9911796707
TMI Blog1988 (2) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... books and 23 parcels were admitted not to have been recorded in the books of account. The gross weight of the parcels was furnished to the ITO at 334.745 kgs., inclusive of packing. The ITO was of the opinion that for packing 10 kgs. of silver 800 gms. of packing materials was required, and thus worked out the total weight of packing of 23 parcels at 26.774 kgs. After deducting this weight he arrived at the net weight of 307.771 kgs. He also allowed allowance for impurities at 61.594 and accordingly arrived at the net weight of the ornaments at 246.377 kgs. He valued ornaments @ Rs. 1,200 per kg. which was value of pure silver, and worked out the figures of Rs. 2,95,652. The ITO held that the assessee had not accounted for this in the books of account and the same represented its income from other sources. 3. The Income-tax Officer also found cash credits of Rs. 25,000 each totalling to Rs. 50,000 in the capital accounts of the two partners. The ITO required the assesses to explain the same. However, the ITO was not satisfied with the explanation regarding the source and accordingly added Rs. 50,000 to the disclosed income under section 68 of the Act. The assessee filed appeals a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king material of parcels to obtain net weight of parcels, the value of parcels, sales and gross profit etc. and credits in the accounts of the two partners of Rs. 25,000 each which were treated as income by the ITO. But the CIT (Appeals) reduced the addition from Rs. 50,000 to Rs. 25,000. The CIT (Appeals), however, did not sustain penalty in this regard. The authorised representative for the assessee argued that an order imposing penalty is a quasi criminal order and burden lies on the department to establish that the disputed amount represented income and the assessee had consciously concealed the particulars of his income or deliberately furnished inaccurate particulars. It was next contended that in penalty proceedings, the taxing authority is bound to consider the matter-afresh on the material placed before it and accordingly the burden lay on the department to establish whether a particular amount is a revenue receipt or not. Mere falsity of Explanation given by the assessee is insufficient, without there being additional cogent material or evidence, from which necessary conclusion could be drawn. In, support of the above contention, reliance was placed in Smt. Kalawati v. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (Appeals) amended the ITO's estimate by taking rotation of 3 months, which was subsequently amended by the Tribunal to rotation of 2 months. Such addition for estimate had also been considered for initiating penalty. It was further emphasised that the silver was sent to credit and the original bills were there, but the authorised representative could file none on record. In the alternative, it was contended that the income assessed was excessive and unrealistic. According to the authorised representative for the assessee, the position as per books of account in respect of recorded sales was as under : --- Sales G.P. Silver bullion 1,14,669 @ 10 % 1,147 Silver Ornaments 76,925 @ 16.43% 12,636 Total 1,93,594 13,813 On the basis of the aforesaid figures, it was contended that after taking into account 5 per cent net profit, the income from unrecorded sales would not be more than Rs. 9,275. He also produced sales-tax orders to show that on these unrecorded sales, a sum of Rs. 9,603 was the sales-tax levied, which was not considered in the assessment proceedings, though the same was allowable in view of the decision of their Lordships of the Hon'ble Supreme Court in Kedar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g evidence to establish that the assessee did not pass entry of 23 post parcels in the account books and also required the assessee to lead evidence in rebuttal. He also referred to the statement of two partners wherein none of these partners in their statement claimed that they carried on any separate business other than the partnership business. These partners also never claimed to have received any parcel in the name of firm M/s Anjani Alankar Mandir, which did not belong to the firm. On the basis of this material evidence, the Departmental Representative contended that 23 post parcels belonged to M/s Anjani Alankar Mandir and they were not entered in the books of the firm. Therefore, the manipulation of the accounts was obvious which was done by not recording real transactions at all. According to the Departmental Representative, on the facts and in the circumstances of the case, the intention of assessee was only to conceal the income arising therefrom and, therefore, the penalty was rightly levied/confirmed by the authorities below. In support, he placed reliance on the decisions in G.K. Padmaraju v. CIT [1959] 37 ITR 365 (AP), Cement Distributors (P.) Ltd. v. CIT [1966] 60 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Addl. CIT v. Lakshmi Industries Cold Storage Co. Ltd. [1984] 146 ITR 492 (All.), CIT v. Chiranji Lal Shanti Swarup [1981] 130 ITR 651 (All.), Rukmani Bahu v. Addl. CIT [1979] 116 ITR 468 (All.), Bhikamchand Sethia v. ITO [1979] 120 ITR 559 (Cal.), CIT v. Nathulal Agarwala Sons [1985] 153 ITR 292 (Pat.) (FB). It was next contended on the basis of the decisions in Lakshmi Industries Cold Storage Co. Ltd.'s case, CIT v. Central Kooridih Colliery Co. [1985] 153 ITR 311 (Pat.), CIT v. Novelty Bar Restaurant [1985] 154 ITR 338 (Pat.) that after addition of Explanation to section 271(1)(c), the decision in the case of Anwar Ali and Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) had no application. The Departmental Representative next contended that Explanation I to section 271(1)(c) was inserted with effect from 1-4-1976 and is applicable to the assessment year under consideration. In view of this Explanation with effect from 1-4-1976, the burden of proof lay on the assessee and the assessee had to give an explanation in regard to an income, which was proved to be false and the revenue was not required to prove from positive material that the same incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not believed, a different interpretation under the said circumstances could not be taken on the basis of circumstances in the penalty proceedings and where the assessee produces no fresh evidence or persons, no additional or fresh circumstance in the penalty proceedings, he would be deemed to have failed in discharging the onus placed on him and the levy of penalty could be valid. The Departmental Representative vehemently contended that no additional evidence in the penalty proceedings was produced in support of the submissions. The Departmental Representative further contended that there is no force in the contention of the authorised representative for the assessee that no penalty is leviable if the additions were made on estimates. In support of this contention, he placed reliance on the decisions in Addl. CIT v. Swatantra Confectionery Works [1976] 104 ITR 291 (All.), CIT v. Kedar Nath Ram Nath [1977] 106 ITR 172 (All.) and Lakshmi Industries Cold Storage Co. Ltd.'s case . He further contended that even-where additions had been made to the returned income on the basis of estimate, the Explanation is attracted and penalty is leviable. To strengthen his point, he further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Departmental Representative, the Allahabad High Court in the case of CIT v. Babu Ram Chander Bhan [1973] 90 ITR 230 had held that only evidence which had come into existence subsequent to the assessment proceedings, but before the penalty proceedings are finalised is admissible in penalty proceedings. The Departmental Representative also relied upon the Calcutta High Court decision in 155 ITR 359 (sic) wherein it was held that the validity of the penalty order must be determined with reference to the information, facts and material in the hands of the authority imposing the penalty at the time of the passing of the order. Therefore, the evidence in the form of sales-tax orders having come into existence after the penalty was imposed is inadmissible. However, on merits, it was contended that in sales-tax order it has been mentioned that the parcels disclosed in the return were much less and on enquiry about the post parcels received, it was found that the figures was much more than what was disclosed by the assessee. Therefore, the extra admission created on the basis of enquiry and detection of concealed purchases and sales came to be credited on 31-5-1985. The Allahabad High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient to establish beyond reasonable doubt that the assessee actually earned that income and that he concealed the same. In the case of Anwar Ali and in the case of Anantharam Veerasinghaiah Co. v. CIT [1980] 123 ITR 457 (SC), the provisions under consideration were of section 28(1)(c) of the Income-tax Act, 1922. The ratio of these decisions is that what was to be seen in penalty proceedings was whether there was material before the Tribunal for recording a finding that the assessee concealed particulars of his income or deliberately furnished inaccurate particulars of such income and if there was material before the Tribunal for recording a finding that the assessee concealed particulars of his income or deliberately furnished inaccurate particulars of such income if there was material then penalty could be levied. According to this dictum, the onus was held to be on the department and there had to be some material apart from falsity of the assessee's explanation to support the finding that the receipt was income. Following the decision of their Lordships of the Supreme Court in the case of Anwar Ali, the Hon'ble Supreme Court held that unless the entirety of the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealment of income and hence principles enunciated in Anwar Ali's case are no longer applicable. Therefore, the decision in Anantharam Veerasinghaiah Co.'s case, Jhagru Ram Kunda Nand's case, Vinaychand Harilal's case, Mohammed Kunhi's case will be inapplicable to the case of the assessee. However, it was pointed out that the Allahabad High Court decision in Lakshmi Industries Cold Storage Co. Ltd.'s case had taken note of these decisions in Addl. CIT v. Rawalpindi Flour Mills (P.) Ltd. [1980] 125 ITR 243 and Durga Dutta Chunni Lal v. CIT [1979] 120 ITR 319. 7. We have given careful consideration to the facts of the case and the rival submissions and the case laws cited by both the parties. The Income-tax Officer on receipt of information from the Sales-tax Officer that the assessee-firm had received 34 post parcels containing silver ornaments and he made enquiries from the postal Department and examined the postal records etc. and thereafter confronted the assessee with the said documentary evidence. In the beginning the partners of the assessee-firm denied either the receipt of parcels in question or the ownership of the contents therein. It is a matter of great surpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence as it was of unimpeachable character. The argument of the Departmental Representative was that both Explanations 1(A) and 1(B) were attracted and that the assessee's case did not fall under proviso below Explanation 1(B) as the amount added was not as a result of rejection of Explanation and the Explanation was neither bona fide nor all facts relating to the same and material to the computation of total income were disclosed by the assessee. In the present case, it is clear that only on account of information received by the Income-tax Officer from the Sales-tax Officer and the subsequent investigation made by the Income-tax Officer from the Postmaster and the Postal records that the assessee found itself driven to the wall and could find no way except to give up the contention regarding the ownership of the post parcels. The ground regarding ownership of the post parcels was first taken before the Income-tax Officer and then before the Commissioner of Income-tax (Appeals), but thereafter given up. The evidence brought on record by the Income-tax Officer showed that the investment, purchase and sale outside the books of account were kept undisclosed by the assessee deliberatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded transaction as no reliable fresh evidence had been furnished in penalty proceedings. In view of the various decisions cited by the Departmental Representative, especially the Full Bench decision of the Allahabad High Court in Lakshmi Industries Cold Storage Co. Ltd.'s case even where additions have been made on the basis of estimate, the Explanation is attracted and the penalty is leviable. Therefore, the submissions of the learned Authorised Representative for the assessee has no force that because additions were made on estimate basis, no penalty is leviable cannot be accepted and hence rejected. 9. As regards the deduction for sales-tax deduction for Rs. 9,602 comprised of Rs. 2,016 for 1976-77 and Rs. 7,587 for 1977-78. According to the Departmental Representative, the evidence in respect of sales-tax is inadmissible and he had placed reliance on the decisions in Babu Ram Chander Bhan's case and CIT v. Bhotica Textiles [1986] 159 ITR 355 (Cal.) at page 361. No doubt, it is correct that relevant orders came into existence after the imposition of penalty, but it remains a fact that the assessee was liable to sales-tax in respect of unrecorded sales, income from which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paragraph 5 of his order that copies of sales invoices were filed by the assessee which were there in paper book at pages 78 to 98 and further at pages 99 to 104. These were additional evidences filed in the course of penalty proceedings for the purpose of consideration as to whether any levy of penalty was called for on the addition made in the assessment order for alleged unexplained capital employed outside the books in connection with the transactions mentioned in 23 post parcels received by the assessee which were not found to have been recorded in books. Copies of these invoices were filed by the assessee to prove that the assessee did not invest any amounts in these transactions. The payments of these amounts were made to the supplier only after sale of the post parcels received or of the earlier post parcels already received. In other words, these additional evidences were produced by the assessee to prove that the assessee did not make any cash investments of his own at all in connection with the transactions mentioned in 23 post parcels which were not recorded in the books of account of the assessee. Copies of these invoices have been filed from pages 78 to 99 of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the delivery of parcels and that payments were made after the sales were done. In my opinion, therefore, it would not be just and proper to levy any penalty on the estimated amount added as capital outside the books alleged to have been utilised in making purchases in the transactions of post parcels received which were not recorded in books. It may be mentioned in this connection that the quantum of the capital alleged to have been invested in the transactions outside books has been estimated at different figures by different authorities. The addition on this account was made by the ITO at Rs. 2,95,652. The CIT(A) allowed relief of Rs. 1,19,431 out of the same. ITAT allowed further relief of Rs. 80,779. The figure finally sustained after the order of ITAT in quantum appeal is Rs. 95,442 only. All these would show that the addition of the estimated capital outside the books invested in these post parcels received which are not recorded in the books, is a matter purely of gneiss work and there is no concrete basis for this addition. For the purpose of determination of quantum of total income, the addition has been upheld by the ITAT to the extent of Rs. 95,442 but that by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the difference of opinion expressed by the learned Judicial Member, Shri Ram Swarup and the learned Accountant Member, Shri B. Nath. The learned Judicial Member has framed the following points of difference :---- "(1) 'Whether it was justified to depart in the penalty proceedings from the findings in the appeal against assessment order and to hold that there was no concealment in respect of Rs. 95,442 representing unexplained investment in the business done outside books In the absence of any fresh and reliable evidence? (2) Whether on the facts and in the circumstances, penalty of Rs. 77,790 or Rs. 20,000 is leviable under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1978-79?" The point of difference as framed by the learned Accountant Member is given below: "Whether in the facts and circumstances of the case imposition of penalty u/s. 271(1)(c) in respect of the addition of Rs. 95,442 for alleged unexplained capital used outside the books was justified ?" The point of difference as framed by the learned Accountant Member is comprehensive enough to cover all aspects of the case. Hence, that should be taken as point of difference referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of concealing income. The Explanation u/s. 271(1)(c) is applicable and penalty is leviable. The minimum penalty leviable comes to Rs. 77,784 and so levy of penalty of Rs. 77,790 would meet the ends of justice. 5. The learned Accountant Member did not agree with the proposed order of the learned Judicial Member. He held that the assessee has been receiving ornaments through parcels regularly and such receipts/purchases were initially on credit for which payments were later on made. The assessee could not file copies of invoices vis-a-vis those post parcels which were not recorded in books, but the trend established by the invoices produced by the assesses proved that the assessee has not invested any capital of his own while making purchases. It would not be just and proper to levy any penalty on the estimated amount added as capital outside the books alleged to have been utilised in making purchases in the transactions of post parcels received which were not recorded in the books, The addition sustained was only on estimated capital. He held that it would not be just to penalise the assessee by levy of penalty for concealment even in respect of the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have filed the copies of accounts of the persons from whom silver was purchased, but that was not done. The purchase of silver was made only out of unexplained investment. He also urged that the names of the customers who used to hand over silver to the assessee were not furnished, The matter was examined in the original assessment proceedings and the Tribunal sustained an addition of Rs. 95,442 as unexplained investment. That finding of the Tribunal will be binding even in the penalty proceedings and that cannot be ignored. Except the arguments of the assessee, no evidence was produced to prove that no capital is required on purchases. He submitted that no additional evidence was produced in the penalty proceedings. Even if pages 77 to 104 of the paper book are considered as additional evidence, the assessee's case does not improve in any way and penalty is leviable as the assessee has clearly concealed the unexplained investment as that was not recorded in the books of account. He urged that onus is on the assessee but not on the department. The Explanation to section 271(1)(c) clearly applies. Hence the penalty levied is justified. He placed reliance on a few decisions. 8. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held as under : "The position, therefore, in law is clear. If the returned income is less than 80 per cent of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or wilful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. No question of law arises. In this case, the Tribunal has borne in mind the relevant principles of law and has also judged the facts on record. It is not a case that there was no evidence or there was such evidence on which no reasonable man could have accepted the explanation of the assessee." It is held therein that under the Explanation to sec. 271(1)(c), the presumption raised against the assesses is a rebuttable one and it is for the fact-finding body to judge the relevancy and sufficiency of the materials. The ratio laid down therein s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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