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TMI Blog1978 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... rate for the earlier year. He, therefore, made an examination of the accounts and found that there was heavy inflation of expenses under the latex collection account and transport account and that the amount shown in the account had no relation to the actuals. To support his conclusion he had referred to the instances of collection and transport charges being shown even during periods of rainy months when there was no rubber tapping. He had also found that the claim for expenses was disproportionate to the dry rubber content of the latex collected. He was of the view that the expenses debited were not really incurred by the assessee, and that the plantation owners do not generally permit coolies of the purchasers of the latex to do the coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re brought to his notice in the course of hearing of the appeal, and were the result of enquiries made by him regarding the ITO's contention that the expenses debited were bogus or fictitious or exaggerated. It was stated by the AAC that he had contacted several estate owners from whom latex had been purchased and these owners had stated to at the expenditure was borne by them, for collecting latex and for putting the same into the tank for being heated with ammonia gas. The gas alone was provided by the assessee. Till the barrels reach the assessee's lorry, all the expenses were met by the estate owners. The correspondence and letters on this subject from the estate owners were shown to the assessee and were referred to by the AAC in his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal has stated that it had based itself on the decision of the Gujarat High Court in CIT v. Lakhdhir Lalji [1972] 85 ITR 77. It was of the view that the materials gathered by the AAC would be available to that officer to impose a penalty but cannot be used by the ITO ; and bereft of the evidence gathered by the AAC there was no material to sustain the levy of a penalty. In regard to the credits in the capital account also, the Tribunal held that no case has been made out and that the department has not discharged the burden of proof to show that there had been a concealment of income by the assessee. It was against the above background of the orders passed by the Appellate Tribunal that it referred the following questions of law for our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty on grounds, inter alia, that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. The Explanation to the section, as it stood at the relevant time, has also relevance to the questions at issue. We shall therefore quote the same : " Explanation.-- Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a point that penalty proceedings could not be passed on the material gathered by the AAC. It has referred in the statement of the case to the decision of the Gujarat High Court in CIT v. Lakhdhir Lalji [1972] 85 ITR 77. We have examined that case. We think the said decision has really no application. That decision only ruled that where the penalty proceedings had commenced against the assessee on a particular footing, namely concealment of particulars of income, but the final conclusion for levying penalty was based on a different footing altogether, namely, on the footing of furnishing inaccurate particulars of income, it could not be said that the assessee had been given a reasonable opportunity of being heard before the order imposing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he made an addition to the income and passed the assessment order. That was sustained by the AAC, who at that stage, went into the matter carefully, by examining the statements of the owners of rubber estates and other material, which we have already referred to. To elaborate the position, the ITO found that the expenditure incurred in the trading account under the various heads were not capable of verification, and that when the assessee was asked to explain how the expenditure was shown to have been incurred even in months when no latex collection was possible, he only stated that they might have been incurred in respect of some earlier or later collection of latex. The officer concluded that the expenditure under the heads " Production e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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