2007 (4) TMI 145

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....ustified in affirming the order of the Commissioner of Income-Tax (Appeal) in canceling the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act ? 2. Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that the exercise books found in the possession of the assessee, though they are not books of account but in strickest sense of the terms, they are books of account ? 3. Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that once the Assessing Officer accepted the offer of the assessee in the proceedings under section 132(5) and also accepted the returns filed by the assessee then the prima facie presumption that can be raised is that ....

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...., 1985 there was a search action carried out in the residential premises of the assessee and his sons, as also the business premises of M/s. Patel Saw Mills and Patel Timber Industries at Chandrapur. During the course of search, various incriminating documents were found at the residential premises of the assessee as well as the business premises of M/s.  Patel Timber Industries and Patel Saw Mills, Chandrapur. It was also noticed that the assessee has made huge investments by lending money on promissory notes, construction of house property etc. Up to the date of search the assessee had not filed any return of income for the assessment years in question. Upon notice issued under Section 148 of the Act for the assessment years 1982-83 ....

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.... is not in dispute that the returns wee not filed by the assessee prior to the date of search. During the course of search a exercise book was seized, wherein it was noticed that the assessee had made investment in promissory notes and also in construction of house. Mr. Thakkar, the learned counsel appearing on behalf of the assessee/respondent, relied upon the decision of the Hon'ble Apex Court in the case of CBI v. V.C.  Shukla AIR 1998 SC 1406 and submitted that the note books seized during the course of search was books of account maintained by the assessee in the regular course of business and therefore, the Explanation 5 of Section 271(1)(c) of the Act, invoked by the Assessing Officer was not justified. This Court in the case of....