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TMI Blog1987 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... inspection of his books of account from the Department and it prepared certain registers on the basis of the vouchers for the subsequent period of the relevant assessment year. The Income-tax Officer, during the course of assessment proceedings, found that sales to the extent of Rs. 37,976 which were recorded in the rough cash book of the assessee did not find a place in the regular cash book for the period up to May/June, 1969. Therefore, he came to the conclusion that the assessee had suppressed these sales in respect of the amount mentioned above. He was also of the view that the assessee had not recorded full sales in his register for the subsequent period also of the relevant assessment year. Therefore, the Income-tax Officer estimated the sales of the assessee at Rs. 3,50,000. The gross profit was estimated by applying a rate of 50% to the estimated sale. Thus, the Income-tax Officer made an addition of Rs. 1,05,566 to the gross profit shown by the assessee. Learned Appellate Assistant Commissioner, in appeal, on estimated sales of Rs. 3,10,000 applied a gross profit rate of 40%. Thus, a relief of Rs. 51,000, was given. On second appeal, the Tribunal applied a gross profit ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegedly concealed by the assessee. It was, therefore, contended that the reference of the penalty proceedings by the Income-tax Officer to the Inspecting Assistant Commissioner was illegal. The representative of the Department submitted that the total income returned by the assessee was admittedly less than 80% of the total income as assessed by the Income-tax Officer and the Explanation to section 271(1)(c) of the Act applies to the case of the assessee. It was submitted that unless the Income-tax Officer indicated to the contrary in the order initiating the action, it shall be deemed that the Income-tax Officer was prima facie satisfied that the entire difference in the income assessed and the income returned by the assessee to be the concealed income of the assessee and it was not obligatory on the part of the Income-tax Officer to quantity in the order initiating penalty action the amount of income which he felt the assessee had concealed. It was submitted that it was enough for the Income-tax Officer to state that the penalty imposable exceeded Rs.25,000 and it was not necessary for the Income-tax Officer to specifically state the amount of income considered as concealed. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under the provisions of section 271 of the Act, the Income-tax Officer has in the first instance to satisfy himself that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income., Then he has to determine the exact amount of income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. If the Income-tax Officer finds that such amount exceeds sum of Rs. 25,000, he shall not issue any direction for payment by way of penalty, but refer the same to the Inspecting Assistant Commissioner. He, therefore, contends that since the Income-tax Officer has not quantified the exact amount, but has merely written that as the minimum penalty imposable exceeds Rs. 25,000, the penalty proceedings are being referred to the Inspecting Assistant Commissioner. According to learned counsel, this is illegal and shows that the Income-tax Officer has not applied his mind and there has been no satisfaction of the Income-tax Officer as required under the provisions of section 271 of the Act. He has drawn our attention to the case of CIT v. C. K. Naha Bros. [1979] 117 ITR 19 (Cal), in which it was held by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal not to be so exigible. Therefore, the Tribunal was not right in directing that the penalty should be recomputed with respect to the addition of Rs. 35,419 and Rs. 6,800. It is clear from the facts of this case also that the above authority has no applicability to the facts of the present case. In the case of B. Muniappa Gounder v. CIT [1976] 102 ITR 787 (Mad), the matter related to the cost of construction of certain houses by the assessee. The Madras High Court held that so long as the cost of construction was not properly determined in the penalty proceedings when it was put in issue by the assessee, the conclusion that the assessee had concealed the particulars of his income cannot follow as, before the charge of concealment could be sustained, one must know the amount which was complained of as concealed. As there was no finding on this aspect, the High Court returned the reference unanswered with a direction to the Tribunal to go into the question of cost of construction de novo and consider the levy of penalty in the light of the conclusion arrived at as regards the cost of construction. On the basis of this authority, learned counsel has argued that in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount before referring the matter to the Inspecting Assistant Commissioner. It is enough that the amount of concealment is more than Rs. 25,000 and, therefore, it was necessary for him to have referred the matter to the Inspecting Assistant Commissioner. He has also contended that it was for the Inspecting Assistant Commissioner to determine the exact amount and while doing so he could legally use the powers given under the Explanation to section 271(1)(c) of the Act. He has referred to the case of CIT v. Drapco Electric Corporation [1980] 122 ITR 341, wherein it was held by the Gujarat High Court that in penalty proceedings initiated by the Incometax Officer without resorting to the Explanation to section 27l(1)(c), the Explanation can be relied upon by the. Inspecting Assistant Commissioner as it enacts merely a rule of evidence and it is competent for the authority which imposes penalty to invoke its aid and, in reaching the final conclusion on the question of concealment, although the Income-tax Officer may not have resorted to it at the stage when he made the reference to the authority. Similar view has been taken in the case of Kantilal Manilal v. CIT [1981] 130 ITR 411 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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