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TMI Blog1983 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... al 35,500 ------ On the first item, the Tribunal's finding was as under : " As far as the business income is concerned, the Income-tax Officer had to resort to an estimate, because there were several omissions. An analysis has been given of the deficiency in stock between January 20, 1967, and March 31, 1967. The period was only of two months and the deficiency which was not explained was quite large. Apart from the deficiency in frosted glass, where there may have been some breakages, there is a clear deficiency in plywood sheets by as much as 44 sheets. In the absence of any explanation, the only inference is that there were sales outside the books. In these circumstances, an estimate of the turnover was warranted and consequently the Income-tax Officer had to estimate the profit also. There is nothing to show that the estimates were in any way excessive. We, therefore, hold that in respect of the amount of Rs. 14,000 penalty will be exigible ". On the second item, the Tribunal's finding was as follows: " As far as the credits of Rs. 27,500 are concerned, they were in three instances in the names of persons, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cls. (a), (b) and (c) of s. 271(1). The other limb of the penalty provision is the substantial provision which deals with the actual imposition of the liability for penalty and the quantification thereof. This limb is found enacted, respectively, in cls. (i), (ii) and (iii) of s. 271 (1). Clause (c) of s. 271(1) lays down the conditions precedent for the ITO or other concerned authority assuming jurisdiction to initiate penalty proceedings for concealment of income. Clause (iii) lays down the basis on which penalty for concealment is to be levied and quantified. It is common ground that to the present case the appropriate provision to apply is s. 271(1)(iii) as it stood amended by the Finance Act, 1968, with effect from April l, 1968. Under s. 271(1)(c), the authority competent to initiate penalty action for concealment is the ITO. For starting the penalty proceedings under s. 271(1)(c), he must be satisfied that a person has concealed particulars of his income or furnished inaccurate particulars of such income. In an Explanation to this section, which was added in 1964, it was provided that, as a matter of rebuttable presumption, the assessee shall be deemed to have conceal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of view of this understanding of s. 271 (1)(iii) that the Tribunal's decision in this case bears examination. As we had earlier mentioned, the Tribunal's order sustaining the penalty to the extent of Rs. 35,500 is in two parts; penalty of Rs. 14,000 and penalty of Rs. 21,500. The quantification of penalty of Rs. 14,000 is towards the estimated addition of Rs. 14,000 to the income returned under the head " Business ". We have earlier extracted the reasonings of the Tribunal on this part of the case. All that the Tribunal says and could say, on this aspect, in their order is that there was quite a justification for the ITO to make an estimate of the turnover, and an estimate of the gross profit. The justification, according to the Tribunal, was the detection of deficiency in stock between January 20, 1967, and March 31, 1967. The Tribunal had not given any particulars as to the value of the stock discrepancy during that period. Precise figures in this regard are not found even in the assessment order. For the purposes of framing an estimate, it is enough that some defect or other is found in the accounts. But, as we read the penalty provision in s. 271(1)(iii), there must be a cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation can be sought in aid. But, beyond that, when it comes to a question of actually imposing the penalty, the authority concerned must be in a position to hold that the penalty is being levied with reference to " an amount of income in respect of which particulars have been concealed ". Merely by relying on the Explanation to s. 271 (1)(c) or by reference to s. 68 of the Act, in which unexplained cash credits can be presumed to be income for purposes of assessment of tax" a penalty cannot be sustained under s. 271(1)(iii). At the hearing, some earlier reported cases were referred to by both sides. We do not, however, think that in any of the earlier cases the questions have been presented in such a fashion as in the present one. We may, however, refer to one decision in Mansukhlal and Brothers v. CIT [1969] 73 ITR 546 (SC). Our purpose in referring to this decision, however, is to highlight the basis of the penalty provision before and after the amendment made by the Finance Act, 1968, in s. 271(1)(iii) of the I.T. Act, 1961. In interpreting s.28(1)(c) of the Act of 1922, which was more or less on the same terms as s.271(1)(c) and (iii) of the I.T. Act, 1961, before it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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