TaxTMI 
TaxTMI 
1989 (5) TMI 125
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....sed sources utilised for household expenses 2,775 . Total 41,275 During the course of assessment proceedings the assessee appeared before the ITO on 24th March, 1979 in response to a notice under s. 143(3) of the IT Act. That day he produced certain books of accounts with written submissions. He was required to prove the cash credits of Rs. 22,500 standing in the names of four persons and so also to explain the source of initial investments of Rs. 5,000 in the business. He produced confirmatory letters of three creditors and not of the fourth one. He did not produce any of the creditors before the ITO. Then on the subsequent hearing on 28th Sept., 1979 he remained absent and the ITO was constrained to frame assessment ex parte as menti....
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....mmenting upon the order of the AAC learned Departmental Representative further argued that the AAC accepted the verbal submissions of the assessee on the income value unsupported by any material. The AAC also failed to take note of the conduct of the assessee that the assessee did not produce the cash book of accounts on subsequent date for verification. 4. We have minutely considered the submissions of the learned Departmental Representative and find force therein. We agree with the observations of the AAC that the penalty proceedings are distinct from the assessment proceedings but thereby it should not be taken that the penalty proceedings are unconnected with the assessment proceedings. It is the assessment proceedings during the cours....
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....ing genuine. Thus, the approach of the assessee to which the AAC concurred cannot be appreciated in law. Similar is the position in respect of the other additions made by the ITO. The additions made were nonetheless income of the assessee which the assessee concealed. We do not approve the inference of the learned AAC that the additions to the gross profit and the additions on account of low household expenses shown are based on purely subjective estimate of the ITO and, therefore, no penalty can be imposed under s. 271(1)(c) on the assessee. There is no doubt tinge of subjectivity and guess work in any estimate, but thereby it cannot be straightaway discarded for the purpose of penalty unless it is demonstrated to be arbitrary or capriciou....