TaxTMI 
TaxTMI 
2006 (1) TMI 86
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....ession of sales. Accordingly, penalty proceedings under section 271(1)(c) of the Act were initiated by the Assessing Officer by issuing notice under section 274 of the Act. After considering the explanation of the assessee, the Assessing Officer held that the assessee had concealed the particulars of income and, accordingly, levied penalty of Rs. 30,000 under section 271(1)(c) of the Act. The assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) observed that the assessee had not disputed the recovery of loose papers from its business premises and which contained entries relating to suppressed sales. Accordingly, the penalty was confirmed. The assessee did not succeed in further appeal before the Income-tax Appellate Tribunal. The basic facts are that during the course of search by the sales tax department on April 27, 1982, at the business premises of the assessee, certain slips and kachcha receipts were found and seized. Based on the notings on these loose papers, the sales tax department estimated the concealed sales at Rs. 44,106 for the year under consideration. Placing reliance upon these figures of ....
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.... with the assessment proceedings and that the penalty cannot be imposed under section 271(1)(c) of the Act solely on the basis of the reasons given in the original assessment order. In support of this contention, reliance was placed upon the decision of the apex court in the case of CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369. It was submitted that the estimated figure of sales of Rs. 44,106 is a mere guess work. It was submitted that the book results have been accepted and section 145 of the Act has not been invoked at the assessment stage. Referring to the provisions of section 145 of the Act, it was submitted that it was only in a case where the Income-tax Officer was not satisfied with the correctness or completeness of the accounts of the assessee that resort could be made to the provisions of section 144 of the Act by making best judgment assessment. That, in the facts of the present case, as the book results had been accepted, no best judgment assessment had been made. It was urged that as the provisions of section 145(2) of the Act had not been invoked, the Assessing Officer was not justified in making the addition, much less levying penalty. It was submitted tha....
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....mount does not represent concealed income as with the hypothesis that it does. That, if the assessee's explanation is unproved, but not disproved, penalty cannot be levied in the absence of any material to indicate that the amount in question was the income of the assessee. Reliance was placed upon the decision of this court in the case of National Textiles v. CIT [2001] 249 ITR 125, as well as in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT [2006] 282 ITR 321 (Guj) in support of the aforesaid contention. Reliance was also placed upon the decision of this court in the case of Navjivan Oil Mills v. CIT [2001] 252 ITR 417, to contend that the presumption against the assessee under the Explanation to section 271(1)(c) was a rebuttable one, and that the onus could be discharged by the assessee on the basis of preponderance of probabilities. It was submitted that accordingly, the assessee had duly discharged the onus which lay on it and rebutted the presumption under the Explanation to section 271(1)(c) of the Act. The decision in the case of CIT v. President Industries [2002] 258 ITR 654 (Guj) was relied upon for the proposition that for levy of penalty, the amount of ....
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.... 44,106 to the assessee's total income. Mr. Naik also referred to the findings recorded in paragraphs Nos. 4 and 5 of the order of the Commissioner of Income-tax (Appeals). It was pointed out that the Assessing Officer had after making proper inquiries, as regards the findings recorded by the Sales Tax Officer, arrived at an independent finding that the assessee had suppressed the sales which represented the assessee's income. That independent findings had been given by the Assessing Officer that the assessee had resorted to making sales outside the books. The Commissioner (Appeals) found that no evidence had been produced before the Assessing Officer at the time of assessment proceedings as well as at the time of penalty proceedings to show that the rough book seized by the sales tax department was used for various purposes and not necessarily only for the purpose of recording the sales effected by the assessee. Mr. Naik referred to the provisions of section 271(1)(c) of the Act and more particularly to Explanation 1 thereof. It was pointed out that under the provisions of the said Explanation where in respect of any facts material to the computation of the total income of any ....
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....y on it, by pointing out that the missing pages had been used for various other purposes. The undisputed facts as available on record are that the search was carried out by the sales tax authorities on April 27,1982. During the course of search several loose slips in the form of kachcha bills were found by the sales tax authorities. It was found that the assessee had issued bills up to serial No. 22 in relation to the year under consideration and that out of the same only 5 bills showing various amounts against various dates were found. The assessee could not produce the missing bills, nor could it produce any evidence that the missing serial-numbered bills were not kachcha bills, but something other than that. After considering the explanation tendered by the assessee, both the Sales Tax Officer in sales tax proceedings as well as the Assessing Officer in quantum proceedings under the Income-tax Act, estimated the unaccounted sales at Rs. 44,106 as under: Sales as per item No. 9 of the inventory kachcha bills Nos. 13 to 21 Rs. 9,282 17 kachcha bills were not produced but sale proceeds estimated Rs. 34,824 Total Rs. 44,106 The Sales Tax Officer a....
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....f assessment proceedings or at the time of penalty proceedings. The bills, though kachcha, were serially numbered, hence, the onus lay on the assessee to point out as to what had happened to the remaining sale bills. It is necessary to note that the estimate made by the sales tax authorities has been accepted by the assessee and no explanation is available on record to show as to why the assessee did not dispute the addition in the sales tax proceedings. It is in the light of the aforesaid factual matrix, that the contentions raised on behalf of the assessee are required to be tested. It has been contended on behalf of the assessee that the penalty has been levied solely on the basis of the reasons given in the original assessment order in quantum proceedings, and that the estimated figure of sales of Rs. 44,106 is a mere guess work. From the facts stated above, it is apparent that the assessee had issued kachcha bills in respect of certain part of its sales as is borne out by the five kachcha bills seized by the sales tax authorities. It has been conclusively proved that the assessee was not accounting for those bills in its regular books of account. The said record was suff....
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....s the correctness or completeness of the accounts of the assessee. That, the book results had been accepted, hence, best judgment assessment could not have been made. As can be seen from the facts of the present case, all the authorities have concurrently found that the assessee has made sales outside the books of account. These suppressed sales are not reflected in the books. The Assessing Officer did not find that any particular entries in the books of account were not genuine. However, on the basis of the record seized by the sales tax authorities, the Assessing Officer found that the assessee had omitted to enter particular items of sale in the books of account. The Assessing Officer found that both the investment in the purchases and the profit earned thereon had been kept out of the books; hence, this was a case of concealment of income. The Assessing Officer further found that the undisclosed sales recorded the assessee's unrecorded investment plus profit thereon, being its concealed income. Accordingly, he found that the income returned by the assessee was not the correct income. In the aforesaid circumstances, the Assessing Officer, without rejecting the book results as a ....