TaxTMI 
TaxTMI 
2005 (12) TMI 224
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.... per cent. On the direction of the Assessing Officer the assessee filed details of month-wise purchases (direct) sales and production vide letter dated 23-12-1991. The same were scrutinized by the Assessing Officer. On scrutiny the Assessing Officer found that the g.p. rate for eleven months' period ending on 28-2-1990 was 30 per cent approximately whereas the g.p. rate for the whole year was only 14.05 per cent as declared by the assessee. Despite specific direction the assessee could not explain the g.p. rate applied by him nor could furnish full particulars of trading nor submitted monthly reconciliation of trading. Hence, the Assessing Officer asked the assessee to furnish quantitative details of books purchased (direct), published, sold, sales returns and the books left in the closing. However, the assessee again failed and could not satisfy the Assessing Officer. The assessee also could not substantiate the quantitative details with the help of vouchers/bills and ultimately vide letter dated 24-3-1993 submitted that due to gross negligence on the part of his accountant the accounts could not be properly maintained. Through this letter he offered additional amount of Rs. 3 lak....
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....Nisha, proprietor of M/s. S.U. Book Binding House appeared but he did not produce books of account. The Assessing Officer recorded his statement in detail and also examined the returns filed by these two concerns. After thorough investigation it was found that the entries of debit were wrongly made by the assessee. Shri "Salauddin being admitted that under pressure and under instructions of Shri J.L. Kumar, the proprietor of M/s. Anmol Publications, he confirmed the balance of Rs. 1,75,750 in the account of M/s. Anmol Publication without referring to his books of account. He also made the following statement: "I do hereby declare that the balance in the account of M/s. Anmol Publication as on 31-3-1990 was Rs. 27,246 only out of which Rs. 26,000 was received on 5-4-1990 by cheque as per my bank statement submitted with you today." 4.6 So far as the other concern, namely, S.U. Book Binding House is concerned, statement of Shri Salauddin was recorded and even Smt. Hamid-ul-Nisha confirmed that the statement of her husband was correct. According to his statement the bills which were shown by M/s. Anmol Publication were issued to other parties and not to M/s. Anmol Publication. H....
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....f account where assessee could not substantiate on the differences in his own books and books of account of the said parties namely: M/s. K.R. Book Binding House Rs. 1,87,318 M/s. S.U. Book Binding House Rs. 1,75,750 M/s. G.K. Fine Art Press Rs. 67,611 ------------- Total amount of difference Rs. 4,50,679" ------------- 4.9 In view of the above letter the Assessing Officer made addition and also made the following observations in the assessment order: "Although in his reply, the assessee has surrendered the amounts of following three credit balances but the surrender cannot be said to be voluntary because the non-genuineness of these amounts had already been detected by the....
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.... of the written submissions of the assessee. The learned CIT(A) has made reference to certain decisions and has observed that surrender of the assessee vide letter dated 24-3-1993 was conditional and terms and there must have been some understanding between the Assessing Officer and the assessee for non-initiation of penalty proceedings under section 271(1)(c). 5. Before us the learned Sr. D.R. argued that this is a clear case for levy of penalty for concealment. According to him the surrender made by the assessee was not voluntary and was made only to avoid furnishing of explanation in relation to defects and discrepancies detected by the Assessing Officer. 6. The learned counsel for the assessee Shri Rajesh Jain, FCA, on the other hand, supported the order of learned CIT(A). He submitted that the assessee had shown the bills received by him and also the fact that the payments were made to them. According to him if the other parties had not maintained correct account books, then no fault could be found on the part of the assessee. The learned counsel further submitted that addition of Rs. 3 lakhs was made on the basis of surrender of the assessee, which surrender was made co....
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....ssment order it is found that for verifying the particulars of debit entries shown by the assessee for the amounts of Rs. 1,75,750 and Rs. 1,27,318 the Assessing Officer examined pages 19 and 20 of the computerized cash book of the assessee and found that it did not reflect any payments made in respect of these two entries in the binding account. Thereafter the assessee was asked to explain this discrepancy. The assessee filed details vide letter dated 13-12-1991. Vide letter dated 24-2-1993, the assessee came with the excuse that due to mistake on the part of the accountant the entries were wrongly shown as amount paid while in fact these related to the amount credited to the account of the two parties against the bills of the c parties for binding work. However, the explanation was furnished after two and half years of filing of return. On 24-3-1993, first surrender of Rs. 3 lakhs was made and truth regarding false debit or credit entries were not conveyed at this stage. 7.3 The Assessing Officer vide order-sheet entry dated 18-1-1993, 9-2-1993 and 16-2-1993 gave opportunity to the assessee and asked him to furnish complete copy of books of account of the two parties but the a....
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....correctness of the signatures made on the return of income filed on 6-2-1991 for the assessment year 1990-91 vide acknowledgement Receipt No. 7494 with ITO Ward 16(3), New Delhi, declaring a total income of Rs. 20,180 and signatures on the Trading A/c, P&L A/c and balance sheet filed with the return where debit balance has been shown in the name of M/s. Anmol Publications as Rs. 27,246.50 and also on the confirmation already filed in the case of M/s. Anmol Publications? A. Yes, signatures at both the places have been made by me." 7.5 As Shri Salauddin did not produce books of account in his case or in the case of M/s. S.U. Book Binding House, the Assessing Officer deputed his inspectors to conduct inquiry and to identify the account of M/s. Anmol Publications in the books of account of the two parties. This was done by taking recourse to the provisions contained under section 133A of the Income-tax Act. The Inspector so deputed identified the books of account of the two parties and their business premises. The ITO issued summons to such parties for producing books of account identified by the Inspectors. In response, to the summons Shri Salauddin along with his accountant app....
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....t was received during the year itself by way of cheques and cash as per my ledger. Q. On 2-3-1993 you were confronted with the photocopy of your sales bills Nos. 77,78,79,80 & 89 for Rs. 48,750, 22,750, 12,350, 16,250 and Rs. 87,218 respectively and were asked to reply as to the genuineness thereof and to state whether those bills were recorded in your books of a/c. At that time you had stated that those bills seem to have been issued by your firm. Now when the books of a/c and bill books of your firm are with you, what is your reply? A. As per my books of a/c the sales bills referred to above have been issued to the following parties and not in favour of M/s. Anmol Publication:- --------------------------------------------------------- Bill Date Name of the party Amount No. --------------------------------------------------------- 77 3-10-89 M/s. Neel Kamal Prakashan, Rs. 5,813 Delhi 78 4-10-89 M/s. Akash ....
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....tions and replies thereto as recorded in my above statement and I do hereby declare that the statement is given by me under my own sweet will and was without any pressure on me from my side. The implications of this statement have g also been explained to me." 7.7 On behalf of his wife Mrs. Hamid-ul-Nisa, Shri Salauddin made a statement on the same date i.e., 11-3-1993, the relevant extracts from which are reproduced: "Q. Sh. J.L. Kumar Prop. M/s. Anmol Publication has filed photocopies of the following bills of M/s. S.U. Book Binding House:- ------------------------------------------------ Bill Date Party's name Amount No. ------------------------------------------------ 671 8-8-1989 Anmol Publication Rs. 26,000 672 15-9-1989 -do- Rs. 6,750 673 10-10-1989 -do- Rs. 19,500 661 ....
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....oices have been issued. Q. Do you understand the implications of the replies given by you today in your statement and you have any pressure to give this statement? Do you understand as to what has been written in this statement? A. My Chartered Accountant Sh. Rakesh Mahajan and my Accountant Sh. Ashok Kumar have explained to me very clearly the questions and replies thereto as recorded in my above statement. I do hereby declare that this statement is given by me on behalf of my wife Mrs. Hamid-ul-Nisa and was without any pressure from any side. The implications of the statement have also been explained to me." 7.8 The Assessing Officer also contacted Smt. Hamid-ul-Nisa and read out the statement of her husband to her, who acknowledged by putting her signatures that the statement made by her husband on 11-3-1993 was correct. 7.9 In view of the thorough interrogation and on closer and deeper scrutiny of the books of account of the assessee as well as of M/s. K.R. Book Binding and M/s. S.U. Book Binding House, it was proved to the hilt that the assessee had forged entries in his books of account and deliberately showed incorrect particulars in the return of income filed by....
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.... material gathered during the course of assessment proceedings is quite relevant for deciding the issue of penalty under section 271(1)(c). Even during the course of penalty proceedings the assessee had not made any effort to lead any evidence than what was adduced before the various authorities during the quantum appeals. In the light of evidence already collected by the Assessing Officer, which also remained uncontroverted by the assessee till date, no further material was required to be produced by the Assessing Officer to prove the charge of concealment against the assessee. The assessee had only raised a technical objection that the Assessing Officer had not recorded a finding whether penalty was initiated for concealment of income or for furnishing inaccurate particulars of income. But the assessee had not been able to make any submission as to how the case of the assessee was prejudiced on account of failure on the part of the Assessing Officer to clearly mention the facts. Taking into account the totality of the facts and circumstances of the case, the penalty under section 271(1)(c) was leviable even for concealment of income where the onus on the revenue is greater in est....
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....penalty is not to be levied. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including a particular item of income in its return, though it may have offered the amount not be taxed subsequently. If such an explanation is offered, the Department has to examine its acceptability and record a finding as to whether the explanation is acceptable or not. Only if the explanation is not found acceptable, the question of penalty will arise. In other words, the explanation of the assessee has to be considered on the merits. The Tribunal has not kept this aspect in view." 7.15 In the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC), the assessee-firm had taken certain bank drafts for payment to suppliers of rice. It had made entries in the accounts not on the dates on which they were obtained but a few days B later. The explanation of the assessee was that as sufficient cash balance was not available on those dates, it had obtained hand loans from friends, and, as it had expected to repay such loans within a short time, no entries were made in its books of account in respect....
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....learned CIT(A). 7.17 On the basis of above discussion, it is established beyond any scintilla of doubt that the assessee deliberately furnished incorrect and inaccurate particulars and it was only on account of extra pains taken by the Assessing Officer in making thorough investigation that malicious design of the assessee could be detected. The assessee did not disclose truth till last and even made a prayer for cross-examination of the witnesses examined by the Assessing Officer and it was only in the last that he had to give up his stand and did not press the prayer for cross-examination and being fully cornered, he had no other way but to surrender the amount of Rs. 4,50,679. Thus, it could not be said that the assessee voluntarily surrendered the amount. In fact, it was on account of very effective measures taken by the Assessing Officer that in the last the assessee virtually felt the guilt on his part. The Assessing Officer had detected the concealment of the exact amount by making thorough probe from all concerned parties and persons and by examining the entire relevant material. In our considered opinion, therefore, the penalty was correctly imposed in relation to the e....
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....bsp; -------------- 2. The record reveals that the assessee had written its cash book manually and computerized the ledger account. The cash book did not show that the payment of the aforesaid amounts has been made to these parties. The computerized ledger, however, contained narration of payment and the fact remained that in the ledger itself the amounts were reflected as payable. The ledger thus itself did not conclusively reveal that the payment had been made and that is how the amount was shown as payable in the aforesaid three accounts. The Assessing Officer did not doubt the correctness of the cash book but the accounts stood rejected merely on the basis of entries contained in the ledger account which was a mistake committed by the accountant in giving such narration of payment due to in-built programming of the computer. Such a mistake could not be said as intentional nor a conscious act of the assessee. In fact the assessee had incurred liability for expenses incurred on account of book binding charges and claimed the same as expenses in the trading account. These expenses were duly supported by the bills issued by all the three aforesaid parties and confirmation theret....
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....certain cases even the date of issuance of bill has not been mentioned by the creditor. In fact, certain bills which were having a similar number were issued in the name of some other parties without mentioning any date against such bills. The Assessing Officer did not verify the authenticity and correctness of such bills. These bills which the creditor produced did not even bear the addresses of the parties on whom such bills are stated to have been drawn. The Assessing Officer did not make any enquiry from any of such party so as to satisfy himself about the correctness of the bills produced by the creditor. In his statement on earlier occasion on 2-3-1993 the creditor had categorically admitted that payment almost in all the cases on binding charges has been received by cheque. The bank account of these two suppliers were also not verified to find out the correctness of the statement now being made wherein the said two suppliers denied of issuance of bills to the assessee for job work leading to the credit appearing in appellant's books. The appellant is getting regular service of job work done for book binding from these two parties and his business is largely dependent on serv....
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....he agreed to the addition on the bona fide belief that no penalty shall be imposed. It, therefore, cannot be held that the assessee has concealed its income. The admission cannot be attributed to intention. There was no element of mens rea on concealment inheritently carries with it the element of mens rea. In the present case in appeal, there was no such intention. Penalty therefore was not exigible. This view finds support from the Apex Court judgment in K.C. Builders v. Asstt. CIT [2004] 265 ITR 562. Reference can also be made to the Hon'ble Madhya Pradesh High Court in the case of CIT v. Beta Nepthol Ltd. [2005] 272 ITR 323 held that when assessee is surrendering disputed items and paying taxes thereon, there is no concealment of income and hence penalty under section 271(1)(c) cannot be imposed. Reliability of third party account has not been proved beyond doubt before holding that the assessee has falsified his accounts. The assessee's explanation through letter dated 15th September, 1993 placed on paper book pages 8-10 also indicates that the facts were not disproved or found wrong. Likewise another supplier M/s. G.K. Fine Art Press who have appeared before the assessing aut....
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....ticulars thereof for the year under consideration. The assessee also did not withhold or conceal any material from the assessing authority at any stage and merely" because the assessee had agreed to surrender the income did not give jurisdiction to the Assessing Officer to come to the conclusion that there was concealment of income on his part. The findings given in assessment proceedings would be relevant and admissible material in penalty proceedings, but those findings cannot operate as res judicata because the consideration that arise in penalty proceedings are different from those in assessment proceedings. It is also an admitted position that in all cases the standard of proof for imposition of penalty is different from that on which the quantum addition of an income can be sustained. This has been so held by the Hon'ble Allahabad High Court in CIT v. Garg Engg. Co. [1999] 235 ITR 451. The circumstances of the case at hand do not give reasonable and positive conclusion that the amount in question represents the assessee's income and the Apex Court in the case of CIT v. Khoday Eswarsa & Sons [1972] 83 ITR 369,376 and also in the case of Anantharam Veerasinghaiah & Co. v. CIT [....
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....f Rs. 52,110. The assessee appellant, in the relevant period had carried business of publication and sale of books. In the course of assessment proceedings, the assessee was asked to furnish quantitative tally of books purchased (direct), published, sold, sales returns and in the closing stock. The aforesaid detail asked for could not be furnished as proper books of account were not maintained due to the fact that Accountant of the assessee was new and inexperienced in the line of maintaining of accounts. The appellant, accordingly offered to surrender Rs. 3 lakhs for failure to furnish complete quantitative tally of books purchased, sold, returned or in the stock. The Assessing Officer further found that assessee had shown Rs. 4,50,679 towards amount paid/payable on account of binding and printing as per following details: -------------------------------------------------- Name Amount payable -------------------------------------------------- 1. M/s. S.U. Book Binding House Rs. 1....
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....s found that amount in dispute was not shown as due from the assessee. Accordingly, Assessing Officer tried to re-summon Shri G.K. Wason with books of account. After two, three attempts, the service of summons was effected on Mr. Wason but he neither appeared before the Assessing Officer nor produced his books of account, though a confirmation, through a Chartered Accountant was sent by him that no amount was due to him as shown by the assessee. 6. The assessee, while surrendering amount in question, had stated as under: "17. That, for the reasons stated in the preceding paragraphs and in the interest of avoidance of any litigation on matters where assessee was himself at default, for the mistake of his own, it was thought expedient to avoid any confrontation by way of prolonged litigation and following two amounts are being voluntarily surrendered for being added to the taxable income of the said year, with a humble submission that assessee, whose innocence is unquestionable beyond any doubt, shall be kept immuned from all kinds of penalty/prosecution proceedings as far as possible, the assessee after lot of hardships, and keeping in vogue the provisions of the Act shall be ....
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.... such a case it would be against laws of natural justice and equity to call it a deliberate concealment to evade tax, and hence, complete immunity from the above penalty is requested." The Assessing Officer added Rs. 4,50,679 to the income of the assessee on account of "non-genuineness of credits detected by the Department and proved beyond doubt on evidence collected from witnesses" as discussed in the assessment order. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Income-tax Act. 7. In reply to show-cause notice issued under section 271(1)(c), the assessee claimed that penalty proceedings be kept in abeyance till the decision of CIT under section 273A was available. The assessee also furnished oral submissions on different dates which are recorded by the Assessing Officer in the impugned order of penalty. It is also recorded that assessee was allowed inspection of entire record, seized with the Assessing Officer, to make submissions. 8. It was submitted on behalf of the assessee that surrender of amount in question was voluntarily made with an understanding that he shall be immuned from the penalty proceedings and that levy of pe....
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....s of parties other than M/s. Anmol Publications. The Assessing Officer also brought on record that photocopies of all the bills were given to the assessee as books of account etc. stood impounded and were in the custody of the Department. He also observed that no evidence was produced by the assessee in support of claim of Rs. 1,87,318 and Rs. 1,75,750 except putting the blame on the Accountant. The Assessing Officer also relied upon statement of Shri Salauddin and Smt. Hamid-ul-Nisa who had confirmed that balance shown by the assessee was incorrect. The assessee at one stage wanted to cross examine the witness but waived that claim subsequently. The Assessing Officer further observed that assessee made false claim relating to payment to binders through cheques. 11. In respect of balance shown as due to M/s. G.K. Fine Art Press, who had confirmed the balance vide their letter dated 20-1-1993 without complete statement of account. Subsequently, their Prop, was summoned but books were not produced nor appearance was made inspite of service of summons. Shri Sharad Kohli, Chartered Accountant had appeared on 23-3-1993 and produced copy of account of assessee in books of M/s. G.K. Fi....
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....71(1)(c) would be levied. The assessee further contended that assessee had made voluntary, honest and spontaneous declaration before the Assessing Officer. The assessee challenged the finding that the action of surrender was not voluntary. In this connection, reliance was placed on the decision in the case of Addl. CIT v. Kishan Singh Chand [1977] 106 ITR 534 where, according to the assessee, the Hon'ble Allahabad High Court in similar circumstances cancelled penalty on the ground that there was understanding between the assessee and the Assessing Officer otherwise assessee would not have agreed to enhance assessment without cogent reasons. The Department further failed to prove that amount added by the Assessing Officer was in fact assessee's concealed income. Their Lordships of Allahabad High Court in the cited case had relied upon decision of Apex Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696. In respect of addition of Rs. 3 lakhs, the assessee pointed out that assessee in his various letters had explained to the Assessing Officer the nature of business of the assessee and pointed out that books sold on approval basis are liable to be returned even after one year's ....
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....lahabad High Court in the case of CIT v. Mansa Ram & Sons [1977] 106 ITR 307 where the facts were quite identical to the facts of the present case. The assessee therein had also surrendered a disputed cash credit and agreed to assess the amount as its income. The Tribunal on appeal, in the above circumstances, held that charge of concealment was not proved and levy of penalty was cancelled. The assessee further argued that there was self contradiction in the order passed by the Assessing Officer. In para 21 of the order, the Assessing Officer had stated that assessee claimed to have surrendered 3 credit balances but the said surrender could not be taken as voluntary as the non-genuineness of these amounts had already been detected by the Department and proved beyond doubt through evidence collected. However, learned Assessing Officer had himself used the word "surrender" against both the sums added and not "addition" in the computation part of assessment order where amounts have been added. Reference was invited to the computation portion of the order. There was thus a contradiction in the approach of the Assessing Officer as on one hand he wanted to prove that he had detecte....
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.... not be compared with criminal acts. It was argued that Assessing Officer tried to draw absurd conclusion. The Assessing Officer was also wrong in holding that cases cited on behalf of the assessee were irrelevant. In penalty proceedings, the assessee made an attempt to prove the genuineness of the credits and on his request, the assessee was provided with copies of some of the accounts from impounded documents. The assessee, therefore, as per letter dated 15-9-1993 and 21-9-1993 made a request for copy of books of account and other documents to make a complete analysis but such a request was bluntly turned down. The assessee wanted to highlight discrepancies in the statement of the creditor but this was not possible in the absence of books of account. Thus, Assessing Officer had failed to give adequate opportunity to prove its case. Reliance in this connection was placed on the decision of Krishan Lal Shiv Chand Rai v. CIT [1973] 88 ITR 293 (Punj. & Har.) wherein it has been stated that a party is entitled to prove that an admission made previously by him was not correct and true. So the assessee was denied an opportunity to show that surrender was wrong and was made solely to ....
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....wherein three credit balances were noticed. In the case of first concern i.e. M/s. K.R. Book Binding House, the proprietor is Salauddin and in the case of second concern M/s. S.U. Book Binding House, proprietor is wife of Salauddin Mrs. Hamid-ul-Nisha. The Assessing Officer had examined Shri Salauddin as proprietor of M/s. K.R. Book Binding House and also representative of his wife being proprietor of M/s. S.U. Book Binding House. At the first stage of examination, Shri Salauddin had accepted the credit balance as claimed by the appellant. It is only when the books of account of Shri Salauddin did not support his statement, he backed from his earlier statement and submitted that his earlier statement was made without concerning his books of account. So he denied having Rs. 1,87,318 due from M/s. Anmol Publication. He also denied having credit due to his wife Rs. 1,75,750 under such circumstances the appellant had expressed his desire to cross examine Shri Salauddin but immediately the appellant withdrew its claim of cross-examination, and offered the amount to be included in computation of his total income. The Assessing Officer has reproduced the relevant portion of the letter dat....
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....espect of penalty imposed or deleted for addition of Rs. 4,50,679. 19. The learned Judicial Member upheld the levy of penalty. He referred to the books of account of the assessee in para 4.3 onward of his order and found that two amounts viz. Rs. 1,75,750 and Rs. 1,87,318 were shown to be paid to the parties on 31-3-1990. The Assessing Officer further found that there was credit balance of Rs. 87,611.75 in the name of M/s. G.K. Fine Art Press under the head "Printing Account". The Assessing Officer had accordingly asked the assessee to show ledger, cash book and bills in support of above referred to entries. On scrutiny of account, the Assessing Officer had found that no payment as on 31-3-1990 was shown to parties in the cash book. When questioned the assessee had submitted that on account of mistake of the Accountant, the entries were shown as "amount paid" but in fact entries related to amount credited to the account of two parties towards their bills for binding. The parties had given bills on different dates, but the same were credited only on 31-3-1990 in the binding account. On going through further details, Assessing Officer became suspicious and summoned Shri Salauddin,....
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....dated 13-12-1991 filed details. However, subsequently vide letter dated 24-2-1993, the assessee came up with excuse that due to mistakes on the part of the Accountant, entries were shown as paid while in fact amounts were credited to the accounts of two parties against bills issued by the party. The Judicial Member, further noted that on 24-3-1993, the assessee made first surrender of Rs. 3 lakhs on account of false debit and credit entries in the books of account. Thereafter in para 7.3, the learned Judicial Member had elaborated how opportunities were provided to the assessee to furnish complete copies of accounts of two parties but assessee failed to do so and thereafter Assessing Officer was forced to invoke his power under section 131 of Income-tax Act. He then referred to the statement of Shri Salauddin who when confronted with entries in books of account categorically stated that photocopies of bills produced by the assessee were not issued by him and he had nothing to do with these bills. Similar statement was made in respect of business carried on by his wife. Shri Salauddin had further produced Bill Nos. 671, 672, 673, 661 and 662 to show that these bills were issued to d....
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....the same was not explained. The learned Judicial Member further observed that Assessing Officer had taken extraordinary pain to bring to light the fraudulent act committed by the assessee. It was one of the rarest case where facts relating to guilt of the assessee were fully established. The learned Judicial Member relied upon decision of Hon'ble Kerala High Court in the case of CIT v. D.K.B. & Co. [2000] 243 ITR 618 and the decision of Supreme Court in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99. He highlighted the portion where Their Lordship of Apex Court has explained import of Explanation to section 271(1)(c) of Income-tax Act. Thereafter the learned CIT(A) confirmed action to levy penalty under section 271(1)(c) in respect of addition of Rs. 4,50,679 with the following observations: "7.16 The facts concerning the present matter are of more severe nature because in this case there was no written agreement or any understanding for not initiating penalty proceedings. The Assessing Officer has dealt with each aspect of the matter including the explanations offered by the assessee and various pleas raised by him during penalty proceedings. It is surprising that t....
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....posed order, the learned Accountant Member did not agree with the order proposed by the learned Judicial Member. He observed that cash book did not show that payment was made to these parties. The computerized ledger had only contained narration of payment and even ledger itself did not show that amounts were reflected as payable. The Assessing Officer did not doubt the correctness of cash book but accounts were rejected merely on the basis of some entries made by mistake by the Accountant. The mistake cannot be said to be conscious or intentional. The liabilities for expenses were incurred on book binding charges and claimed towards expenses. Expenses were further supported by bills payable to all the three parties. The parties have further filed confirmation of amount payable. The Assessing Officer has himself taken into account these expenses while estimating the profit and while making addition of Rs. 3 lakhs as against claim of expenses of Rs. 4,50,679. The Assessing Officer thus himself accepted method of book keeping erroneous and estimated the business profit. The learned CIT(A) has deleted penalty on account of estimate made by the Assessing Officer and deletion of penalty....
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.... bills by the supplier. It is to be remembered that in earlier statement, Shri Saluddin had admitted that bills issued to the appellant for doing job work were genuine and payments were received through banking channels. These crucial facts were not disproved by assessing authority which were even otherwise revealed from books of account supported by authentic bills produced by the appellant. The learned Accountant Member also referred to the fact that the assessee was denied copies of bills and books during the penalty proceedings. It is stated by the learned Accountant Member that facts claimed by the assessee through books of account maintained in the regular course of carrying out of business activity were not disproved. The Assessing Officer did not make any independent enquiry or verification of what was stated by Shri Salauddin in the later statement. No independent material was brought on record to show that what was stated by Shri Salauddin on subsequent occasion was correct. At any rate, according to learned Accountant Member, Shri Salauddin has been found to g be lying at one occasion and, therefore, his subsequent deposition could not be taken trustworthy to reject corr....
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.... the Assessing Officer did not have jurisdiction to come to the conclusion that there was concealment of income. The standard of proof for imposition of penalty was different the proof needed for assessment. The learned Accountant Member relied on the decision of Allahabad High Court in the case of CIT v. Garg Engg. Co. [1999] 235 ITR 451 and that of Apex Court in the cases of CIT v. Khodey Eswarsa & Sons [1972] 83 ITR 369 and on the case of Anantharam Veerasinghiah & Co. v. CIT [1980] 123 ITR 457. In the ultimate para, the learned Accountant Member observed as under: "Having considered the entire concepts of the case, I am satisfied that there was no conscious and deliberate concealment of any of the particulars of its income by the assessee and he merely agreed to surrender the amount of credit outstanding as his income as the Accountant had committed error in preparing the accounts. However, for the mistake committed by the Accountant and even without proving the correctness and truthfulness of statement of the third party it cannot be held that it was a case of concealment of income or particulars thereof. The assessee's explanation being bona fide and the return not bein....
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....itted that without any material, learned CIT(A) held that there was an understanding between the assessee and the Assessing Officer not to levy penalty. The aforesaid finding was contrary to material on record. 28. The learned counsel for the assessee supported the proposed order of the Accountant Member. He submitted that assessee had declared G.P. rate of 14.7 per cent and if addition proposed was further added, the G.P. would go up to 33.67 per cent which is unheard of in this line of business. These circumstances clearly showed that addition made was absurd and assessee even after claiming the expenditure in question had shown reasonable income. The assessee had agreed to addition to buy peace and to maintain business like relations with people to save his business interests. The learned representative further argued that statement of Shri Salauddin was not reliable as earlier on 2-3-1993, he had confirmed assessee's accounts as correct. In these circumstances, it cannot be said that revenue had proved case of concealment/furnishing of inaccurate particulars of income beyond shadow of doubt. The learned counsel further submitted that assessee was induced by the Assessing Off....
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.... his proposed order has also agreed with this view, although even on merit his view is that there is no case for levy of penalty. 30. On careful consideration of all the relevant circumstances and material on record, I am unable to subscribe to the above view. I agree that it may not be possible to produce direct evidence of such an understanding but then there should be sufficient circumstantial evidence to prove that assessee had surrendered and agreed to addition only to buy peace of mind and on account of assurance of the Assessing Officer not to exercise his discretionary power to levy penalty. Normally test to be applied in such cases is to see what is the material to establish the case of concealment/furnishing of inaccurate particulars of income other than admission/surrender of the assessee. If admission is disregarded is there evidence to support the case. Relative value of admission depends upon other material on record, or the penalty is solely based on admission. In my considered opinion, in this case the assessee had failed to establish that there was an understanding not to levy penalty in case the disputed amount was surrendered for assessment purposes. The mere ....
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....r the Deputy Commissioner (Appeals) or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." 32. Their Lordships of Supreme Court in the case of K.P. Madhusudhanan held that Explanation puts the burden on the assessee to show that provision of section 271(1)(c) are inapplicable in his case. In my opinion language of explanation is more than clear and words employed are in case assessee "fails to offer an explanation" or offers an explanation which he "is not able to substantiate" or his explanation "is found to be false" or fails to prove that explanation is bona fide and fails to produce all facts and material relating to computation of his income, then he would be deemed to have concealed par....
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....ly when bank statements were not produced by the assessee. The question of levy of penalty has to be examined in the light of Explanation 1 to section 271(1)(c) and burden as per aforesaid Explanation was clearly on the assessee and not on the revenue. In this connection reference may be made to the letter dated 24-3-1993 under which surrender was made by the assessee. 33. Apart from Explanation referred to above, the assessee in the present case surrendered the amount of Rs. 4,50,679 for purposes of assessment. Thus the assessee admitted that above amount was its income. The surrender was accompanied by a letter dated 24-3-1993 which is reproduced by the Assessing Officer in the assessment order. There is no suggestion, whatsoever, in the letter that disputed amount is not assessee's income. The emphasis was on the fact that assessee is co-operating with the revenue and, therefore, a lenient view of the matter should be taken. Having regard to above documentary evidence, it is very difficult to accept that assessee never admitted that disputed amount was its income. It is settled law that admission of a fact, shift the burden to the person who admits the fact. Thus apart from t....
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.... G.K. Fine Art Press showing nil balance. The revised copy cannot be relied upon to reject case of the assessee. There is no explanation why Shri Wason confirmed copy of assessee's account and also state on oath that amount was due from the assessee for services rendered. There is again no explanation why he was trying to evade service of summons issued by the Assessing Officer and why his attendance was not enforced. Above circumstances are sufficient to cast doubt on the stand of Mr. Wason adopted by the Assessing Officer to reject c and condemn the assessee. Penalty proceedings are quasi criminal proceedings and assessee is entitled to benefit of doubt. It is difficult to hold that assessee has failed to prove his bona fide or the claim of deduction. Thus provision of section 271(1)(c) read with Explanation lave not attracted in this case as it is settled law that burden placed on assessee can be discharged with reference to material brought on record during the course of assessment p proceedings and it is not necessary that new and fresh material should be produced in penalty proceedings to discharge the burden. Admissions are relevant but not conclusive and can be shown to be ....
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....ne the witnesses relied upon by the Assessing Officer and also surrendered for assessment sum of Rs. 4,50,679 including the two amounts in question (Rs. 1,75,750 and Rs. 1,87,318) for assessment with covering letter dated 24-3-1993. The surrendered amount was added in the income of the assessee. The Assessing Officer also initiated penalty proceedings and ultimately levied penalty as he found that wrong and false claim was made by the assessee in respect of above credits. 38. After considering all the relevant circumstances, in my view, penalty under section 271(1)(c) in respect of claim shown as payable by the assessee to the two concerns is clearly exigible. The assessee failed to discharge burden that lay on the assessee under Explanation 1 to section 271(1)(c) of the Income-tax Act. In fact the assessee admitted that he has not substantiated his claim. It is no doubt true that Shri Salauddin in his earlier statement recorded on 2-3-1993 had supported the claim of the assessee and subsequently took a different stand and stated that amount shown as payable to their concerns were not payable. He also furnished evidence to show that bills alleged to be issued to the assessee in ....
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.... learned representative could not give me any satisfactory answer. The situation, therefore, is that there is no reason to reject detailed and authentic evidence produced by Shri Salauddin, more particularly when it has gone unrebutted and unchallenged by the assessee. On the contrary, through his act and conduct, the assessee supported the statement of Shri Salauddin and agreed to treat the cash credits as its income through a surrender. Even in the letter accompanying the surrender, the assessee did not state that disputed amount was not assessee's income. Doubts and objections raised by the assessee later were required to be put to the witnesses through cross examination of witness at the appropriate time. This was not done and every thing went unchallenged and unrebutted. No attempt was made to discharge the onus that lay on the assessee in terms of section 271(1)(c) read with Explanation 1 to the "section. Therefore, the Assessing Officer was fully justified in levying penalty on the assessee under section 271(1)(c) in respect of two items. I have already held that no understanding, not to invoke penal provisions against the assessee, between Assessing Officer and the asses....