M RADHAKRISHNIAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case of penalty under s. 271(1)(c) of the I.T. Act, as it stood after amendment by the Finance Act, 1968, but before its further amendment by the, T.L. (Amend.) Act, 1975. The IAC who levied the penalty in the first instance recorded a finding that the amount of income in respect of which the assessee had concealed particulars of his income was Rs. 55, 830. The IAC accordingly levied minimum penalty at the same figure, namely, Rs. 55, 830. On appeal, the Tribunal sustained the penalty to the extent of Rs. 35, 500 made up of the following two figures Rs.Concealment of particulars of income underthe head 'Business' 14, 000Income from Other sources 21, 500Total 35, 500On the first item, the Tribunal's finding was as under. "As far as the business income is concerned, the Income-tax Officer had to resort to an estimate, because there were several omissions. An analysis has been given of the deficiency in stock between January 20, 1967, and March 31, 1967. The period was only of two months and the deficiency which was not explained was quite large. Apart from the deficiency in frosted glass, where there may have been some breakages, there is a clear deficiency in plywood sheets by as much as 44 sheets. In the absence of any explanation, the only inference is that there were sales outside the books. In these circumstances, an estimate of the turnover was warranted and consequently the Income-tax Officer had to estimate the profit also. There is nothing to show that the estimates were in any way excessive. We, therefore, hold that in respect of the amount of Rs. 14, 000 penalty will be exigible "On the second item, the Tribunal's finding was as follows" As far as the credits of Rs. 27, 500 are concerned, they were in three instances in the names of persons, who have died, and who were close relations of the assessee. It should have been possible for the assessee to let in some manner of evidence to establish the creditworthiness of such close relations. Where the assessee has not tendered any evidence at all regarding the creditworthiness of such relations beyond ascertaining that they had funds, it has to be considered that there was no explanation for such credits. As far as the credit in the name of Susheela is concerned, here again the assessee had not let in any evidence and being a close friend, the position stands on a similar footing. Regarding the daughter, the assessee had adduced a confirmation letter before the Inspecting Assistant Commissioner and this has not been proved false. Out of the amount of Rs. 27, 500, we, therefore, hold that penalty will be exigible only in respect of an amount of Rs. 21, 500 because, in the absence of any evidence at all, we have to hold that the assessee has not discharged the onus of showing that the failure to return such amounts as part of the income was not due to gross or wilful negligence."

(2.) AGAINST this order of the Tribunal the assessee demanded and got reference to this court on the following questions of law "1. Whether, on the facts and in the circumstances of the case, the provisions of section 271(1)(c) stood attracted to justify any penalty ?.2. Whether, on the facts and in the circumstances of the case, penalty of Rs. 14, 000 would be exigible in respect of the addition to the gross profit in the assessment ?.3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the penalty of Rs. 21, 500 in respect of the addition of a like amount under other sources as unproved credits ?"

(3.) THIS clearly is the meaning and intendment of s. 27l (1)(iii) of the ActIt is from the point of view of this understanding of s. 271 (1)(iii) that the Tribunal's decision in this case bears examination. As we had earlier mentioned, the Tribunal's order sustaining the penalty to the extent of Rs. 35, 500 is in two parts penalty of Rs. 14, 000 and penalty of Rs. 21, 500. The quantification of penalty of Rs. 14, 000 is towards the estimated addition of Rs. 14, 000 to the income returned under the head "Business". We have earlier extracted the reasonings of the Tribunal on this part of the case. All that the Tribunal says and could say, on this aspect, in their order is that there was quite a justification for the ITO to make an estimate of the turnover, and an estimate of the gross profit. The justification, according to the Tribunal, was the detection of deficiency in stock between January 20, 1967, and March 31, 1967. The Tribunal had not given any particulars as to the value of the stock discrepancy during that period. Precise figures in this regard are not found even in the assessment order. For the purposes of framing an estimate, it is enough that some defect or other is found in the accounts. But, as we read the penalty provision in s. 271(1)(iii), there must be a clear evidence to show that an amount of Rs. 14, 000 had been concealed by the assessee, that is to say, each and every single rupee comprising that sum. If it is a mere estimate of some figure or other, even for the purpose of assessment of income, we fail to see how it can be said that it represents the amount of income in respect of which particulars have been concealed within the mischief of the language of s. 271(1)(iii).