COMMISSIONER OF INCOME TAX Vs. BARODA TIN WORKS

JUDGEMENT

(1.) THE following questions of law were referred to this Court for its decision in these proceedings by the Tribunal, Ahmedabad, 'A' Bench, Ahmedabad :

(2.) WE have heard the learned counsel for the parties. The facts of the case are that the assessee is engaged in the manufacture and sale of tin containers, drums, buckets and other tin articles. In the previous year relevant to the asst. yr. 1971 -72 the assessee furnished the return under s. 139 of the Act declaring an income of Rs. 43,297. The return was supported by the trading account, copy of P&L; account and copy of the balance sheet. The ITO, during the course of assessment proceedings, noticed certain cash credits in the names of several parties. He required the assessee to produce copies of accounts of such creditors to prove the genuineness of the documents. The assessee was able to produce before the ITO some confirmatory letters from some of the creditors. The ITO also issued summons under s. 131(1) of the Act to the creditors from whom confirmatory letters were made available. However, the creditors could not appear before the ITO and they were stated to be untraceable. In the aforesaid circumstances, the assessee agreed for addition of the peak credits which was worked out to be Rs. 21,500 as income from undisclosed sources. On the basis of these additions, notice under s. 271(1)(c) initiating penalty proceedings was issued on 26th Oct., 1974 calling upon the assessee to explain and adduce evidence why the amount added be not treated as representing concealed income. In reply to show cause notice, the assessee stated that he has obtained confirmatory letters of the depositors in some cases, whose deposits were added to the total income. At the time when the said deposits were taken it is noted that the addresses of the depositors as they were given to the assessee. In the absence of positive proof of deposits in the form of confirmatory letters for producing them before the assessing authority for examination, he agreed for adding the said deposits in the total income and when the question comes for levy of penalty, mere agreement to include the amount in total income does not entitle the Revenue to levy penalty. The assessee relied on the principle enunciated in the case of CIT vs . Vinaychand Harilal : [1979]120ITR752(Guj) for confirming that the deposits made by creditors are concealed income of the assessee.

(3.) THE AAC in appeal found that mere consent of the appellant that impugned amount of peak credits be taxed in its hands will not tantamount to an admission on its part that what was brought to tax was either its concealed income or its business income. The ITO ought to have established in the course of penalty proceeding that appellant had either concealed its income or furnished inaccurate particulars of his income, which the ITO has failed to do.