. Mir Mohammed Ali [1981] 128 ITR 215 (Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no warrant for invoking the principle that the view in, favour of the assessee must be adopted, as found in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). On the other hand, on the above aspect, learned counsel for the assessee argues that the present case is only a case of estimate and that the finding of the Tribunal accordingly is that there was no concealment of income. According to the said learned counsel, taking into account the abovesaid disallowance of the revenue expenditure to the extent of Rs. 100 (Rs. 400 - Rs. 300) per day on an estimate basis, the "total income" arrived at by the assessing authority, should be taken only as income, estimated by the assessing authority. He also relied on certain decisions, dealing with cases of estimated income, where on the facts, the court held that there was no concealment. We have considered the rival submissions on the above aspect. Taking into account the facts found as well as the legal position, we have necessarily to accept the argument of learned counsel for the Revenue and reject that of learned counsel for the assessee. First of all, it is clear to us that this is not a case of the assessing authority esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income at a higher estimate than that furnished by the assessees, it cannot be stated as an inflexible rule that, in all cases, estimated income is not liable to penalty, as it is always open to draw an inference of deliberate underestimate on the facts and circumstances and if there was such an underestimate, an inference of concealment can also be drawn. We, therefore, are unable to appreciate the reasoning of the Tribunal that the estimate of the Revenue being higher than that of the assessees, there can be no concealment." Further, in the abovesaid CIT v. Balakrishna Textiles [1992] 193 ITR 361 (Mad) and Addl. CIT v. Perumalswamy (T. K.) [1984] 150 ITR 600 (Mad) relied on by the Tribunal to hold that the said Addl. CIT v. Perumalswamy (T. K.) [1984] 150 ITR 600 (Mad) held a different view itself was considered and held thus (page 369) : " In the first of these cases Addl. CIT v. Perumalswamy (T. K.) [1984] 150 ITR 600, the levy of penalty for the assessment year 1963-64 was upheld, differing from the Tribunal, on the ground that, in the disclosure petition, the assessee had admitted that the original return as well as the accounts on which it was based did not disclose th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of this latter feature of disclosure by the assessee himself, the court held that the said fact would negative concealment. So, it cannot be held, based on that decision, that whenever there is an estimate of income, there is no scope for holding that the assessee has concealed the income. Therefore, if on the assessee's own A showing the filing of the original return was an act of concealment of income, it does call for a penalty. In fact in CIT v. Krishna and Co. [1979] 120 ITR 144 (Mad) also, this court held as follows (page 146) : In the face of the assessee's own admission that the amount represented its income, there is absolutely no other evidence required to show that the amount represented its income and that it had been concealed from the return. " No doubt in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705, the Supreme Court pointed out that the acceptance of additions of income by the assessee, is not acceptance of concealment of income and that there may be a hundred and one reasons for such admission. But, as pointed out in CIT v. Balakrishna Textiles [1992] 193 ITR 361 (Mad) itself,these observations of the Supreme Court have to be under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the cost estimated by the Departmental valuer as well as private valuer and that was held to be not sufficient to hold that there had been con cealment of income. That decision has no application to the present case. Therefore, it is clear that the Tribunal and the first appellate authority committed an error of law, in holding that if the addition is based on estimate, section 271(1)(c) will not be attracted. It must also be noted that the Tribunal itself while narrating the facts observes thus : "During the course of the search, trip-sheets were seized, which showed suppression . . . During the course of the discussion, the assessee admitted the suppression" (emphasis supplied). The Tribunal, while dealing with the other reasoning of the Commissioner of Income-tax (Appeals) for cancelling the penalty, that for the default committed by the accountant, the assessee-firm cannot be held responsible for the penalty, erred in relying on Ladhuram Laxminarayan v. CIT [1976] 103 ITR 106 (Gauhati) ; CIT v. Dos Brothers [1978] 113 ITR 769 (Gauhati) and CIT v. K. L. Mangal Sain [1977] 107 ITR 598 (All). No doubt, in this regard, the assessee adduced evidence to the effect that the managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t could not be held that the assessee was guilty of fraud or gross or wilful neglect. In the present case, there may not be any necessity to invoke the said Explanation ; In view of the search made and the seizure effected gross omissions of collections were found out, and, subsequently, the assessee himself has filed revised return accepting the omissions. To the above facts, it is clear that CIT v. K. L. Mangal Sain [1977] 107 ITR 598 (All) has no application. No doubt, in the present case, the Tribunal says, that the sworn statement recorded from the managing partner, showed that the accountant was looking after the entire business in the matter of maintaining account books, and that the omissions of collections found in the account books were known to him only after the search operation. However, the Tribunal itself records that when the abovesaid accountant was examined, he admitted that he was not in the habit of writing accounts daily since he was not getting trip-sheets daily. In the present case, strictly speaking the Tribunal has not expressly held that for the default committed by the accountant, penalty under section 271(1)(c) could not be levied. So the abovereferred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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