INCOME TAX OFFICER Vs. C D JOSEPH

JUDGEMENT

(1.) THIS is an appeal filed by the Revenue challenging the decision of the Tribunal affirming the decision of the CIT(A), which set aside the order of penalty imposed by the AO on the respondent. The brief facts of the case as disclosed by the pleadings of the appellant are the following :

(2.) THE assessee is the proprietor of Chemmannur Jewellery, Thrissur. The assessment year concerned is 1989-90. The assessee filed a return of income showing a net loss of Rs. 1,27,600. The total turnover was Rs. 1,44,26,152 and the gross profit declared was only Rs. 7,99,933. The AO felt that it is too low as the percentage of gross profit worked out to be only at the rate of 5.54 per cent. Therefore, the AO. started investigation by calling for various details including books of accounts. Finally, the bill books were impounded under S. 131(1) on 28th Nov., 1991, by the assessing authority for further investigation. The assessee, on the very next day, i.e., 27th Nov., 1991, preferred a petition before the CIT under S. 273A making an offer of Rs. 15 lakhs by way of income from business to cover the undisclosed income for the relevant year. He also offered an additional amount of Rs. 1 lakh towards probable disallowance out of expenditure charged to P&L a/c. The AO, taking into account, the above offer and also on the basis of the investigation held by him, completed the assessment on a total income of Rs. 16,25,000. The assessment was completed by order dt. 24th March, 1992. In the said order, it was also stated that separate proceedings for imposing penalty under S. 271(1)(c) shall be initiated.

(3.) THE assessee filed an appeal before the CIT(A), Cochin, and the same was allowed by the appellate authority by Annexure B order dt. 9th Jan., 1995. The CIT(A), in the said order, held as follows :