ORDER
R. L. SANGANI, J.M. :
These two appeals by the assessee arise out of proceedings for imposition of penalty under S. 18(1)(c) of the WT Act, 1957.
2. The assessee is an individual. The assessment years involved are 1974-75 and 1975-76. On 17th July, 1975 search and seizure operations under S. 132 of the IT Act, 1961 took place at the business premises and residence of the assessee. Prior to that date the assessee had not been assessed to income-tax or wealth-tax. During the search, several account books, loose papers, etc., were seized which indicated that the assessee had been carrying on business on large scale. However, books of accounts were not complete. Consequently, the Departmental officers scrutinised the seized documents in the presence of assessee and estimated income for nine years from asst. yrs. 1967-68 to 1974-75. The income estimated by them was as follows :
Asst. yr.
Estimated income
1967-68
27,037
1968-69
49,723
1969-70
81,848
1970-71
61,188
1971-72
1,37,291
1972-73
1,82,725
1973-74
1,32,557
1974-75
2,70,844
3. The above income was estimated under S. 132(5) of the Act. The assessee accepted the said estimate for all assessment years except for asst. yr. 1975-76. The assessee filed returns for asst. yrs. 1967-68 to 1974-75 in which he estimated the income as above. The assessments were made for those years on agreed basis as above. As far as asst. yr. 1975-76 was concerned, the assessee estimated the income at Rs. 3,50,000 and filed return of said income on 8th Sep., 1976. Ultimately the assessment for asst. yr. 1975-76 was finalised at Rs. 5,06,170. This assessment became final as the assessee did not file any appeal.
4. For asst. yr. 1975-76 the ITO levied penalty of Rs. 1,25,000 under S. 271(1)(c) of the IT Act, 1961. However, that penalty was cancelled by the CIT(A) by order dt. 31st March, 1983. This order is at page 59 of the paper book.
5. The assessee filed wealth-tax returns for asst. yrs. 1970-71 to 1975-76 under Voluntary Disclosure Scheme. The WTO did not accept the net wealth declared by the assessee and assessed the assessee at higher figures. The main reason for assessments resulting in higher figures was that the WTO did not allow deduction of the income-tax liabilities in computation of net wealth. The assessee filed appeals and the AAC allowed income-tax liabilities as deduction by common order dt. 29th Nov., 1980. As a result of this allowance the net wealth as assessed got reduced substantially. The WTO initiated penalty proceedings under S. 18(1)(c) for asst. yrs. 1971-72 and 1972-73 and also for asst. yrs. 1974-75 and 1975-76. As far as asst. yrs. 1971-72 and 1972-73 were concerned, the penalties imposed by him were cancelled by the AAC by order dt. 18th March, 1988. The AAC held that the difference in the returned wealth and the assessed wealth arose because of the different approach of the assessee and the WTO in estimating the net wealth of the assessee and that no specific property was concealed by the assessee and as such it was not fit case for imposition of penalty.
6. As far as asst. yrs. 1974-75 and 1975-76 are concerned, the WTO imposed penalties of Rs. 64,902 and Rs. 1,98,538 respectively which penalties have been confirmed by the CWT(A). The difference in the wealth-tax payable on the assessed wealth and on the wealth disclosed in revised statement of wealth for these two years is only Rs. 69 and Rs. 1,048 respectively but the penalties imposed are Rs. 64,902 and Rs. 1,98,538 respectively. The penalties are heavy because of the fact that during the relevant assessment years the legal provision regarding quantum of penalty was that penalty should be equal to the wealth sought to be concealed. In other words the yardstick was the value of wealth and not the value of tax sought to be avoided.
7. As regards asst. yrs. 1974-75 and 1975-76 with which we are concerned in these appeals, the assessee had filed returns on 31st Dec., 1975 declaring net wealth of Rs. 1,08,000 and Rs. 1,50,000 respectively. These returns were filed under the Voluntary Disclosure Scheme. The assessee had not given particulars of wealth. He had only indicated the value of wealth as stated above. In the course of assessment proceedings the WTO called upon the assessee to give details of the wealth declared in the returns. The assessee filed revised statements of wealth by giving the following details :
Assessment year
1974-75
1975-76
Value of immovable property
1,41,746
1,92,501
– 33,500*
1,59,001
Value of movable property
24,930
84,645
1,65,976
2,43,646
*Exempted
It would thus be seen that in the course of assessment proceedings the assessee, in the revised statements of wealth, valued the net wealth for theses two years at Rs. 1,65,976 and Rs. 2,43,646 as against the value declared in the original returns at Rs. 1,08,000 and Rs. 1,50,000 respectively. After giving effect to the order of the AAC, who had allowed deduction of income-tax liabilities, the wealth that was ultimately assessed by the ITO for these two years came to Rs. 1,72,902 and Rs. 3,48,538 respectively. Thus the difference in the net wealth between the assessed wealth and the wealth mentioned in the revised statements for these two years was Rs. 6,926 and Rs. 94,892 respectively.
8. In reply to show cause notice the assessee explained that he had submitted the wealth-tax returns on the basis of estimate as the books of accounts were not complete. It was submitted that the difference between the wealth estimated by the WTO and the wealth estimated by the assessee was not very large and when such estimate was made, there was no question of any concealment. He accordingly pleaded that penalty proceedings should be dropped.
9. The WTO in his penalty orders mainly relied on the fact that in the returns the wealth shown was of Rs. 1,08,000 and Rs. 1,50,000 respectively while in the course of assessment proceedings in the revised statements the wealth shown was Rs. 1,65,976 and Rs. 2,43,646 respectively. Consequently, there was concealment in the original returns. According to him, if the assessee would have correctly estimated the wealth, the assessed wealth and returned wealth could have been the same.
10. The CWT(A) emphasized the fact that the difference between the assessed wealth and the returned wealth was more than 25%. According to him, the WTO had specified certain items of wealth which had not been disclosed and as such this was a case of concealment of wealth and, hence, penalties had been rightly imposed. He, accordingly, confirmed the penalties. The assessee is now in further appeals before the Tribunal.
11. The submission on behalf of the assessee was that the net wealth had been estimated on the basis of incomplete books of accounts which were in possession of the Department. The value had been estimated on the basis of rough accounts, jottings lists, etc., which had been seized and which were in possession of the Department at the relevant time. The WTO also estimated the wealth on the basis of those very documents. Consequently, this was not a case of concealment but this was a case where different estimates were made by the assessee and by the Department on the basis of the same documents. It was submitted that the discussion had taken place between the assessees representative and the Departmental officers for the estimate of the total income for the asst. yrs. 1967-68 to 1974-75 and as a result of said discussion figures of total income for those years was arrived at and accepted by all concerned. In the absence of complete and adjusted account books estimation of movable wealth was to be restored. It was further submitted that in the income-tax assessment the basis of estimation of total income was difference between the assets and liabilities. It was also submitted that on identical facts penalty under S. 271(1)(c) for asst. yr. 1975-76 had been cancelled by the CIT(A). On the facts of the case the penalty should not have been levied.
12. The submission on behalf of the Department, on the other hand, was that the difference between the assessed income and the returned income was more than 25% and that the explanation of the assessee was not satisfactory. It was pointed out that the assessee did not disclose items of wealth and mentioned only the estimated value of wealth and that in the course of assessment when the details were sought, the assessee disclosed higher value of wealth. Considering the circumstances the penalty was rightly levied.
13. We have considered the rival submissions and facts on record. It has been expressly mentioned in the appellate order for asst. yr. 1975-76 arising out of imposition of penalty under S. 271(1)(c) of the IT Act, 1961 (Page 65 of the paper book) that it had been mentioned by the ITO in his report dt. 11th Aug., 1982 that the wealth-tax assessments were completed on the basis of income assessed from year to year in the absence of other complete details. It is established that after the incomplete books and documents were seized the assessee and the Departmental officers sat together in order to ascertain the income and net wealth of the relevant years. The income for several years from asst. yrs. 1967-68 to 1974-75 was estimated at different figures mentioned in para 2 of this order, and this income was treated as agreed income. The assessments for those years were made on agreed basis. For asst. yr. 1975-76 the assessee did not agree with the estimation made by the ITO and that income assessed by the ITO for that year was subsequently reduced to some extent. As far as wealth-tax returns were concerned those returns were filed on the basis of those very incomplete account books. The estimate made by the assessee for several years was not accepted by the WTO and he estimated the wealth at higher figures. The assessee accepted those estimates and challenged only the question of allowing deduction of income-tax liabilities. The WTO had not allowed deduction of income-tax liabilities and that deduction was allowed by the appellate authority and as a result of giving effect to the appellate orders the wealth assessed got substantially reduced the WTO imposed penalty under S. 18(1)(c) of the Act for asst. yrs. 1971-72 and 1972-73 on the ground that the assessed wealth was more than the returned wealth and those penalties were cancelled by the AAC on the reasoning that the returns were made on the basis of estimation from in complete books and the assessments were also made on the basis of estimation from incomplete books and as such these were cases of mere difference of opinion regarding estimates which were made from the same sources and, hence, penalty was not leviable.
14. As far as asst. yr. 1974-75 was concerned, which is one of the two assessment years involved in these appeals, the assessee had estimated the wealth at Rs. 1,08,000 and had not given details of wealth. When details were asked for the assessee again inspected the account books and from them extracted the items of movable and immovable properties and submitted that the value of movable property was Rs. 24,930 and value of immovable property was Rs. 1,41,746 and as such the total net wealth was Rs. 1,65,976 when effect was given to the appellate order the assessed wealth has been reduced to Rs. 1,72,902. There is thus difference of only Rs. 6,926 between the assessed wealth and the details of wealth submitted by the assessee in the course of assessment proceedings. It is obvious that the assessee had estimated the wealth on the basis of incomplete account books and other documents which were in the custody of the Department. The WTO also estimated the value on the basis of those very documents. It is thus a case of difference in estimation between the assessee and the Department on the basis of the very same documents which were in possession of the Department from the date prior to the date on which the returns were filed. Committing of mistake by the assessee in estimating the wealth on the basis of documents which were in custody of the Department, could not be said to be unnatural. Concealment of wealth implies conscious hiding or conscious attempt to keep the Department ignorant in respect of certain items of wealth. In the present case such an act cannot be attributed to the assessee. As already stated, all the relevant documents on the basis of which wealth was to be estimated were in the custody of the Department. It was a matter of mere calculation from those very documents. If the assessee committed mistake in that calculation it cannot be said that the assessee had concealed the wealth. All material facts were in the knowledge of the Department because of the fact that the documents on the basis of which wealth was to be estimated, were in the custody of the Department. There was a land valued at Rs. 15,000 at Padra. The assessee thought that this land was includible from asst. yr. 1975-76 while the WTO was of the opinion that it was includible for asst. yr. 1974-75. Such a difference of opinion would not indicate the act of concealment on the part of the assessee. In the assessment order for asst. yr. 1974-75 the WTO has observed that what the assessee had done was to estimate the wealth by taking into account the income declared in the income-tax proceedings and the income of the preceding years, making deductions of house-hold and income-tax liabilities and that from the figures arrived at the value of movable properties. The WTO did not accept this method of estimating the wealth. As already stated, he was of the opinion that income-tax liabilities were not deductible but subsequently the appellate authority had held that the income-tax liabilities were deductible. He took into account the value of movable properties as on 1st April, 1973 (as determined in asst. yr. 1973-74) and added income of the year and deducted household expenses of Rs. 30,000 in order to determine the value of movable properties as on valuation date for asst. yr. 1974-75. It is thus obvious that this is a case where different methods of estimation had been applied by the assessee and by the WTO in respect of the same account books which were in the custody of the Department. It cannot, therefore, be said that the assessee had concealed the wealth and penalty under S. 18(1)(c) could not be levied. The said penalty was liable to be cancelled taking into account the fact that difference in tax on assessed wealth and on wealth disclosed in assessment is very small and it is not conceivable that assessee would have made conscious effort to save small amount of tax.
15. As for as asst. yr. 1975-76 was concerned, the assessee had disclosed the value of wealth at Rs. 1,50,000 but had not given details of wealth. This was perhaps because of the fact that account books were in the possession of the department. When asked to give details of wealth the assessee inspected the books of accounts and extracted the details from those books. According to him, the net value of immovable property after deducting the value of exempted property would be Rs. 1,59,000 and the value of movable property would be Rs. 84,645 and value of net wealth would be Rs. 2,43,646. After giving effect to the appellate order the wealth has been assessed at Rs. 3,48,538. Thus the difference in the assessed wealth and in the revised estimate filed by the assessee comes to Rs. 94,892. The reasons given for asst. yr. 1974-75 would apply for asst. yr. 1975-76. Those reasons need not be repeated. The assessee as well as the WTO have adopted methods as were applied for the other years. As far as asst. yr. 1975-76 was concerned, according to the WTO, the assessee should have taken into account the items of Rs. 11,307, Rs. 2,890 and Rs. 2,495 making in all Rs. 16,442 which represented cash balances as per cash book of Liberty Fertilizers, cash book of National Fertilizers and cash book of Commercial Traders. The WTO also observed that the assessee should have taken into account the amount of Rs. 26,760 regarding payment to G.I.D.C., whereas the assessee had taken into account the amount of Rs. 16,100. He also observed that the value of one of the properties should have been estimated higher by Rs. 1,500 than was done by the assessee. The CWT(A) has emphasized that these specified items of cash balances had not been taken into account by the assessee and, hence, there was concealment. As already stated all account books were in the custody of the Department and estimate was required to be made from those account books. If the assessee adopted one particular method in estimating net wealth and the WTO adopted another method in estimating the net wealth and the sources from which estimate was required to be made both by the assessee as well as by the WTO was the same, viz., the incomplete books and rough books, it could not be said that the assessee had concealed particulars of wealth solely because the estimate made by the assessee is lower than the estimate made by the WTO. It would bear repetition to state that all materials facts were known to the Department from the date prior to the date of filing of returns and the wealth was to be ascertained from the account books which were in the custody of the Department. In these circumstances, it could not be said that there was an act of concealment on the part of the assessee which would attract penal provisions under S. 18(1)(c) of the Act. The explanation given by the assessee was satisfactory and as such no penalty ought to have been levied. We, accordingly, cancel the penalties imposed by the WTO for both the years.
16. The appeals are allowed.