9911796707
TMI Blog1984 (1) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... made on agreed basis, no appeal was filed by the assessee. However, the ITO initiated penalty proceedings against the assessee under section 271(1)(c) of the Income-tax Act, 1961 ('the Act'). In reply dated 25-2-1982 in response to the ITO's letter dated 16-2-1982, the assessee stated that the proceedings initiated may be dropped. However, the ITO relied upon the following entry dated 22-11-1979 in the order sheet: "An addition of Rs. 35,000 made on agreed basis. Assessed 271(1)(c)." The ITO took the view that the assessee had not only agreed to an addition of Rs. 35,000 to the trading results but it also accepted that it was the concealed income as the order for issue of notice under section 271(1)(c) of the Act was also made in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e leakages only because the gross profit declared was considered to be low. In this connection, he also pointed out that neither any queries were made nor any explanation was asked for from the assessee and that from the mere fact that no specific explanation was given by the assessee during the penalty proceedings, penalty could not be justified. Reliance was also placed by him on these decisions---D. Halappa Sons v. CIT [1974] 95 ITR 542 (Mys.), CIT v. Bombay Automobiles [1980] 123 ITR 582 (AP), Addl. CIT v. Aggarwal Misthan Bhandar [1981] 131 ITR 619 (Raj.), CIT v. Devandas Perumal Co. [1982] 28 CTR (Bom.) 211 and Addl. CIT v. Jeewandas Gyanchand [1982] 28 CTR (MP) 285. On the other hand, Shri K.K. Roy, the learned departmental repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss profit of Rs. 1,36,870 at the rate of 9 per cent and for the assessment year 1976-77 on a turnover of Rs. 13,83,850 a gross profit of Rs. 1,58,601 at the rate 11 1/2 per cent had been shown. The assessee is not required to be heard before the initiation of penalty proceedings under section 271(1)(c) nor does it appear that the assessee was, in fact, heard in this case before such initiation. The assessee, on the facts of the present case cannot be said to have, agreed either to the initiation of the penalty proceedings under section 271(1)(c) or to the imposition of any penalty therein. The stage of the assessee's agreement for the imposition of the penalty could have come only in the course of the penalty proceedings and not in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible leakages. No specific leakages or defects had been detected by him. Explanation 1(A) to section 271(1)(c) refers to the failure on the part of the assessee to offer an explanation in respect of any facts material to the computation of his total income. No stage for offering such an explanation ever arose in the assessment proceedings before the ITO because the facts material to the computation of total income had been given by the assessee and no queries or notices were addressed to the assessee in regard thereto. The learned departmental representative is, therefore, not right in inferring that the concealment was established on the part of the assessee under the aforesaid provision. In the case of Anwar Ali it was clearly held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was inability to explain satisfactorily. Even in that case it was recognised that the question whether consent given by the assessee for the imposition of penalty was a valid one, was a question of fact. In the case of Aggarwal Misthan Bhandar, the Hon'ble Rajasthan High Court was again considering the case about an estimated higher assessment which was accepted by the assessee to avoid disputes. It is in that context that it was held that the levy of penalty was not valid. In the case of Devandas Perumal Co. and the case of Jeewandas Gyanchand the proposition was recognised by the Hon'ble Bombay High Court and the Madhya Pradesh High Court that the mere factum of the ITO, having estimated the net profit at a figure higher than what was d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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