ORDER
H.L. Karwa, J.M.
1. This is an appeal by the assessee and is directed against the order of the CIT(A), Jalandhar, dt. 27th April, 1994, for the asst. yr. 1987-88. The grounds taken by the assessee in this appeal, read as under:
“1. The order of the learned CIT(A), confirming the penalty imposed under s, 271(1)(c) is against law and facts of the case.
2. That the CTT(A) has failed to appreciate the fact that there is no concealment and the additions made are purely based on estimates and more so the explanation given by the assessee throughout the assessment stage has not even been discussed by the. learned CIT(A) and thus the penalty has wrongly been confirmed by him.
3. That even otherwise the assessee duly substantiated the explanation it gave in respect of receipts and thus the Explanation to Section 271(1)(c) has also wrongly been applied.”
2. Briefly stated, the facts of the case are that the assessee-doctor is a child specialist. The IT Department conducted a search under Section 132 of the IT Act, 1961, at the business and residential premises of the assessee on 26th Sept., 1986, during the course of which certain history-sheets of the patients and indoor registers were found and seized. It was found that the assessee had shown the professional receipts in the indoor register at Rs. 1,30,850 whereas these have been enhanced to Rs. 1,80,000 after physical checking of the history sheets. However, during the course of assessment proceedings under Section 143(3), the AO found that the total receipts were to the tune of Rs. 2,21,335. According to the AO the total receipts shown in the register were at all Rs. 1,30,850. He, further pointed out that the receipts worth Rs. 90,485 were not accounted for in the register. It seems that after allowing an opportunity of being heard to the assessee, the AO estimated the professional receipts at Rs. 1,95,000. Similarly, the AO has estimated the amount recorded on history sheets as Rs. 24,425 against the amount of Rs. 11,350 shown by the assessee. Thus, the AO has estimated the total receipts at Rs. 2,12,000 (Rs. 1,95,000 + Rs. 17,000) against which the assessee has shown receipts at Rs. 1,80,000 in the return of income. Thus there was a difference of Rs. 32,000, which amount was added to the total income of the assessee.
3. In further appeal, the learned CIT(A) confirmed the addition.
4. The assessee preferred an appeal against the order of the CIT(A) before the Tribunal and the Tribunal vide its order dt. 25th April, 1996, in ITA No. 1117(Asr)/1990 reduced the addition to Rs. 25,000. On the basis of addition of Rs. 32,000 made on account of suppressed indoor professional receipts in the assessment of the assessee, the AO initiated the penalty proceedings under Section 271(1)(c) against the assessee. The AO took the view that the assessee had furnished inaccurate particulars of his taxable income. A notice under Section 274 r/w Section 271(1)(c) was issued to the assessee. In response to the said notice, it was stated by the assessee that he has not concealed the particulars of his income. It was also stated that the additions were made purely on estimate basis. It was further explained that full and complete details of each item were furnished during the course of assessment proceedings. The AO did not find any merit in the explanation given by the assessee and consequently he imposed a penalty of Rs. 12,800 under Section 271(1)(c) of the Act.
5. On appeal, the learned CIT(A) upheld that penalty for the reasons stated in paras 4 and 5 of the impugned order. Before us, Shri S.S. Kalra, C.A., the learned counsel for the assessee reiterated the submissions made before the authorities below. He further brought to our notice that in the quantum appeal preferred by the assessee, the Tribunal vide its order, dt.25th April, 1996, in ITA No. 1117(Asr)/1990 has reduced the addition to Rs. 25,000 only. A copy of the said order was also filed before us. He further submitted that the addition made by the AO was purely based on estimates and, therefore, he was not justified in imposing penalty under Section 271(1)(c) of the Act. According to the learned counsel for the assessee, in order to justify the levy of penalty, there must be some material or circumstance leading to reasonable conclusion that the amount does represent assessee’s income and the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars. It was also submitted that findings given in the assessment order are relevant but not conclusive in penalty proceedings, because, the consideration that arise in penalty proceedings are different from those that arise in assessment proceedings. Reliance was placed on the decision of the Gujarat High Court in the case of National Textiles v. CIT.
In view of the above, it was urged by Shri S.S. Kalra, C.A., the learned counsel for the assessee, that penalty imposed by the AO and confirmed by the CIT(A) may be deleted.
6. On the other hand, Shri B.M. Verma, the learned Departmental Representative strongly supported the orders of the authorities below.
7. We have carefully considered the rival submissions and have also gone through the orders of the authorities below. It is true that this Tribunal vide its order, dt. 25th April, 1996, in ITA No. 1117(Asr)/1990 has reduced the addition from Rs. 32,000 to Rs. 25,000 only. While deciding the quantum appeal of the assessee, the Tribunal took the view that the addition of Rs. 32,000 made by the AO and which was confirmed by the CIT(A) was on higher side. On a perusal of the assessment order dt. 21st Dec., 1988, passed under Section 143(3), it would be clear that total receipts as per Indoor Register have been worked out at Rs. 1,30,850, whereas the said receipts have been enhanced to Rs. 1,80,000 at the time of filing of return. It is also apparent from the assessment order that the then AO worked out the figure at Rs. 1,89,750. However, the AO who had passed the assessment order, worked out the receipts at Rs. 2,21,335. Finally, the AO estimated the total receipts at Rs. 2,12,000 against which the assessee has shown receipts at Rs. 1,80,000 in his return of income. As we have already noted that the Tribunal has allowed a relief of Rs. 7,000 to the assessee while deciding quantum appeal of the assessee, in ITA No, 1117(Asr)/1990, referred to above. In other words, the Tribunal has estimated the professional receipts at Rs. 2,05,000 as against Rs. 1,80,000 shown by the assessee. From the above narrated facts, it would be clear that the addition has been made on pure estimate basis. No doubt, there is a difference between the professional receipts estimated by the different authorities. However, the AO has not given any finding to the effect that the difference between the income shown by the assessee and the income assessed was due to the fraud or gross or wilful neglect on the part of the assessee. In the case of National Textiles v. CIT (supra), the Hon’ble Gujarat High Court has held that in order to justify the levy of penalty under Section 271(1)(c), there must be some material circumstances leading to reasonable conclusion that the amount does represent the assessee’s income and the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars. The Hon’ble High Court further observed that Expln. 1 does not make assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. The Hon’ble Punjab & Haryana High Court in CIT v. Metal Products of India (1984) 150 ITR 714 (P&H) held that merely because the addition has been made on estimate under the first proviso to Section 145(1) of the Act by adopting the view that the gross profit shown in the books of accounts was too low as there were defects in the manner of accounting employed cannot be automatically lead to the conclusion that there was failure to return the correct income by means of fraud or gross or wilful neglect. In the instant case, the AO has not given any finding to this effect that the assessee had deliberately furnished the inaccurate particulars of his income. Thus, considering the facts and the circumstances, of the present case, we are of the confirmed view that no penalty under Section 271(1)(c) of the Act is leviable in this case and accordingly, we cancel the same.
8. In the result, the appeal is allowed.