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R.B. Singh Vs. Assistant Commissioner of - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(2000)75ITD250(Mum.)
AppellantR.B. Singh
RespondentAssistant Commissioner of
Excerpt:
1. in view of the common grounds involved in these 5 appeals filed by the same assessee, they are consolidated in the common order for the sake of convenience. these appeals have been filed by the assessee shri r. b. singh of m/s. machinery sales and services, bombay against the common order passed by the cit(a) confirming the levy of penalty under section 271(1)(c) of the income-tax act for the assessment years 1975-76, 1976-77, 1977-78, 1978-79 and 1980-81.2. the assessee is carrying on business in the purchase and sale of textile machinery parts under the name m/s. machinery sales and services. the assessee filed returns of income for the assessment years 1975-76 to 1980-81 declaring the total income as shown below : 3. the assessments were completed under section 144 of the.....
Judgment:
1. In view of the common grounds involved in these 5 appeals filed by the same assessee, they are consolidated in the common order for the sake of convenience. These appeals have been filed by the assessee Shri R. B. Singh of M/s. Machinery Sales and Services, Bombay against the common order passed by the CIT(A) confirming the levy of penalty under section 271(1)(c) of the Income-tax Act for the assessment years 1975-76, 1976-77, 1977-78, 1978-79 and 1980-81.

2. The assessee is carrying on business in the purchase and sale of textile machinery parts under the name M/s. Machinery Sales and Services. The assessee filed returns of income for the Assessment Years 1975-76 to 1980-81 declaring the total income as shown below : 3. The assessments were completed under section 144 of the Income-tax Act on total income as under : 4. The Assessment orders were made on 27-3-1986 for all the 5 years under consideration. The assessee later filed returns of income on 17-3-1987 showing the total income as under : 5. The assessee's claim was that the revised returns filed by him after the completion of the assessments were returns under the Amnesty Scheme and so he was entitled to the benefits available under the scheme. It was contended before the Assessing Officer that as the assessee was entitled to the benefits under the Amnesty Scheme, he was not liable for penalty under the various sections of the Income-tax Act. The Assessing Officer did not accept the above contention. He had already initiated penalty proceedings under section 271(1)(c) as could be seen from the Assessment Order dated 27-3-1986. In response to the show-cause notice issued under section 274, the assessee gave the Explanation that in the light of the circulars issued by the Central Board of Direct Taxes under the Amnesty Scheme no penalty could be levied. The Assessing Officer did not accept the assessee's contention and he proceeded to levy the penalty under section 271(1)(c) as shown below : 6. The assessee took up the matter in appeal with the main contention that the Assessing Officer was not justified in levying penalty in view of the benefits available under the Amnesty Scheme. Before the Commissioner (Appeals), it was contended that the assessee had filed revised returns for the various Assessment years offering income higher than what had been assessed and so the returns should be considered as filed under the Amnesty Scheme. Though it was contended before the first Appellate Authority that even though there was a search conducted in the assessee's premises, there was no seizure at the time of the search and that there were only the books of account seized by the department, the Commissioner (Appeals) noted that in the course of the search there were duplicate books of account found in the assessee's premises and there were certain entries relating to credits in the other sets of accounts which were not reflected in the regular accounts. Though the assessee had been asked to prove the genuineness of the credits, only confirmation letters had been filed in respect of few of the credits. The Commissioner (Appeals) was of the view that the returns filed by the assessee were only after concealment had been detected by the department and so the assessee could not claim the immunity under the Amnesty Scheme. The Commissioner (Appeals) further held that on merits also penalty could be levied as the Assessing Officer had sufficient materials before him to come to the finding that in the returns filed originally there was concealment of income. The Commissioner (Appeals) thus confirmed the levy of penalty for all the 5 years under appeal. Aggrieved with the order of the Commissioner (Appeals), the assessee has filed these appeals before the Tribunal.

7. On behalf of the assessee Shri S. S. Phadkar Advocate, submitted before us that the Commissioner (Appeals) was not correct in confirming the penalty without giving due consideration to the claim for the benefits available under the Amnesty Scheme. The learned counsel pointed out that the assessee filed the revised returns for the Assessment years 1975-76 to 1980-81 on 17-3-1987 admitting incomes higher than what had been assessed, and that he had also withdrawn the appeals filed before the Tribunal against the assessments. It was his contention that as the revised returns admitting higher incomes had been filed when the Amnesty Scheme was in force, there was no justification for denying the assessee the benefits available under the scheme. Shri Phadkar drew our attention to various circulars issued by Central Board of Direct Taxes particularly the Circular No. 451 dated 17th February, 1986 explaining the provisions of the Amnesty Scheme. He pointed out that in answer to question No. 28 there was the clarification by the Board that if an addition was contested in appeal the assessee could make a declaration after withdrawing the appeal and that in such a case a lenient view would have to be taken. It was his contention that the revenue authorities were not justified in ignoring the revised returns filed by the assessee even though the appeals before the Tribunal were withdrawn. The learned counsel added that on merit also no penalty could have been levied under section 271(1)(c) as the assessments for all these years had been made under section 144 of the Income-tax Act, more or less on estimate basis. Shri Phadkar submitted that for the Assessment year 1975-76 the assessment was originally completed on 7-3-1979 under section 144 with the estimated addition of Rs. 5 lakhs on the reasoning that the assessee had not given any Explanation regarding certain credit entries in the books of account. That order of assessment was re-opened under section 146 and again the assessment was made under section 144 on 31-3-1980, with the addition of Rs. 5 lakhs. Again the assessment was re-opened under section 146 and the assessment has been redone under section 144 with the estimated addition of Rs. 1,00,000. In the third assessment order dated 16-3-1984 the addition was not made on account of credit entries appearing in the books of account, but as business income from the proprietary concern M/s. Machinery Sales and Services. Shri Phadkar argued that there was no material before the Assessing Officer to estimate of the assessee's income from business at Rs. 10 lakhs. He also drew our attention to the order of the Commissioner (Appeals) dated 10-11-1986 in the quantum appeal (vide page 62 of the paper book) wherein it was commented that the assessment had been made in a haphazard manner. The learned counsel stated that for the Assessment year 1976-77 also, there was addition of Rs. 2,50,000 as an estimate though in the first order of assessment under section 144, dated 7-3-1979 the addition was to the extent of Rs. 2 lakhs only. Shri Phadkar submitted that for all the years under consideration there were only estimated additions made in the ex parte assessments, and that there was the finding of the Commissioner (Appeals) that the assessments had been made without giving the assessee adequate opportunity to furnish evidence regarding the credits. According to the learned counsel after cancelling the assessments under section 146, the Assessing Officer had taken the case for re-assessment in the month of March just before the time barring date after giving a short notice for hearing. It was stated that as the assessee was not given adequate time the confirmation letters could not be furnished to prove the genuineness of the credits. It was his contention that in such a case of estimated addition without valid grounds there could be no levy of penalty under section 271(1)(c).

8. The learned counsel has also raised another contention that as could be seen from the assessment orders penalty proceedings had been initiated on the ground that the assessee had furnished inaccurate particulars of income. Before issuing the notice under section 271(1)(c) the Assessing Officer felt that the default on the part of the assessee was in furnishing inaccurate particulars in the returns but in the orders passed by him penalty was levied for the default of concealment of income. The learned counsel contended that after initiating penalty proceedings for furnishing inaccurate particulars, the Assessing Officer was not correct in levying penalty on the grounds of concealment of income. It was his contention that the contradiction as above vitiated the penalty orders.

9. Per contra the departmental representative Shri Meena supported the order of the Commissioner (Appeals) and submitted that the appellate authority had found that the returns filed by the assessee after the completion of the assessments were not valid returns under the Amnesty Scheme and in that sense there was no question of any immunity from the levy of penalty. The learned DR pointed out that though the assessee made a petition to the Commissioner of Income-tax on 17-3-1987 for accepting the revised returns as filed under Amnesty Schemes by the order dated 4-9-1991 the Commissioner rejected the petition and refused to grant the immunity. The paper book filed by the assessee's counsel contains a copy of the above order of the Commissioner of Income-tax (Page 47). It was the contention of the learned DR that the assessee had not complied with the conditions under the Amnesty Scheme and so in view of the Circular No. 451 issued by the Central Board of Direct Taxes the assessee forfeited the right to the benefits of the scheme.

Shri Meena submitted that in an answer to question No. 12 it was made clear in the Circular that the immunity under the scheme could not be availed by the assessee whose premises had been searched by the Tax authorities. In the present case not only premises of the assessee had been searched but also duplicate sets of account found by the search party. It was thereafter that the assessments had been made on income higher than what the assessee had declared in the returns. Only after the assessments had been confirmed in appeal, that the assessee filed the revised returns on 17-3-1987 claiming the same as returns under the Amnesty Scheme. Shri Meena submitted that the Commissioner (Appeals) was therefore perfectly justified in holding that the assessee was not entitled to the benefits of the Amnesty Scheme.

10. As regards the contention that no penalty could be levied on merits also, the learned DR submitted that the fact that the assessee himself later admitted higher income in the revised returns filed on 17-3-1987 would go to show that the income as admitted in the original returns were inaccurate and that by filing the returns declaring lower income the assessee was concealing the income liable to fix in his hands. The learned DR submitted that though the assessee was asked to confirm the credits as appearing in the accounts as genuine, he did not prove the genuineness with confirmation letters or other evidence. According to Shri Meena though the letters of confirmation had been filed in regard to a few credits, the assessee failed to furnish necessary evidence to prove that those were genuine credits. Shri Meena contended that even in a case of estimate of income penalty could be levied under section 271(1)(c). For that contention he has placed reliance on the decision of the Madras High Court in CIT v. S. Krishnaswamy & Sons [1996] 219 ITR 157. The learned DR further stated that filing of revised returns showing higher incomes also would not exonerate the assessee from charge of concealment of income as held by the Kerala High Court in the case of CIT v. K. Mahim [1984] 149 ITR 737/[1983] 15 Taxman 557.

Relying on the number of judicial decisions the learned DR contended that in view of the fact that the assessee himself had later admitted higher incomes would go to show that by returning earlier lower income, the assessee was concealing the income assessable in his hands for which penalty could be levied under section 271(1)(c). Regarding the contention that penalty proceedings had been initiated by the Assessing Officer on finding that the assessee had furnished inaccurate particulars and then there could not have been levy of penalty for the default of concealment of income, the learned DR submitted that concealment of income would include furnishing of inaccurate particulars also and so there was no infirmity in the order levying the penalty.

11. We have given due consideration to the submissions of both sides and gone through the facts of the case. The learned counsel for the assessee has also filed before us two paper books containing a number of documents. The Commissioner (Appeals) has rejected the assessee's claim for benefit under the Amnesty Scheme.

12. As already stated the assessments for all these years were made under section 144 of the Income-tax Act on incomes much higher than what the assessee had admitted in the returns filed by him. The assessee's contention is that he has later filed revised returns admitting incomes even more that what were assessed and that such returns were filed when the Amnesty Scheme was in force. The revised returns were filed on 17-3-1987. In the assessee's paper book on page 81 there is a copy of the letter dated 12-1-1987 stating that Shri Ramji B. Singh, Miss Sushila R. Singh and Shri Sunil R. Singh would be declaring additional income of Rs. 70,10,000 and paying tax of Rs. 35 lakhs. As per the statement furnished by the assessee on page 61 of the Paper Book, the actual amount offered as income in the returns filed on 17-3-1987 for the Assessment years 1975-76, 1976-77, 1977-78, 1978-79 and 1980-81 came to Rs. 18,69,733.

13. The Commissioner passed the order under the Amnesty Scheme on 4-9-1991 (vide page 47 of the Paper Book) rejecting the assessee's claim for the benefits under the Amnesty Scheme. One of the reasons given by the Commissioner for rejecting the assessee's petition reads as under : "In the Board Circular No. 451, dated 17-2-1986, in answer to question No. 28, it is clarified that the assessee should withdraw the appeals filed and make a declaration before the Commissioner for getting the benefits of the Amnesty Scheme. The appeal filed by the assessee before the ITAT had not been withdrawn by him and the ITAT has decided the appeal on 19-2-1991 for the Assessment years 1975-76 to 1977-78 as discussed in the earlier para. The assessee's case is also not covered by the reply to the query No. 12 in Boards Circular cited above." 14. The learned counsel for the assessee submitted before us that as early as on 30th March, 1987 the assessee had made a request before the Tribunal for permission to withdraw the appeal with a view to avail of the concessions under the Amnesty Scheme and that the Tribunal had disposed of the appeals ex parte by the order dated 19-2-1991. Later the assessee made a Miscellaneous Application before the Tribunal and then the Tribunal passed the order on 20-5-1993 allowing the assessee to withdraw the appeals for the Assessment years 1975-76, 1976-77 and 1977-78. A copy of the order of the Tribunal in ITA Nos.

260-262/Bom./87 dated 20-5-1993 is available in the Paper Book on page 7. Though the assessee thereafter made a petition before the Commissioner under section 273A(1) the Commissioner dismissed the same on the reasoning that his predecessor had earlier itself (i.e., by the order dated 4-9-1991) considered all the aspects of the case, and that the assessee's petition had been rejected earlier not only for non-withdrawal of the appeals, but for other reasons also.

15. As the matter stands now we have to proceed as if the assessee had withdrawn the appeals before the ITAT and also made the petition before the Commissioner of Income-tax claiming the benefits under the Amnesty Scheme, particularly immunity from levy of penalty. The Commissioner (Appeals) has held against the assessee for the reason that as there was a search conducted in the assessee's premises, the assessee had forfeited the benefits under the scheme. In the Boards' Circular No.451 dated 17th February, 1986, the matter is dealt with as under :- Q. No. 12 - Can immunity given by the Circular be availed of by assessees whose premises have been searched by the tax authorities 16. But then the Board has clarified the matter in Q. No. 30, as under :- Q. No. 30 - Whether an assessee could make a declaration in respect of assets or income which is not the subject-matter of seizure Answer - Yes, if it has not been already found out in the course of the search.

17. It is clear from Q. No. 30 and the answer thereto that it is not the search alone which will exclude the assessee from the benefit of the Amnesty Scheme, but the actual detection of assets or income sought to be declared under the Amnesty Scheme, could deprive an assessee of the benefit of the scheme. In the case of CWT v. N. C. J. John [1998] 233 ITR 475 on page 479, the Kerala High Court has dealt with a similar matter as under : "If there was no detection of concealment at the time of search, can it be said that the assessee will still be deprived of the benefit of the Amnesty Scheme. We do not agree with the submissions of learned senior standing counsel that the moment a search operation is conducted on anybody's premises he becomes disentitled to the benefit of the Amnesty Scheme. A search may be conducted on wrong information without detecting any concealment. Moreover, a search may be conducted on a few premises of an assessee and to take advantage of the Amnesty Scheme, the assessee may declare the income or wealth, which he kept at different premises, which was not detected to by the raiding party at the time of search and from which no concealment was detected. The question will arise whether the doors of the Amnesty Scheme will be closed in these situations also. A search without detection of any concealment, in our opinion, is of no consequence and, therefore, the assessee should not be deprived of the benefit of the amnesty scheme merely by the factum of search, but if the raiding party had detected some concealment, then the position would have been different. We are fortified in this view by question No. 30 and answer thereto, which are reproduced below [see 1986, 158 ITR (St.) 135, 139]".

18. In the light of the above observation of the High Court we have to see whether there was actual detection of assets or income before the assessee filed the revised returns claiming as Amnesty returns. It must be made clear that in the search conducted in the assessee's premises on 2-12-1977 there was no detection of cash or other valuables. Though there was, later a survey made under section 133(A) of the Income-tax Act that action also did not bring out any asset or income of the assessee. In the appellate order (page 6) the Commissioner (Appeals) has dealt with this matter as under : "Thus, the crux of the matter is whether any material had been found by the department during the search or it has been voluntarily declared by the appellant before the department became aware of existence of such income inspite of the search. The view taken by me consistently in such a situation in all the appeals has been that when the Assessing Officer has "found materials", to say that there has been concealment, the benefits of Amnesty Scheme will not be available to the appellant. The fact of finding material cannot be equated with the establishing of concealment. That is to say, if from the material seized there is any clue available regarding existence of such like concealed income then it will be held that the department has found material which can, after analysis and scrutiny, lead to the establishment of concealment, even if actual scrutiny has not been carried out. This view is reinforced by the fact that in the original Circular words used are "that the returns have been filed voluntarily and in good faith". In case, there is any material seized by the department, which can possibly lead to the establishment of concealment it will not be considered as having been filed voluntarily but out of fear that the department might establish the concealment from the material found by it. Hence it cannot be said that assessee has filed returns before department detected the concealment. AR's repeated assertion that a few confirmations had been filed does not help the assessee.

From records, it is clear that at no stage the assessee made any attempt to explain the entries or produce the parties concerned. It is obvious that assessee had no evidence hence he avoided availing of any opportunity." 19. The Commissioner (Appeals) has observed that in the search, duplicate books of account had been found and that the assessee had been asked to explain the entries therein. According to the appellate authority that would mean that the department had found material which when analysed and scrutinised could lead to establishment of concealment. As explained by the learned counsel for the assessee what the search party found in the assessee's premises were two sets of books of account. Some credit entries in one set of accounts were not appearing in the other sets. It is important to note that in the duplicate sets of accounts there were credit entries in the name of various parties. But does it mean that those entries showed the income of the assessee introduced in the name of bogus parties. If that was the case, we do not see the reason as to why the entries were appearing in the books of account which were (according to the department) not meant to be produced before the department. The case of the department appears to be that, the assessee was bringing into the accounts his own income in the name of bogus parties.

20. In that case, it was more likely that the credits would have been entered in the regular accounts. Further if we analyse the addition for various years, it can be seen that the Assessing Officer was not quite sure as to what was the undisclosed income of each year. For the Assessment year 1975-76, he makes addition of Rs. 5 lakhs for the following reason :- "In this case a raid was conducted a few years back and some duplicate books of account were seized in which cash entries in numerous names are mentioned which do not find place in what the assessee calls regular books of account. The assessee was given time and again asked to submit explanation regarding these entries but he has constantly refused to do so. In these circumstances addition of Rs. 5 lakhs in respect of these entries is being made." 21. The learned counsel for the assessee has clarified that the assessee had never refused to submit his explanation regarding the credits. According to him the case was posted for hearing on 3-3-1979 and then on 6-3-1979 and that as the assessee was not given adequate time he did not furnish the details. Drawing our attention to para 1 of the assessment order the learned counsel submitted that the Assessing Officer made the assessment order on 7-3-1979 with the observation - "As it is a time barring case, I have no alternative but to resort to the provisions of section 144 of the Income-tax Act as there is no time to fix the case again". We agree that this is not the same as stating that the assessee had refused to give any explanation regarding the credits. Though initially the Assessing Officer made the addition of Rs. 5 lakhs on account of the credit entries in the duplicate set of accounts, later the Assessing Officer changed his view and in the final order passed under section 144 on 27-3-1980, there was addition of Rs. 10 lakhs for the reasoning as under :- "The assessee had declared income from house property and business income in the return of income filed on 30-3-1978. The assessee is a proprietor of M/s. Machinery Sales and Services, which is doing business of purchasing old machinery and selling the same. During the previous year, the assessee has disclosed the total sales of Rs. 1,50,46,682. In the absence of loan confirmation, and confirmation of interest paid and commission, I estimate the income of the assessee from the proprietary concern of M/s. Machinery Sales and Services at Rs. 10 lakhs." 22. From a reading of the Assessment Order for the assessment year 1975-76, it cannot be said that there was detection of concealment of Rs. 10 lakhs (or is it Rs. 5 lakhs), at the time of the search in the assessee's premises on 2-12-1977. As held by the Kerala High Court in the case of N. C. J. John (supra), we have to hold that as clarified by the Central Board in Q. No. 30 in the Circular No. 451 dated 17th February, 1986, the assessee could make a declaration in respect of the assessment year 1975-76, in respect of the income of Rs. 10,00,000, which has not been detected or found in the course of the search.

23. The fact that the same amount had already been assessed in the assessee's hands, is not quite relevant. The assessee has complied with the requirement of withdrawing the appeal, and making the declaration and the payment of tax on the declared income (vide Q. No. 28 in the Circular No. 451).

24. In the assessment years 1976-77 and 1977-78 also we have to hold that the revised returns filed on 5-2-1987 should be accepted as Amnesty returns. For these two years also the Tribunal had passed the orders giving permission to the assessee to withdraw the appeals. For the assessment year 1976-77, as against the addition of Rs. 2 lakhs made in the order dated 7-3-1979 in the later order dated 27-3-1986, the addition was to the extent of Rs. 2.5 lakhs. For the assessment year 1977-78 there were two additions, Rs. 75,000 as estimated income from the proprietary business and Rs. 1,86,500 as unexplained cash credits. It is not clear from the Assessment Orders as to whether the duplicate sets of accounts related to all the assessment years. As a matter of fact in the Assessment Orders for the assessment years 1976-77 and 1977-78 there is no mention about any duplicate set of accounts. That means there was no material gathered in the search on the basis of which it could be said that there was detection of any income in the course of the search to rule out the benefit of Q. No. 30 (in the Circular No. 451) to the assessee. In other words the returns of income for the assessment years 1976-77 and 1977-78 also should be considered as Amnesty return, entitling the assessee to all the benefits under the scheme.

25. We thus find that there is no justification for denying the assessee the benefits under the Amnesty Scheme for the assessment years 1975-76, 1976-77 and 1977-78. In coming to the above finding we are fortified by the observations of the Kerala High Court in the case of N. C. J. John (supra).

"The Amnesty Scheme has been introduced for the benefit of the tax-payers as well as for the benefit of the revenue. The provisions of the scheme should be construed keeping in view its purpose and the context. Rigid or pedantic interpretation of the scheme has to be avoided. Keeping in view the interpretative principle and the answer to question No. 30 as contained in the scheme itself, the scheme cannot be interpreted in a narrow manner. An assessee cannot be deprived of its benefit, simply because he was subjected to search, notwithstanding that there was no detection of any concealment. The scheme has to be interpreted rationally. A search without detection of any concealment is of no consequence and, therefore, the assessee should not be deprived of the benefit of the Amnesty Scheme merely by the factum of search; but if the raiding party had detected some concealment, then the position would be different." 26. We accordingly reverse the orders of the Revenue authorities and hold that in view of the immunity available under the Amnesty Scheme, no penalty could be levied for the assessment years 1975-76, 1976-77 and 1977-78. We thus cancel the penalty under section 271(1)(c) levied for these 3 years.

27. As regards the assessment year 1978-79, it is to be made clear that the assessee had not withdrawn the appeal and so the revised return filed on 17-3-1987 cannot be considered as amnesty return. The assessee is thus not entitled to the benefits under the Amnesty Scheme. For the assessment year 1980-81 also the assessee has not complied with the provisions of the Amnesty Scheme as clarified in the Boards' Circular.

The Commissioner (Appeals) was therefore justified in holding that the assessee was not entitled to immunity from levy of penalty for those 2 years.

28. Now considering the merit of the case, it is the contention of the learned counsel for the assessee that there could be no penalty leviable under section 271(1)(c) for the assessment years 1978-79 and 1980-81, for the reason that there was no concealment of income established by the Assessing Officer. For the assessment year 1978-79 there was addition of Rs. 1,09,300 as undisclosed income on account of the unproved cash credits in the assessee's accounts. From the assessment order it can be seen that the Assessing Officer examined the books of account produced by the assessee's representative Shri V. K.Sethi and found that there were credits totalling Rs. 1,09,300 appearing in the name of 8 persons. The Assessing Officer issued a detailed letter on 8-2-1985 to prove the genuineness of the cash credits. Though further opportunities were given, on various dates, the assessee made no attempt to show that the credits were genuine. The total income assessed for this year is Rs. 1,32,898 including other additions as disallowances. For this year the assessee later filed the revised return (claiming as amnesty return) declaring income of Rs. 1,32,900. That means the addition of Rs. 1,09,300 in the assessment order, is also now admitted by the assessee as his income. For this year the assessee had admitted in the original returns, income of Rs. 16,900 only. When the assessee himself subsequently admitted the total income of Rs. 1,32,900 it cannot be said that there was no concealment of income by him to warrant the levy of penalty under section 271(1)(c). For this year the Assessing Officer has levied penalty of Rs. 64,500 treating the sum of Rs. 1,09,300 as the income concealed by the assessee. In the circumstances of this case, we find that there was justification for levying the penalty. We accordingly confirm the penalty levied for the assessment year 1978-79.

29. We notice that for the assessment year 1980-81 the assessee had filed the returns admitting a total income of Rs. 17,500 only. The assessment was made under section 144 on a total income of Rs. 90,000.

For making the estimate the reason given by the Assessing Officer reads as under :- "The assessee did not comply with this notice. Under the circumstances, I have no alternative but to pass an ex parte assessment order under section 144 of the Income-tax Act estimating the income to the best of my judgments with the materials available on record. The assessee has not produced the details of rent, salary, wages, loans confirmations etc. In the absence of the details, the total is estimated at Rs. 90,000." 30. The Assessing Officer has levied a penalty of Rs. 38,640 treating the difference of Rs. 72,500 as the income concealed by the assessee.

It has been brought to our notice that the assessment order for the assessment year 1980-81 had been set aside by the Commissioner (Appeals) and that the re-assessment had not yet been made. Whatever that the, we do not think that on the basis of the estimate made in this case, without any basis, it would be correct to say that there was concealment of income established by the Assessing Officer. True the assessee had subsequently filed the return admitting the total income of Rs. 1,00,000 on 17-3-1987. But no action appears to have been taken on that return. It is our considered view that on the basis of the income estimated by the Assessing Officer at Rs. 90,000, without any basis, it would not be correct to levy penalty under section 271(1)(c), even though subsequently the assessee admitted a higher income in an invalid return. In cancelling the penalty for the assessment year 1980-81, we are guided by the following observation of the Kerala High Court in the case of CIT v. India Sea Foods [1996] 218 ITR 629 (FB) :- "Penalty proceedings are penal in nature. The elementary principles of criminal law will apply. It is a quasi-criminal proceeding. There should be conscious concealment. The provisions should be construed strictly. Even after the addition of the Explanation to section 271(1)(c) of the Income-tax Act, 1961, conscious concealment is necessary and the presumption under Explanation to section 271(1)(c) can be displaced by the assessee proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect and the quantum of proof necessary would be that required in a civil case, namely, preponderance of probabilities." 32. Before concluding, we find it necessary to clarify that for the assessment year 1978-79 as can be seen from the assessment order while initiating penalty proceedings under section 271(1)(c), the Assessing Officer has not made any observation that penalty has been initiated for default in furnishing inaccurate particulars. The contention of the learned counsel that penalty has been levied under section 271(1)(c) for the offence of concealment of income after initiating the proceedings for some other reason would not apply for this year.

33. We may also clarify here that, for the assessment years 1975-76 to 1977-78, we have cancelled the penalty not because there was no concealment of income by the assessee, but because the concealment of income had not been detected in the course of the search and so the assessee was entitled to the immunity under the Amnesty Scheme as clarified in the Circular issued by the Central Board. In other words, our decision for the assessment years 1975-76 to 1977-78 would not apply for the assessment year 1978-79.

34. In the result the appeals for the assessment years 1975-76, 1976-77, 1977-78 and 1980-81 are allowed and the appeals for the assessment year 1978-79 is dismissed.


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