JUDGMENT
Satish Kumar Mittal, J.
1. This order shall dispose of IT Appeal Nos. 470 and 472 of 2007, filed by the Revenue under Section 260A of the IT Act, 1961 (hereinafter referred to as ‘the Act’), which are arising from the common order dt. 19th March, 2007, passed by the Income-tax Appellate Tribunal, Chandigarh, Bench ‘B’, Chandigarh (hereinafter referred to as ‘the Tribunal’), passed in ITA Nos. 234 and 235/Chd/2006, in case of the assessee for the asst. yrs. 1992-93 and 1993-94, respectively. In both these appeals, the following substantial question of law has been raised for consideration of this Court:
Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty imposed under Section 271(1)(c) of the IT Act ignoring its own finding of the fact that the assessee had concealed its income by not recording certain sales which were evident from the invoices and G.Rs found and seized?
2. In both these appeals, common issue is involved which revolves around the penalty levied by the AO under Section 271(1)(c) of the Act, which has been confirmed by the Commissioner of Income-tax (Appeals) [hereinafter referred to as ‘the CIT(A)’]. The facts are being taken from IT Appeal No. 470 of 2007.
3. For the asst. yr. 1992-93, the assessee filed return of income on 30th Dec, 1992 showing income of Rs. 65,18,970. The return was duly verified by one of the directors of the company and was accompanied by copies of P&L a/c, trading account and balance sheet and other annexures duly audited by a chartered accountant. During the assessment proceedings, the AO came to know that the Central Enforcement Wing of Excise & Taxation Department carried out inspection of the business premises of the assessee on 23rd Jan., 1993 and seized certain documents. On scrutiny of those documents, the AO noticed that in one invoice book containing five sale vouchers, original copies of four bills were found torn and the duplicate and triplicate copies were available. By taking into consideration the said material and the statement of the director of the company, the AO arrived at a conclusion that the books of account of the assessee were not reliable and did not reflect its true income. Accordingly, the AO rejected the accounts of the assessee and concluded that the assessee had made unaccounted sales. While completing the assessment, the AO, in order to arrive at the quantum of such unaccounted sales, extrapolated the average sale price in 4 invoices to 53 invoices and proceeded to make an addition of Rs. 66,16,865. The said order passed by the AO was challenged by the assessee in appeal before the CIT(A), who endorsed the conclusion that the assessee had made unaccounted sales and was indulging in sales outside the books of account. The CIT(A), therefore, proceeded to apply yield of 93.13 per cent shown by the assessee in the immediately preceding year as against the yield of 92.57 per cent shown by assessee for the year under consideration. Accordingly, the addition of Rs. 15,50,000 was made. The assessee challenged the said order passed by the CIT(A) before the Tribunal, who vide its order dt. 11th July, 2003 upheld the order of the CIT(A) and the addition sustained by the CIT(A) was confirmed.
4. Subsequently, the AO on the basis of the addition having been confirmed, issued notice under Section 271(l)(c) of the Act for imposing penalty for concealing of income in respect of additions made on account of unaccounted sales. The AO, while rejecting the contentions of the assessee that the penalty proceedings are distinct and separate from assessment proceedings, therefore, the conclusion of the findings in assessment proceedings were not conclusive for penalty proceedings; that there was no evidence of any goods having moved from assessee’s premises; no discrepancy had been found in the books of account; the fact that there was no finding that the invoices seized by the sales-tax authorities were made by the management; and that the income in respect of alleged sales had been earned by the assessee and there was no evidence of any actual funds being received by the assessee in respect of those sales, came to the conclusion that the assessee had unaccounted sales amounting to Rs. 15,50,306 and on this income, the assessee evaded a tax of Rs. 7,84,170. Accordingly, the penalty equivalent to the tax evaded was levied. The assessee filed an appeal against the said order before the CIT(A), which was dismissed.
5. Feeling aggrieved against the said order, the assessee filed an appeal before the Tribunal, which was allowed and the penalty levied by the AO and confirmed by the CIT(A) was deleted, while observing as under:
In the present case, it is not in dispute that the addition had been made by the AO by estimating the sales outside the books of account. Learned CIT(A) estimated the yield and worked out the additional production, on this estimated additional production, he applied average sale rate and worked out the additional sale at Rs. 15,50,306 which was rounded off to Rs. 15,50,000 and added to the income of the assessee. The Tribunal also estimated the yield on the basis of preceding year and the addition made by the learned CIT(A) had been sustained. It is true that the assessment proceedings and penalty proceedings are two different and distinct proceedings. It is also well settled that the addition made in assessment proceedings can be material but not a conclusive and concrete evidence that the assessee, in fact, had concealed the particulars of income or furnished inaccurate particulars of income to the extent of the addition made. In the present case, the addition had not been made on the basis of alleged sales outside the books of account but the addition had been sustained by estimating the yield on the basis of yield of preceding year. It is true that the yield in a particular year depends upon many factors like quality of raw material, weather condition, condition of machinery, skill of workers and proper management etc. So, it is very rare when the yields for-two different years remain identical.
9.1 As regards to the issue relating to making the addition is concerned, no one will disagree that the fair and reasonable estimate can be made when the books are not showing true picture. However, for levying the penalty, there should be conclusive evidence that the assessee had concealed the particulars of income or furnished inaccurate particulars of income. In the present case the AO made the addition by estimating the sales outside the books of account, the estimate was made only on the basis that in one “invoice book” original copies of the invoices in respect of four invoices were not available. However, no evidence was brought on record that the assessee vide those invoices made the sales outside the books of account. It was also not brought on record that if any sale was outside the books of account to whom that sale was made. It is true that the circumstances were such that some sales might have been made outside the books of account, however, there was no conclusive evidence that the sales estimated by the AO to the extent of Rs. 66,16,865 were made outside the books of account and to that extent the assessee earned income outside the books of account. For that reason, the learned CIT(A) estimated the addition to the extent of Rs. 15,50,000, the Tribunal confirmed the addition by taking into consideration the yield of preceding year vis-a-vis the yield of the year under consideration. So, it cannot be held that there was conclusive evidence that the assessee, in fact, concealed the income to the extent of the addition sustained by the Tribunal.
6. We have heard counsel for the appellant and have gone through the impugned order.
The order passed by the Tribunal is based upon two decisions of this Court in CIT v. Ravail Singh & Co. (2002) and Harigopal Singh v. CIT both these decisions, this Court has held that in order to attract Clause (c) of Section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or furnishing of inaccurate particulars of such income. The provisions of Section 271(1)(c) of the Act are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. It was held that when the addition had been made on the basis of estimate and not on account of any concrete evidence of concealment, then the penalty was not leviable. The similar view was also taken by this Court in CIT v. Dhillon Rice Mills , where the addition was made by the AO by estimating the yield of super phak as well as of chhilka and also the price of chhilka, that addition was reduced by the CIT(A). However, the penalty levied by the AO was deleted by the CIT(A).
7. The order of CIT(A) was confirmed by the Tribunal and the appeal filed by the Revenue against the said order of the Tribunal was dismissed by this Court, on the ground that the AO had made the additions on the basis of estimate of the yield of phak and chhilka and an estimate of the price and that the estimate would not ipso facto lead to penalty.
8. In view of the aforesaid factual and legal position, we are of the opinion that no substantial question of law is arising from the order passed by the Tribunal. Dismissed.