TaxTMI 
TaxTMI 
1982 (8) TMI 16
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.... were debited in the accounts, the firewood transported from the jungle did not find a place in the books of account. On enquiry the assessee explained that it had consumed firewood in its boiler in the manufacture of kattha and part of the same was sold in the market for Rs. 28,624. Quantitative details of the firewood extracted and consumed in the manufacture of kattha were not available and hence the ITO estimated the assessee's consumption of firewood at Rs. 22,000 and estimated the excess firewood available for sale but not accounted for at 37,500 quintals. Taking the price of the firewood at Rs. 4 per quintal, the ITO made an addition of Rs. 1,50,000. On appeal, that addition was reduced to Rs. 1,06,000. From the order of the AAC appeals were filed, both by the Revenue and the assessee. The Tribunal required the assessee to furnish a comparative statement of firewood consumed by it in the manufacture of kattha in some of the previous years. The assessee could not do so and also conceded that the quantity of firewood purchased was not mentioned in the books. The same was the position regarding the recovery of firewood from the jungle. The Tribunal found that the assessee ha....
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.... 10,000 ------ Rs. 3. Asansol set 1,500 Jai Prakash Narain Singh. 5,000 Sri Ram Gulati. 25,000 Banshidhar Shyam Lal. 25,000 Hasnanand Jiwandass. &nb....
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....sessee that so far as the unexplained credits were concerned, it could not be held that merely because the assessee did not disclose this amount in its return, it was guilty of fraud or gross or wilful neglect. As for the addition of Rs. 50,000 it was urged that the addition was at best made on estimate. It was also contended that the Explanation places a negative burden on the assessee which is comparatively very light in nature and that the facts of the case indicated that the assessee could not be held guilty of fraud or gross or wilful neglect in not returning its correct income. In the opinion of the Tribunal, the assessee's submission was well founded. To quote, the Tribunal observed: " All said and done, the addition of Rs. 50,000 has been sustained by us on the basis of estimate. It is true, we have tried to make the estimate to the best of our judgment. All the same, however, it cannot be said that while making the estimate the element of guess-work has not been there. We are, therefore, inclined to give the assessee the benefit of doubt in the matter of the penal provisions only. As regards the credits added also, the position remains the same, i.e., the amounts hav....
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....rtment, that the Explanation to s. 271(1)(c) is attracted to this case and the Tribunal did not apply its mind to it and, lastly, it was not a case of no evidence and, therefore, the burden on the assessee stood discharged. According to the learned counsel the question referred embraces only a pure question of fact which cannot be answered by this court. The second contention urged was that in the statement of the case it has not been stated that no evidence was led by the assessee or that there was no evidence on record and that being so, this court cannot look into the order passed by the Tribunal in the appeal. After considering the respective submissions, in our opinion, the approach of the Tribunal, the reasonings given by it and the inferences drawn, are wholly misconceived and erroneous in law. We would first refer to the relevant provisions in this behalf as contained in the Indian I.T. Act, 1922, and the I.T. Act, 1961. Section 28(1)(c) of the Act of 1922 provided for a case of concealment of income or improper distribution of profits. In so far as it is relevant for the present purpose, it read as under : "If the Income-tax Officer, the Appellate Assistant Commis....
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.... assessment proceedings would be relevant and admissible materials in penalty proceedings, but those findings cannot operate as res judicata because the considerations that arise in penalty proceedings are different from those in assessment proceedings. The fact that the assessee's explanation regarding a cash credit or other receipt is disbelieved and the amount is assessed in his bands, does not by itself justify the Department in imposing a penalty ; the circumstances of the case must be such is to lead to the reasonable and positive conclusion that the amount represents the assessee's income. Penalty on the ground of concealment can be imposed only if there is a conscious and deliberate concealment on the part of the assessee. In CIT v. Anwar Ali [1970] 76 ITR 696 (SC), these principles were reaffirmed and in CIT v. Khodar Eswarsa and Sons [1972] 83 ITR 369 (SC), it was further laid down that the penalty cannot be levied solely on the basis of the reasons given in the order of assessment. The question is whether the insertion of the Explanation with effect from April 1, 1964, brought any change in the law applicable in this behalf. As noted above, prior to the insertion of the ....
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....ing the materials placed on the record. We do not think that after the insertion of this Explanation there arises any question of giving any benefit of doubt to an assessee. The penalty can be knocked off only in case the Tribunal holds that the assessee has established that the failure to return the correct income was not due to fraud or any gross or wilful neglect on his part. The Tribunal in the present case, therefore, erred in knocking off the penalty on the considerations adverted to above. As noted above, penalty has been imposed with reference to two additions. There was an addition of Rs. 50,000 as sustained by the Appellate Tribunal on account of unexplained firewood. The Tribunal had found in the quantum appeal that the assessee had not maintained any proper account in regard to the firewood recovered by it. Of course, the addition was made on the basis of an estimate but that does not mean that penalty would not be exigible if the assessee fails to prove that the difference in the income returned and the income assessed on that account was not due to any fraud or gross or wilful negligence on his part in returning the correct income. In other words, even where additi....
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....l was legally justified in cancelling the penalty. In other words, on the facts and in the circumstances found by the Tribunal, what is required to be seen is as to whether the penalty was exigible. It cannot be disputed that the Explanation to s. 271(1)(c) was attracted and it was considered by the IAC. The import of the Explanation, therefore, was very much involved in the case. In regard to the addition of Rs. 50,000, the Tribunal has not recorded any finding that the failure on the part of the assessee to return the same was not on account of any fraud or any gross or wilful neglect on its part. The reasoning of the Tribunal is that this addition was sustained on the basis of an estimate and since, in making the estimate, an element of guess work was involved, the Tribunal felt that the assessee was entitled to the benefit of doubt. This was a wholly erroneous and misconceived approach. We have shown above that in the case of a best judgment assessment, if the provisions of the Explanation are attracted, penalty is exigible. There is no question of giving any benefit of doubt to an assessee unless, of course, the onus placed on the assessee in terms of the Explanation stands di....
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....nover of the sales disclosed was accepted by the Department and merely because a higher rate of profit was applied by the I.T. authorities in the past, it was held, that it could not be said that the higher income assessed by the Department was due to any gross neglect on the part of the assessee. The finding recorded by the Appellate Tribunal in favour of the assessee being essentially a finding of fact and based on relevant considerations, it was held, could not be questioned in a reference. In Addl. CIT v. Chatur Singh Taragi [1978] 111 ITR 849 (All), also, income had been estimated because the account books had not been properly maintained and were not open to verification. At the same time there was no particular item of income which the assessee could be said to have omitted to include in its income. Thus, merely because some addition had been made on account of some shortcomings in the account, it was held that penalty could not be imposed and the assessee had been able to discharge the onus cast on him under the Explanation to s. 271(1)(c) of the Act. It would be seen that both these cases proceeded on their own facts and they are of no assistance to the petitioner. Our ....