TMI Blog1992 (4) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... Its head office and factory are in Kishangarh with branches in Ahmedabad, Amritsar, Bombay, Calcutta, Delhi, Jaipur, Ludhiana and Surat, etc. Its accounting period relevant to the asst. yr. 1972-73 ended on 31st Dec., 1971. In the return filed by the assessee on 31st July, 1972 originally a loss of Rs. 8,19,698 had been declared. However, in the revised return filed on 12th Sept., 1972 nil income was returned. In those returns the assessee had claimed to have incurred brokerage or commission @ 25 per cent amounting to Rs. 94,369.39 on the sale of cotton (First Pool and Second Pool) to one Mahaskar Enterprises, 3rd Khetwadi Lane, Dayabhai Building, Room No. 49, Bombay (hereinafter referred to as ME), through one Maruti Shanker Kharde its alleged proprietor (hereinafter referred to as Kharade). This expense was allowed by the ITO originally in the assessment which was completed on 31st March, 1975 under s. 143(3) on a total income of Rs. 8,55,089. In I appeal, vide order dt. 19th Sept., 1975 the AAC allowed unabsorbed development rebate of earlier years to be allowed with the result that income was reduced to NIL . The "giving effect to" order was passed on 29th Oct., 1975. But i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astern Spg. Wvg. Co. Ltd., 26, Ambedkar Road, Bombay 14,45,785 2per cent 28,916 New City of Bombay Mfg. Wvg. Co. Ltd., 63, Chinchpokli Road, Bombay- 33 21,59,684 2per cent 43,193 Shree Gopal Indus. 402, Senapati Bapat Marg Lower Parel, Bombay-13 18,39,709 Rs. 35 per bale on 454 bales Sivananda Mills Ltd. Post Ganpathy, Coimbatore-6 64,173 91 bales 22,260 Asher Textile Mills Ltd., 1/4 Avanashi Road, Tirupur-3 99,707 91 bales Total 1,01,439 The details of the goods sold, as given in assessee s letter dt. 19th March, 1977 (in reply to ITO s letter dt. 15th March, 1977) were as follows: No. of bales sold to No. of bales sold to Amount (Rs.) Rate of Commission Commission 1126 New City of Bombay Manufacturing Co. Ltd. 21,59,684 2per cent 43,193.68 791 New Great Eastern Spinning Mills 14,45,785.50 2per cent 28,915.71 454 Shree Gopal Industries 91 Shivananda Mills Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers Asher Textiles Shri Gopal Industries Sivananda Mills, copy of the debit note for Rs. 7,069 (which had not been filed earlier), particulars of assessee s bank account at Bombay, correspondence and brokerage agreement with ME, name and address of the employee/other persons through whom negotiations for brokerage took place and cheques were delivered. The assessee insisted vide its letters dt. 17th Feb., 1981 and 25th Feb., 1981 that before it supplied the above information, the Department should produce Sri Kharade. The assessee filed the debit note for Rs. 7,069 and account books. But the sale bills were not produced. The confirmations from purchasers were stated to be awaited from Bombay Office. It was said by the assessee that there was no agreement or correspondence with ME. The ITO on the ground that in spite of its reply dt. 17th March, 1981 the assessee had furnished only a part of the information, completed the assessment on 31st March, 1981 under s. 144. The assessee had furnished the address of only Shri Gopal Industries, vide its letter dt. 17th March, 1981 (pp. 25-29). The notice sent to the three purchasers remained undelivered. He also found that the other two par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee furnished replies dt. 26th Aug., 1982 and 8th Aug., 1987 to the show-cause notices. The IAC (Asst.) observed that all documents pertaining to the payment of commission had been fabricated and falsely introduced in the account books and that the device was only a plan to defraud the Revenue. The payment was held to be bogus. It was held that this had been done only with a view to conceal the real income. He held that the assessee returned the particulars on the basis of false materials. He also held that the commission debited to the P L a/c had been found to be in genuine. The IAC (Asst.) held that the explanation given by the assessee was false and had also not been substantiated. Considering that the original return had been filed on 31st July, 1972 and revised return on 12th Sept., 1972 the IAC (Asst.) held that penalty under s. 271(1)(c) was leviable with reference to the income held concealed, i.e., Rs. 1,01,439 and, therefore, as against the minimum penalty prescribed of Rs. 1,01,439 he considered it proper to levy penalty @ 150 per cent, i.e., at Rs. 1,52,159 as against the maximum imposable penalty @ 200 per cent 8. The learned CIT(A) vide his impugned order dt. 22n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 : (1992) 194 ITR 479 (Raj) 10. We have carefully considered the rival submissions, the entire papers on the record as also the decisions referred to above. In Cement Distributors Pvt. Ltd. the Supreme Court held that the recording of bogus transactions in order to display income at a much lesser figure would amount to deliberate furnishing of inaccurate particulars of income. In Anantharam Veerasinghiah Co. the Supreme Court considering a case relating to the asst. yr. 1959-60 observed that the mere falsity of the explanation given by the assessee is insufficient without there being in addition cogent material. In the case of Cement Marketing Co. of India Ltd., the Supreme Court, dealing with a case of omission to declare an income, held that a return could not be false unless there was an element of deliberateness in it. The Full Bench of Patna High Court observed in the case of Nathulal Agarwal Sons that the explanation of the assessee had to be an acceptable one and one that was reasonably valid. In Prithpal Singh, Punjab Haryana High Court held that income under s. 271(1)(c) meant positive income and that if only loss got reduced by the IT authorities, no penalty w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The income in respect of which concealment is required to be examined is the brokerage or commission of Rs. 1,01,439 which the assessee claimed. Thus, the fact that in the revised return income declared as well as in the assessment as ultimately finalised income assessed was nil would not operate against the Department in proceeding with the penalty proceedings. We, therefore, do not accept the contrary submissions made on behalf of the assessee in that regard. 13. The proposition recognised by the Supreme Court in the case of Anantharam Veerasinghiah Co. that the finding in the assessment proceedings are relevant, though not conclusive is not under dispute. Thus, the matter is to be considered afresh in the penalty proceedings. In the penalty proceedings no further material was placed on the record either by the assessee or by the Department. We have therefore, to look at the material from the point of view of its adequacy or sufficiency for the purposes of penalty. We have, in this regard gone through Hyderabad B Bench decision in the case of Dr. (Mrs.) Afzal Jabbar. It is no doubt not necessary that before penalty can be levied, there should be material additional to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it could supply information the Department should produce Shri Kharade. Actually it is the non-production of Shri Kharade both by the assessee as well as by the Department that had led to the situation in which inference have been drawn leading to addition. The Department did not choose to scrutinise or verify the contents of the affidavit dt. 21st Feb., 1974 of Shri Kharade. The said affidavit had also not been filed with reference to any brokerage charges or brokerage services. All that Shri Kharade had stated in the affidavit was that he had a proprietary business known as ME, and that he had not done any genuine business of purchase and sale and had issued Hawala sale bills to needy merchants who in turn paid him remuneration @ 10 to 25 paise per hundred. Therefore, this affidavit could not be said to be directly related to the point in issue before us in the present appeal. Though it is a fact that the addition was confirmed in the assessment proceedings but as we have already mentioned above, what has happened in the assessment proceedings cannot be taken to be final or conclusive so far as the penalty proceedings are concerned. The identity of Shri Kharade is established f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of his affidavit dt. 21st Feb., 1974 could not be confronted to the assessee. So far as the 5 purchasers are concerned, the letters sent by the Department to the purchasers at serial Nos. 3, 4 and 5 had remained undelivered. They could not be contacted or produced either by the assessee or by the Department. Here it may be mentioned that in the letter dt. 17th March, 1981 the assessee had given the address of the purchaser at Sl. No. 3 and regarding the purchasers at Sl. Nos. 4 and 5, it had been said that information in that regard was awaited. It may be that the purchasers at Sl. Nos. 4 and 5 were not listed either in the Telephone Directory or in the Directory of Companies/Textile Mills but since the sales to these purchasers have not been disputed, it would not be possible to say that their identity was not established or that they were fake parties. So far as the purchaser at Sl. No. 1 is concerned, namely New Great Eastern Spg. Wvg. Co. Ltd., Bombay, it had stated vide its letter dt. 17th March, 1981 in reply to IAC (Asst. s) letter dt. 12th March, 1981 that they did not pay brokerage or commission to any agent on the purchases made from the assessee in the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r unproved rather than being disproved. As we have already observed earlier certain circumstances or factors may have created suspicion but due to the fact that full enquiry or investigation was not made or not possible to be made in regard to the broker or the purchasers, the addition had to be made and sustained. But this cannot and would not suffice for the purposes of imposition of penalty. It is trite proposition that if both the possibilities are there then in the situation of lack of evidence it could not be justified to chose the one which leads to the inference of concealment. We are, therefore, of the view that taking into account the entirety of the facts and circumstances of the case, no case of penalty under s. 271(1)(c) was made out. Therefore, the penalty is cancelled. 15. In view of the above finding, it is not strictly necessary to examine the question of quantum of penalty i.e., whether the penalty @ 150per cent of the income held concealed could have been justified instead of @100per cent which is the minimum prescribed rate. We can only say that in the peculiar factual matrix it could not be said that there existed aggravating factors so as to justify the impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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