ORDER
CH. G. KRISHNAMURTHY, PRESIDENT :
In this appeal filed against the order of the CIT(A), New Delhi, the justification of the levy of penalty of Rs. 5,23,655 under S. 271(1)(c) of the IT Act, for the asst. yr. 1973-74 was questioned.
2. The assessed is a registered firm carrying on the business of manufacture of automobile leaf-springs and supplying them to various State Road Transport Corporations and defense Ministry. The firm was in existence from the asst. yr. 1952-53 till the asst. yr. 1981-82 when it was said the business of the firm was taken over by a company bearing the same name.
3. There was a search and seizure operation carried out by the IT Department at the business premises of the firm, i.e., factory at Faridabad, Head Office at Kashmere Gate and also at the residences of all the partners (eleven partners) some of the sales representatives, Depot Managers and even some of the employees of the firm at various places of the country on 6th April, 1976. One fact that needs to be noted here is that in November, 1975, an IAC at Bombay called for the account books of the assessed relating to the asst. yrs. 1973-74 to 1976-77 for verification of certain transactions with Steel Marketing Co. of India, Bombay and those books after doing away with the examination, on their return journey to Delhi, were lost in transit. Thus, the books of accounts were not available even during the search and the assessments were made on the basis of the material available in the search drawing inferences from the data available.
4. For the assessment year under appeal, the assessed returned an income of Rs. 4,58,737 and the same was assessed on a figure of Rs. 28,11,737 under S. 144 of the IT Act but this assessment was reopened and again a fresh assessment was made under S. 144 on a total income of Rs. 41,31,080 on 28th March, 1979. This assessment also was set aside and another assessment was made and in that assessment two major additions were made by the IAC (Asst.) one in respect of the sum of Rs. 5,23,655 on account of suppressed sales and another addition of Rs. 1,05,230 on account of value of scrap.
5. On appeal, the CIT(A) reduced the addition of Rs. 5,23,655 to Rs. 3,41,397 on account of suppressed sales but on further appeal by the Department to the Tribunal, the Tribunal restored the addition made by the ITO holding that the CIT(A) was not justified in reducing the addition. We are not in this appeal concerned with the other addition made on account of the value of scrap but suffice it to say that it was this addition of Rs. 5,23,655 that was regarded as income concealed and in respect of which the present penalty in dispute was levied which was confirmed by the CIT(A).
6. Some of the defects pointed out which are quite material as a result of the search were :
(a) Goods supplied were in excess of the goods shown in the delivery challans and also bills.
(b) Sales made without properly accounting for them in the books.
(c) Sound goods were shown to have been sold as rejected goods and the sale proceeds of rejected goods only were accounted for in the books.
(d) The rejected material per ton was only 1,468 as against 4,281 shown in the regular books.
Goods were shown to have been transferred to the Depots showing lesser quantity in the delivery challans than the actual quantity sent and the difference was sold in the market in the guise of rejected material on very low prices. On the basis of the seized material, the Assessing Officer worked out the suppressed sales at Rs. 5,23,655 as under :
Opening Stocks :
823 Tons
Purchases :
5,097
5,920
Less : Closing stock
785
5,135
Less : Sale of raw material
47
5,088
Less : Wastage 5%
254
4,834
State Transport
30,53,433 – 2,726 1,120
defense :
31,22,897 – 3,929 795
1,915
2,919
Available for market sale :
Market sale :
2,919 x 3,506
10,234,014
Less : Sale accounted in the books :
81,35,833
20,98,181
Less : Sales accepted as having been made out of the books but brought into the books through the account called “Advance of supply account”
15,46,966
5,51,215
Deduct : Target commission at an estimated rate of 5%
27,560
Balance :
5,23,655
As we have mentioned earlier it was on account of this addition made on account of suppressed sales, that the penalty of equal amount was imposed. In reply to the show cause notice issued by the ITO requiring the assessed to show cause as to why a penalty for concealment of income should not be imposed, the assessed furnished the following reasons for the consideration of the ITO :
(i) The returned income was supported by duly audited statement of accounts, meaning thereby that there could be no concealment of income.
(ii) That the complete stock tally right from the stage of the opening stock to the closing stock was filed with the Department which was not questioned in any year and was accepted in toto, meaning thereby that when the stock particulars tallied, there could not be any suppression of sales as alleged by the Department.
(iii) up to asst. yr. 1972-73 and thereafter from the asst. yr. 1978-79 onwards, the book results were accepted, meaning thereby that the modus operandi and the method of maintenance of accounts remained the same. The question of suppression of sales singling out this particular assessment year could not be justifiably drawn.
(iv) That while giving comparative position of gross profit from year to year, there was no discrepancy nor any violent fluctuations so as to infer that there was suppression of sales. Therefore, there was no reason to make any addition on account of suppression of sales which would grossly distort the accepted position of the gross profit. Rejecting these contentions as having no bearing on the subject and relying on the order of the Tribunal passed for the very same assessment year whereby the addition made by the ITO at Rs. 5,23,655 as suppressed sales was restored and holding that when a highest fact finding body found that there was suppression of sales to the extent of the addition made by the ITO, the assessed must be considered as having concealed its income and, therefore, liable for penalty under S. 271(1)(c) of the IT Act, 1961. Thus, he imposed a penalty of Rs. 5,23,655 which is the minimum prescribed under the Act.
7. On appeal, more or less the same contentions were repeated and in addition reliance was placed upon the orders passed for the subsequent years 1974-75, 1976-77 and 1977-78 where under identical circumstances, additions were not made or were made at a low rate and in any case, no penalty was imposed to show that no penalty should be imposed for this year also, notwithstanding the fact that addition was sustained by the Tribunal. It was also submitted that the penalty levied was arbitrary. It was also pointed out that in the asst. yr. 1975-76, when on similar facts and circumstances, a penalty of Rs. 25 lakhs was imposed but was deleted by the CIT(A) vide his order dt. 18th July, 1983 and that order was confirmed by the Tribunal in ITA No. 4262/83 dt. 31st March, 1986, no penalty could be imposed for this year holding the assessed to be guilty of concealment of income on exactly similar facts. These are in main the submissions made before the CIT(A) on behalf of the assessed against the imposition of penalty. The CIT(A), however, held that the assesseds case was not so simple as was made out. When an addition of Rs. 5,23,655 was supported by the Tribunal, the highest fact finding body as suppressed sales and when the assessed in the statements submitted before the Department admitted the unaccounted for sales according to his calculations at Rs. 2,51,962 and only when that amount was increased to Rs. 5,23,655, it could not be said that the assessed was not guilty of concealment of income.
8. In addition, the CIT(A) held relying upon the order of the Tribunal that not only the assessed had concealed the sales but also claimed bogus and fictitious deductions on account of target commission, discount and representative commissions which the Tribunal declined to allow for want of proof. The CIT(A) held that the claim for the deduction of these commissions was deliberately made with a view to reduce the income and, therefore, it was a clear case of furnishing of inaccurate particulars of income, apart from concealment of income.
9. At this stage an argument was addressed before the CIT(A) that in any case since the additions were made on estimate basis, no penalty should be levied. But the Commissioner repelled this argument by pointing out that the addition made and sustained by the Tribunal was by no means an addition made on the basis of estimate but by working out the suppressed sales in a methodical and scientific manner. Besides there was also an admission on the part of the assessed that he had unaccounted for sales, though that amount varied with the amount estimated by the Department. That apart there was a finding of the Tribunal that the assessed had claimed expenditure which were not incurred by him and, therefore, fictitious. Thus, the concealment of income and furnishing of inaccurate particulars was proved beyond doubt and the penalty was leviable.
10. Against this order, the assessed has come in appeal contending that the levy of penalty for concealment of income or for furnishing of inaccurate particulars was wholly unjust and unwarranted. The learned Chartered Accountant Shri Relan appearing for the assessed before us laid emphasis mostly on three points. One was the addition made and sustained in the assessment proceedings was purely on estimate basis and suspicion, unaided by the account books which were lost. Account books being the primary evidence in support of the income earned by the assessed and such primary evidence not being available, any assessment made could only be termed as “an assessment made on estimate basis”. To arrive at the income different methods might have been adopted. Some of the methods adopted may be more scientific than some other methods. It is not so much the accuracy or the perfection of the method adopted to arrive at the addition to be made in the assessment as much as whether it was based upon estimate when and where there was a possibility to draw two different opinions. In such a case, it was held unanimously by several Courts in India that penalty for concealment of income treating the addition so made as concealment of income was not leviable. He submitted that the assessed had ever accepted that there was concealment of income or suppressed sales. When the Department wanted the assessed to file a statement in a particular method, the assessed only complied with such request, introducing in it the deductions claimed on account of various commissions paid. That is not to say that the assessed had admitted that there was suppressed sales or made fictitious claims towards expenses.
11. Secondly, he submitted that on identical facts in subsequent years right up to the asst. yr. 1978-79, the additions on account of suppressed sales were either deleted or made at a low rate. The penalty imposed for the asst. yr. 1976-77 of as high as Rs. 25 lacs was deleted by the CIT(A) and the deletion was approved by the Tribunal. Thirdly, in all the previous years right from the asst. yr. 1952-53 that is for over 20 years, the assessed had an accepted history. In a bid to explain the discrepancies pointed out by the Department with reference to the delivery challans, packing slips and invoices found in the search, the learned Chartered Accountant submitted that the weight given in the delivery challan was different from the weight mentioned in the goods receipts register maintained in the transport company. From this no inference can be drawn that the assessed had been manipulating its stock unless the weights are found to be irreconcilable. Now that the weights were reconciled and a full quantity tally was furnished, no adverse inference on the basis of this discrepancy could be drawn against the assessed. There were no cash sales at all nor were there any sales in Delhi State. All the sales were made through the banks, through railway receipts, etc., by proper documentation. There was no such thing as proof of any bank or railway receipts so as to give rise to a suppressed sale. There was an item of Rs. 15,46,966 in the advance supplies account which amount was regarded as suppressed sales. This amount represented the advance moneys received from the dealers and drafts through sales representatives. At the end of the year all such amount credited to this account was transferred to the trading account, to the debit of the purchases account. In other words, purchases to this extent were reduced which meant income to that extent was increased. Thus when the sum of Rs. 15,46,966 was a transfer to the trading account which had the effect of increasing the income, how can this amount be regarded as suppressed sales, he asked.
12. As regards the rejected goods taken as sound goods by the Department, the learned Chartered Accountant pointed out that out of 150 bills, there are only 11 bills relating to Indore and Jaipur which showed some discrepancy whereas there was no discrepancy in respect of other bills. Therefore, when there was no discrepancy in the other bills at all, it cannot be generalised that sound goods were shown as rejected goods at low rates. There was no independent enquiry made to ascertain from the dealers or from the buyers of these goods as to whether they purchased the sound goods or rejected goods. If the purchaser had admitted that he had purchased sound goods but the bills showed as rejected goods and that he had paid to the assessed over and above the amount shown in the bill towards rejected goods, only then an inference can be drawn against the assessed that sound goods were sold as rejected goods. There was no such evidence brought on record by the Department. It is only their supposition. Therefore, merely on the basis of the discrepancies found in few, out of a large number of bills regarding weights, no inference can be drawn that the assessed manipulated its sales by showing sound goods as rejected goods. In any case, this must be seen in the light of the reconciliation of the quantity particulars. When the quantity particulars were reconciled and there was a full tally of the quantity particulars then the question of sound goods being sold as rejected goods would not arise. If sound goods were sold as rejected goods, the shortage shown would have been higher. Since the shortage shown was normal, no presumption that sound goods were sold as rejected goods could be drawn against the assessed. Although on a more clear analysis, this contention cannot establish the assesseds case because when quantity particulars were being reconciled only the weight is taken and no consideration is taken of its money value whether the goods were sold as sound goods or rejected goods. Both in respect of sound goods and rejected goods, the weight will be same. Rejection may be on account of some deficiency in manufacture. By making a special reference to the method as to how the unaccounted for sales were accounted for by the assessed and by filing a statement at page 93 in the paper book, it was submitted that from the total quantity of the goods available, the goods sold to State Transport Corporations and defense Departments was deducted and the balance was taken as quantity of the goods available for sale in the market. Here the rub comes according to the learned Chartered Accountant. This quantity of the goods available for sale in the market was deemed to have been sold at the average selling rate of Rs. 3,506 per ton and thus the turnover of Rs. 1,02,34,014 was arrived at. From the turnover thus arrived at, the turnover shown as per books was deducted and the balance was regarded as unaccounted for sales. The assessed had no option except to work out the unaccounted for sales on the method directed by the Department. Though it is defective and speculative in the sense that the turnover was arrived at as if the entire stock available for sale in the market was sold at the same rate of Rs. 3,506 per tone. It is this area where the estimate had taken place and the estimate of suppressed sales arrived at on the basis of the estimated sales could not be treated as difference in the unaccounted for sales. It was from this unaccounted for sales of Rs. 20,98,181 that the assessed sought to deduct Target Commission, cash discount and representative commissions amounting in all to Rs. 2,99,253 against which according to the estimate adopted by the Tribunal, a sum of Rs. 27,000 only was allowed. Here again, there was a difference in approach. That the commission was payable was not in dispute except that there was dispute about the quantum. Merely because there was a variation in the quantum due to the difference in estimates and suppositions, it cannot be said that the entire claim made by the assessed was fictitious claim. It was substituting one estimate in place of another.
13. Now from this Rs. 20,98,181, the advance supplies account referred to earlier namely, Rs. 15,46,966 was deducted which means that that amount was taken as accounted for. Therefore, the estimate of suppressed sales arrived was liable to vary depending upon the view one would adopt to arrive at the estimate and merely because the addition was sustained by the Tribunal, it cannot conclusively be held that the amount represented concealed income of the assessed. That is how the argument of the learned Chartered Accountant proceeded.
14. The learned Departmental Representative countered these arguments relying wholly on the order of the Tribunal, the CIT(A) and the ITO on the penalty order and in particular, he placed reliance upon the following decisions of the High Court in support of the view that in a case where estimates were made, penalties were imposable :
CIT vs. Warasat Hussain (1988) 171 ITR 405 (Pat), CIT vs. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC).
Relying upon the Delhi High Court decision in the case of Durga Timber Works vs. CIT (1971) 79 ITR 63 (Del), the learned Departmental Representative submitted that this is a case where the assessed admitted concealment of income and, therefore, penalty was leviable and it is no more open to the assessed to argue that the Department must still establish concealment of income.
15. We have recorded the arguments addressed to us in sufficient detail, and we have perused the concerned orders, particularly the order of the Tribunal for the year 1973-74 whereby the addition of Rs. 5,23,655 was restored. We have also gone through the penalty order, the orders of the Tribunal for subsequent years and also the order of the Tribunal for the asst. yr. 1976-77 whereby the penalty of Rs. 25 lacs was cancelled. In our opinion, this case does not seem to be a case where the assessed can rightly be punished with the guilt of concealment of income or furnishing of inaccurate particulars. It is to be remembered that the return was filed on the basis of the audited accounts and the books of accounts were not available to produce in support of the return filed. Unless the books of accounts maintained by the assessed which was the evidence in support of the return filed by the assessed, are available, it may difficult to record a finding that the assessed had concealed income or furnished inaccurate particulars of income. It is no doubt true that S. 271(1)(c) does not make any distinction between an assessed who maintained books of accounts and concealed income and an assessed who had not maintained any accounts and concealed income. Such a discrimination is not discernible from the language of S. 271(1)(c). Sec. 271(1)(c) says that if the assessed had concealed the particulars of his income or furnished inaccurate particulars of its income and if the Assessing Officer finds the concealment of income or furnishing of inaccurate particulars of income during the course of any proceedings, then a penalty is leviable, subject to the conditions laid down subsequently. The prime evidence should, therefore, be the assessed must have concealed the particulars of its income or furnished inaccurate particulars of its income. The particulars of income can be concealed either in the return filed or it can be in the books of accounts itself. The books of account may show one income and a different income can be returned for the purpose of assessment, thereby concealing the particulars of income, or the books of account might show fictitious claim to reduce the income. Examples of this nature can be multiplied to show that it is not necessary for concealment of income to exist always in the books of accounts maintained by the assessed but concealment of income can take place even where returns were filed arriving at the income on estimate basis. But a situation be totally different if the assessed maintains books of accounts and those books of accounts were audited and on the basis of those audited accounts, a return of income was filed. Then the books of accounts become relevant to find out whether the assessed has concealed the particulars of his income or furnishing inaccurate particulars of such income. Such evidence is not available in this case. It is not the case of the Department that the assessed had not lost the account books. Enough evidence was filed and was brought on record to show that account books were lost. Assessments made under S. 144 were revoked under S. 146. This would show that the claim of the assessed that books of accounts were lost and, therefore, not available was genuine.
16. Now the question is, when the books of accounts were not available in support of the return of income filed, can an inference of concealment of income be drawn on the basis of the inferences drawn from the subsidiary records found in the search. It may be that every discrepancy found in the subsidiary records will have a proper explanation in the books of accounts maintained by the assessed. Since the account books were the referable point and in the absence of those account books merely because certain discrepancies were found in subsidiary records, are we justified in assuming that these discrepancies were also available in the account books and were unexplainable so as to suggest that the books of accounts also contained particulars of concealment of income. This inference cannot perhaps be drawn while dealing with the levy of penalty for concealment of income which are quasi criminal proceedings. That apart the assessed had offered explanation for these discrepancies and reconciled the quantity particulars. Reconciliation of the quantity particulars is a major step to show that quantity-wise the opening stock and purchases were fully accounted for in the sales and closing stock. This also shows that there could not be any leakage or suppression of sales or unaccounted for stocks remaining outside the accounts. This also goes a long way to show the reliability and authenticity of the accounts maintained. More than half the battle is won when quantity particulars are reconciled.
17. Now the question is whether the turnover shows is real or manipulated or suppressed. Now for this purpose, we have got to go to the method by which the suppressed turnover was arrived at. We have already given above as to how the stocks available for sale in the market were arrived at. Assuming that the quantity of the stock available for sale in the market was accurately arrived at if not correctly, a question would then be whether the sale value of such stock was correctly arrived at. The average sale value was adopted for the purpose of finding out the sale value of these 2,919 tons said to have been sold in the market. This is an assumption for which we did not find any reliable data either in the order of the ITO or in the order of the CIT(A) or in the order of the Tribunal. All these authorities have proceeded on the basis that, that was the only method to arrive at the sale value of 2,919 tons sold in the market. That may be an excellent method to arrive at the addition to be made for the purpose of assessment. There cannot be any quarrel about that aspect. But does that mean that it represents the real turnover that the assessed had achieved but not shown in the books. Here there must be some more evidence to show that this was the real fact. Here an assumption was made that that turnover so arrived at was the real turnover and the turnover as shown by the books was not the real turnover. This assumption as we have pointed out above may be a good assumption for the purpose of assessment but may not be good assumption for the purpose of bringing home to the assessed the guilt of concealment of income.
18. Now from the different of 20,98,181 between the turnover arrived at on estimate basis and the turnover shown by the books, the credit of Rs. 15,46,966 shown as advance of supplies account was deducted and only the balance was taken as the suppressed turnover. In other words, the credit in the advance supply account of Rs. 15,46,966 was not regarded as suppressed turnover and was regarded as part of the turnover booked in the accounts. Therefore, the explanation of the assessed that the method of accounting employed by it was such that it was credit to the advance supply account, the advances received from suppliers, was correct. When that was so, an inference that the assessed was adopting a method by introducing the account of advance supply account to the suppressed turnover, cannot be a valid and correct assumption. This assumption appear to us to have influenced the mind of the authorities below in arriving at a conclusion that the assessed was indulging in suppression of turnover.
19. Thirdly, about the question of deductions claimed on account of commissions, again when we go to the orders of the CIT(A) and the Tribunal, we find that it was based upon assumptions that there would not be any possibility for the payment of commission. The claims were disallowed, particularly the Tribunal observed that the credit of Rs. 15,46,966 to the advance supply account must be net of commission. There was no evidence to arrive at this conclusion. Moreover when the credit in the advance supply account was regarded as advances received from the suppliers, how can that amount be taken as net of sales, net of commission. This, therefore, is a wrong premises, though may be valid for the purpose of assessment but not valid for the purpose of arriving at a finding that the assessed was guilty of concealment of income by claiming fictitious expenditure. The authorities below did not show that no commission was at all payable. Some commission was allowed. The allowance of commission was also made in the past and also in the subsequent years. Therefore, the claim made for the allowances of commissions cannot be said to be fictitious with reference to the past and future conduct of the assessed and the Department.
20. Further no incriminating material found in the course of search was brought to our notice so as to conclude that the assessed had concealed the particulars of its income or furnishing inaccurate particulars of income. Therefore, the argument of the assesseds counsel that the assessment was made on estimate basis may have to be accepted for the purpose of penalty proceedings. As we have pointed out above the suppressed turnover was arrived at on estimate basis making the assumption in one way or the other without any supporting material there for and also for the deductions claimed on account of commissions. What is good for making additions in the assessment are not always good for levying penalty for concealment of income although the assessments made to provide a sufficient evidence and a guidance to conclude that there could be concealment of income also. This is laid down in a series of decisions including the Supreme Court in the case of CIT vs. Mussadilal Ram Bharose (supra). In this case the facts are :
“For the asst. yr. 1965-66, the income returned by the respondent, a licensed vendor of country liquor, was rejected by the ITO on the ground that the sales and expenses were not verifiable and the margin of profit shown was low. The ITO accordingly estimated the sales and applied a net profit rate of 8% and arrived at a total income of Rs. 60,936 against the returned income of Rs. 30,138. The Tribunal, on appeal, reduced the total income of Rs. 40,600 in the light of the license fee paid by the respondent and the lower rate of profit in the cases of other liquor contractors. Penalty proceedings were initiated against the respondent under S. 271(1)(c) of the IT Act, 1961, and the IAC levied a penalty of Rs. 8,300. The Tribunal, however, cancelled the penalty holding that the respondent had maintained certain types of books of account and honestly believed them to be sufficient for the true ascertainment of its profits and that it could not be said that in filing the return of income as reflected in the books of account, the respondent was grossly or willfully negligent, much less fraudulent. The Tribunal and the High Court rejected the Departments applications for a reference. On appeal to the Supreme Court :
“Held accordingly, dismissing the appeal, that the Tribunal and the High Court had rightly rejected the Departments applications for a reference. The Tribunals conclusion on relevant and sufficient material that the respondent had discharged its onus to prove that the difference was not owing to gross or willful neglect or fraud, was a conclusion of fact and no question of law arose. The Tribunal had borne in mind the relevant principles of law and had also judged the fact on record. This was not a case where there was no evidence nor a case where no reasonable person could have accepted the explanation of the respondent.”
The Supreme Court held in this case that :
“Where the total income returned by the assessed is less than 80% of the total income as assessed, the Expln. to S. 271(1)(c) of the IT Act, 1961, shifts the burden to the assessed to show that the difference was not owing to fraud or gross or willful neglect on his part. This onus is rebuttable. If, in an appropriate case, the Tribunal or the fact finding body is satisfied on relevant and cogent material on record and draws an inference thereupon that the assessed was not guilty of gross of willful neglect or fraud, then, in such a case, the assessed cannot come within the mischief of the section and suffer penalty. The conclusion of the Tribunal is a conclusion of fact and no question of law arises.”
In this case, the Tribunal held that : “the income assessed arose mainly on account of estimate of profit in view of the various defects in the account books and the application of a higher net profit rate on the estimated turnover.”
It was this penalty that was cancelled by the Tribunal saying that the assessed had maintained certain types of books of account and honestly believed the same to be sufficient for the true ascertainment of the profits. It could be considered as making an estimate of income on a proper basis and it could not be said that in filing the return of income as reflected in the books of accounts, the assessed was grossly or willfully negligent, much less fraudulent. These observations of the Tribunal were upheld by the Supreme Court when the Hon able Supreme Court pointed out on pages 22 and 23 as under :
“If the returned income is less than 80% of the assessed income, the presumption is raised against the assessed that the assessed is guilty of fraud or gross or willful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent. Is for the fact finding body to judge the relevancy and sufficiency of the materials. If such a fact finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessed had discharged the onus, it becomes a conclusion of fact. No question of law arises. In this case, the Tribunal has borne in mind the relevant principles of law and has also judged the facts on record. It is not a case that there was no evidence or there was such evidence on which no reasonable man could have accepted the explanation of the assessed.”
This decision is an authority for the proposition that penalty under S. 271(1)(c) cannot be imposed merely when estimate of income was made unless something more concrete was there to show that the assessed was guilty of concealment of particulars of income or furnishing inaccurate particulars thereof.
21. This penalty is related to the asst. yr. 1973-74. We have to, therefore, go by the law as it stood before the present Expln. 1 was substituted by the Taxation Laws (Amendment) Act, 1975 w.e.f. 1st April, 1976. The original Explanation which is attracted in this case was the Explanation inserted by the Finance Act, 1964, w.e.f. 1st April, 1965 and under that Explanation, the burden of disproving the presumption of concealment was thrown on the taxpayer. It is in this context the decision of the Supreme Court becomes relevant, as it interpreted the law as obtaining in the year relevant to the year under appeal. We have not found any fraud or gross or willful neglect on the part of the assessed except difference of opinions in arriving at the estimate of income.
22. We have now tried to analyze the basis for the addition and how it was based on pure estimates and not on realities. The estimates are supposed to be taken as realities by the Explanation added w.e.f. 1st April, 1976. Even then there should be no explanation offered by the assessed of the explanation offered must be found to be false. Here is a case where there was an explanation offered for each one of the discrepancies found by the searching party in the subsidiary records but the explanation offered was not found to be false except that different interpretations were drawn to justify the addition made in the assessment. Having regard to the facts of this case, it is even possible to say that there is no suppression of turnover at all had there been books of accounts. Now having regard to this background we can very well appreciate how the facts that in subsequent years, the additions on account of suppressed sales were arrived at very low figures or were not made at all, become relevant, to conclude that there could be no suppressed sales.
Therefore, there is substance is the second argument advanced by the learned Chartered Accountant.
23. Now when we turn to the penalty order passed by the ITO, we find that other than relying upon the order passed by the Tribunal for this assessment year restoring the addition to Rs. 5,23,655, there was practically no other reason given by him in support of the levy of penalty. The points made by the assessed before the IAC as to how there was no concealment of income were not at all dealt with by him. There the assessed pointed out that the returned income was supported by audited statement of accounts, complete stock tally was available and the books of accounts were accepted in all the earlier years and also in subsequent years, and the rate of gross profit shown this year compared favorably with the rates of gross profit shown and accepted both in the earlier years and subsequent years. There was no discussion about these points in his order. We have now shown above how these point are relevant in coming to the conclusion whether there was concealment of income or not. We reiterate that the finding recorded by the Tribunal is a very relevant and may act as good evidence but not as conclusive evidence for the purpose of levy of penalty under S. 271(1)(c). Penalty proceedings being separate proceedings and quasi criminal in nature, the assessed is entitled to plead that even though the addition was made in assessment proceedings, that addition should not be taken as conclusive evidence for concealment of income. It is this aspect that we have considered and on a consideration of that aspect, we are of the opinion that the assessed cannot be said to be guilty of concealment of income or furnishing of inaccurate particulars on the facts of this case.
24. Now even the order of the CIT(A) is also an order which placed reliance upon the order of the Tribunal restoring the addition of Rs. 5,23,655. For the same reasons as given by us above, we hold that the mere fact that the addition was confirmed by the Tribunal, cannot be taken as conclusive evidence of concealment of income. To reiterate the order of the Tribunal confirming the addition is only good evidence and very relevant evidence but not conclusive evidence. Those facts can be reappraised and even additional evidence can be taken in penalty proceedings to come to a conclusion whether the assessed had concealed the particulars of income or furnishing inaccurate particulars of income. This is now a settled law of the land. On a consideration of the above, we are of the opinion that concealment of income in this case is not proved and the addition confirmed by the Tribunal is good only for assessment purposes and is not good for drawing a conclusion that it represented the concealed income of the assessed, particularly when adverse inferences were drawn on the basis of discrepancies found in the subsidiary records ignoring the explanations offered by the assessed and that too without the aid of the books of accounts maintained by the assessed. We, therefore, allow the appeal.