NEW BIJLI FOUNDRY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, a registered firm, is engaged in the manufacture and sale of sewing unchines, lathes, milling machines, drills, chaff cutting machines, machinery casting and assembling of radios. In the revised return filed for the assessment year 1961-62, it declared its income at Rs. 68,331. During the assessment proceedings the ITO discovered that a surprise raid was conducted by the sales tax authorities on the premises of the assessee and during the search Uchanti Bahi containing record of the transactions of purchase and sale, which were not shown in its account books, was also seized. When called upon to produce this Uchanti Bahi, the assessee showed its inability to do so and alleged that the same was lost while returning from the office of the Assistant Commissioner of Sales Tax, Jullundur, on April 8, 1963. He, however, produced certified copies of the extracts made from that Bahi by the sales tax authorities which showed sales and purchases to the tune of Rs. 1,58,919 and Rs. 1,54,000, respectively, outside the regular account books. THE ITO rejected the purchase entries and added the whole of the amount of Rs. 1,58,919 to the income of the assessee. On appeal, the AAC agreed with the other findings of the assessing authority but reduced the addition to 20 per cent. of the sales which according to him was the normal rate of profit. On second appeal, the Tribunal upheld the principles followed by the appellate authority in determining the income from the Uchanti transactions and allowed reduction of 2 per cent. in the gross profit.

(2.) FOR the suppression of its income, the IAC, vide his order dated March, 16, 1968, levied a penalty of Rs. 72,812 on the assessee. On appeal, the Tribunal held that since Uchanti Bahi contained secret transactions which were not incorporated in the regular account books, the assessee had concealed its income and so the penalty was rightly levied under Section 271(1)(c) of the I.T. Act. It, however, reduced the amount of penalty to 40 per cent. of the tax sought to be evaded instead of 50 per cent. on the basis of income as finally determined in the quantum appeal.