RATHNAM AND CO Vs. INSPECTING ASSISTANT COMMISSIONER

JUDGEMENT

(1.) THE petitioner herein is a firm carrying on business as building contractors and dealers in tiles. For the assessment years 1960-61, 1961-62, 1962-63 and 1964-65, certain additions for bogus hundi credits were made by the ITO in the assessments on agreed basis. For the year 1963-64, addition came to be made by the ITO on the basis that the gross profits shown in the accounts of the assessee was too low to be accepted. After the completion of the assessment for the above years proceedings were initiated for penalty under Section 271(1)(c) and penalties were levied in respect of all the years by the IAC. As against the orders levying penalty for the years 1960-61 to 1963-64, revision petitions had been filed before the Commissioner and against the order levying penalty for 1964-65, an appeal was filed before the Income-tax Appellate Tribunal. THE Commissioner cancelled the penalty for 1960-61, 1961-62 and 1962-63, but he sustained the penalty for 1963-64. As regards the order levying penalty for 1964-65, which was challenged before the Tribunal, the petitioner succeeded in getting the order of penalty cancelled by the Tribunal. Since the petitioner's request for the cancellation of penalty for the year 1963-64 was rejected by the Commissioner, the petitioner has now approached this court for the issue of a writ of certiorari calling for the records of the Commissioner and to quash his order in so far as it rejected the claim of the petitioner for cancellation of the penalty for the year 1963-64.

(2.) THE contention advanced by the petitioner in the writ petition is that before April 1, 1964, proof of deliberate concealment on the part of the assessee should be established, that, in this case, there is absolutely no material to indicate that the assessee had deliberately concealed the particulars of income and that the mere fact that the petitioner had agreed for an addition on the basis of a higher percentage of gross profit will not lead to the inference that there has been a deliberate concealment on the part of the assessee. It is said that the assessee agreed for an addition to the lower percentage of gross profit only for the purpose of assessment and not for purpose of penalty, and, therefore, the agreement of the petitioner for the estimate of income arrived at by the ITO based on a higher percentage of gross profit cannot form the basis for the levy of penalty under Section 271(1)(c), unless a deliberate concealment on the part of the assessee is positively established by the ITO.

(3.) THE learned counsel for the petitioner seeks to distinguish the said decisions of this court by contending that the petitioner has not made any estimate of his income in his return, but he has filed a return on the basis of his account books which he has maintained in the regular course of business, and that the ITO while completing the assessment did not reject the same as not reliable. But a perusal of the order of the ITO indicates that he was not inclined to accept the entries in the account books as genuine. He specifically says that the entries in the account books are not possible of verification in the absence of necessary vouchers, etc., and that apart from this the gross profit shown by the assesses was too low to be accepted. THE ITO, therefore, made an addition of 1/3rd of the gross value and the assessee accepted without demur that addition. THE acceptance of this addition before the completion of the assessment will lead to an inference that the gross profits shown by the assessee in his books of account are low and this was done deliberately. We are, therefore, of the view that in this case, the inference drawn by the respondents that the assessee should be taken to have deliberately concealed the particulars of income by his conduct in agreeing to the addition being made to his income is justified. We, therefore, see no reason to interfere with the impugned order. THE writ petition, therefore, fails and is dismissed. No costs.