TMI Blog1990 (6) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction records of the assessee, felt that it was not full and complete and did not bring out true production of oil, khali and soap and, therefore, he made the following additions to the assessee's trading results on the basis of comparable cases and assessee's own past history: Rs. (1) Groundnut oil a/c 3,79,105 (2) Groundnut khali a/c 22,640 (3) Rice bran oil a/c 6,22,050 (4) Soap a/c 3,33,432 4. The assessee challenged the above additions in appeal before the Appellate Assistant Commissioner, who, after hearing the assessee at length, sustained the following additions in different accounts : --- Rs. (1) Groundnut oil a/c 1,76,085 (2) Groundnut khali a/c 16,250 (3) Soap account 70,224 In respect of rice bran oil a/c, the entire addition made by the Income-tax Officer was deleted. 5. Against the aforesaid order of the Ld. CIT (Appeals) there were cross appeals to the Tribunal both by the assessee and the department. The Tribunal vide its order in ITA No. 577 (All.) of 1976-77 and ITA No. 614 (All.) of 1976-77 dated 21st July, 1980 confirmed the following additions to the assessee's total income : (1) Groundnut oil account Rs. 1,66,970 (Vide paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, it was specifically stated that it had not used filler and, therefore, the presumption made by the Assessing Authority regarding under-production of soap was wrong. In support of it, the assessee again filed a certificate from Harcourt Butler Technical Institute to support its case. According to the assessee, the soap made by it was pure and of a very good quality as would be clear from the average sale price of the soap and so the charge of under-production was not sustainable. Further prayer was made that so long as the appeal was pending before the Tribunal, presumption of concealment may not be raised, because the propriety of the additions itself was under challenge. 7. It appears that there were no further proceedings before the Inspecting Assistant Commissioner after the filing of the aforesaid letter. In the meanwhile, the Tribunal's order in quantum appeal came to be passed as noted earlier on 21st July, 1980. As the law had undergone change in between, the penalty proceedings were transferred from the file of the Inspecting Assistant Commissioner back to the file of the ITO who was now to pass the penalty order subject to the approval of the IAC. Perhaps the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only and to this loss was added the brought forward loss of Rs. 8,27,650. A note was given on the face of the return that the aforesaid loss or loss as determined by the ITO, whichever might be the correct figure, might be taken. The returned loss of Rs. 9,81,906, thus, consisted of loss of this year amounting to Rs. 1,62,255 and the brought forward loss of Rs. 8,27,650. As the return on its face itself indicated that Rs. 8,27,650 represented the loss of earlier years, no facts were either concealed from the ITO in this regard nor were twisted as alleged by the Revenue. The aforesaid sum of Rs. 8,27,650 could not, therefore, be the subject matter of penalty. The loss of Rs. 1,62,255 as shown by the assessee had, of course, not been accepted by the department and additions as indicated above have been made, as a result of which, instead of there being loss, there would be a positive income for the year under consideration, which, after setting off against the loss of earlier years, would be reduced to nil income. The quantum of penalty and the approach of the ITO was thus, according to the assessee's submission before the Ld. CIT (Appeals), were incorrect. 9. The Ld. CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and when the assessee was called upon to support his stand that the aforesaid cuttings etc. were clerical errors, committed through mission and the assessee was required to produce the supporting vouchers on the basis of which the original entries might have been made and then corrected on the basis of the correct vouchers, these vouchers of original entry were deliberately withheld by the assessee from the scrutiny of the assessee in authority, first Appellate Authority as also the Tribunal. In the face of the aforesaid findings of the Tribunal with regard to the manipulation in the books of account of the assessee and its conduct, the finding of the Ld. AAC that the addition was a mere estimate was, prima facie perverse, for the estimate in question was not made without any material, but on the basis of the mistakes in the books of the assessee and the evidence available on record and referred to in detail by the Tribunal in its order. It was a mere guess work. Such addition on estimate is much different from the addition made for example on the short ground that quantitative details had not been maintained by the assessee. It was not a case of non-maintenance of the details, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty---- (i)....... (ii)....... (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. " The aforesaid amendment in clause (iii) was brought about by the Finance Act, 1968 with effect from 1st April, 1968. Prior to this clause (iii) read as below : " in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent, but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income. " Laying emphasis on the underlined portion as above, it was submitted by the learned counsel for the assessee that unless there was tax payable by a person, there would be no question of proceeding with imposition of penalty under clause (iii) for such penalty has to be "in addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out already, if in every case the quantification of penalty will lead to a nil amount, it is reasonable to construe that the liability to penalty itself is attracted only when tax is payable by an assessee. This conclusion of ours is in consonance with the object of the section, namely, to prevent evasion of tax. Once it is found that no tax is payable, there is no question of evasion of tax and consequently there could be no attempt to prevent such evasion. In our view, the very structure of the language of section 271(1) does not admit of such compartmentalisation as clauses (a), (b) and (c) creating in themselves a "penal liability" in abstract, and clauses (i), (ii) and (iii) in themselves quantifying the penalty for the liability and yet where no tax is payable, the penalty being "nil" in every case, thereby rendering the penalty only a technical and purposeless one. As a matter of fact, the amendment of clause (iii) of section 271(1) by section 19 of the Finance Act of 1968, with effect from April 1, 1968, will support our conclusion in this behalf. As far as the present case is concerned, as we pointed out already, even clause (iii) contemplated the penalty as a measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed means the tax that would have been chargeable on the income in respect of which particulars have been concealed of inaccurate particulars have been furnished had such income been the total income ;" The aforesaid Explanation 4 has been put in to make the amended clause (iii) workable and, therefore, amended clause (iii) may also be noted at this stage as below :----- " S. 271(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act is satisfied that any person---- (a) ...... (b) ...... (c) has concealed the particulars of his income or furnished inaccurate particulars of his income or furnished inaccurate particulars of such income. (i)....... (ii)....... (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. " According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is purpose is achieved, and does not create any further fiction to the effect that the assessed income has to be taken as the correct for purposes of imposition of penalty under section 271(1)(c)(iii). For purposes of fixing the quantum of penalty under section 271(1)(c)(iii), the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished, has to be found by the authority concerned. " Similar interpretation on the scope of the Explanation to section 271(1)(c) has been given by the Hon'ble Madras High Court in the aforementioned case of M. Radhakrishniah. Relying on the aforesaid two authorities, the learned counsel for the assessee submitted that the order of the ITO could not be supported for the simple reason that he had proceeded on the footing as if the Explanation to section 271(1)(c) extended further fiction of fixing the amount of concealed income also which clearly it did not. Therefore, according to the learned counsel, there was no question of restoring the order of the ITO as prayed by the Ld. Departmental Representative. 16. He also questioned the imposition of penalty on merits, and supported, in this connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel that heavy addition of more than Rs. 6 lacs had been made by the ITO in the Rice Bran account, where also there had been cuttings and erasures etc. The entire addition was deleted by the Ld. AAC and the Tribunal confirmed the Appellate Assistant Commissioner's judgment in this regard. This went to show, according to him, that the mere fact of erasures does not suggest an act of concealment. According to the assessee's learned counsel the assessee's employees might have been inefficient and the assessee may not have proper control over them on account of which there were cuttings and erasures, but that is not the same thing as committing a fraud or gross or wilful neglect. In support of the above proposition, the learned counsel relied upon the following authorities : 1 . CIT v. Harnam Singh Co. [1977] 106 ITR 532 (All.), 2. Addl. CIT v. Horilal Kunj Behari Lal [1977] 106 ITR 720 (All.), 3. CIT v. Babu Ram Ajit Prasad [1977] 106 ITR 818 (All.), 4. CIT v. Kedar Nath Ram Nath [1977] 106 ITR 172 (All.), 5. CIT v. K.L. Mangal Sain [1977] 107 ITR 598 (All.), 6. CIT v. Nawab Bros. [1977] 107 ITR 681 (All.), 7. Addl. CIT v. Chatur Singh Taragi [1978] 111 ITR 849 (All. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, what had to be found out was whether there was any income concealed, and if the answer was that income had been concealed, penalty equivalent to the income concealed would be the minimum that would be imposable on the assessee. It was of no consequence, in this connection, as to what was the ultimate result of the computation of total income of such concealment. The ultimate total income might be a nil figure or a negative figure, but the act of concealment did not disappear because of this. Even the effect of this concealment did not disappear because the evasion of tax was there. It may be manifest in the year of account or in subsequent years. After all concealment of income and reducing thereby the total income to nil or increasing the loss was not an idle exercise indulged in by the assessee for the sheer pleasure of manipulation with the figures. It did have a tangible effect on the taxability of the assessee. Therefore, it would be entirely wrong to say that there could be no effect on tax liability of the assessee if despite the concealment of income, the total income was ultimately determined to be a nil figure or a negative figure. It may be so, but the advant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th effect from 1-4-1968 to 31-3-1976 and, therefore, the aforesaid judgment could not be the authority in support of the assessee's case. 20. The learned Departmental Representative drew our attention to the judgment of the Hon'ble Kerala High Court in the case of CIT v. India Sea Foods [1976] 105 ITR 708, wherein their Lordships have held that for the purpose of imposing penalty under section 271(1)(iii), one had to look at the concealed income and not at the total income. Total income may or may not be a positive figure, but if there was concealed income there would be imposition of penalty. The above viewpoint has been reiterated by their Lordships of the Hon'ble Kerala High Court in CIT v. Rowther Bros. [1979] 119 ITR 353, wherein their Lordships have clearly pointed out while interpreting the amended provisions of section 271(1)(iii) with effect from 1-4-1968 that total income of assessee was irrelevant for the purpose of determining quantum of penalty. Total income of assessee may be below the taxable limit, but if the aforesaid total income was arrived at after adding concealed income of the assessee, penalty would be imposable with reference to the concealed income. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lment would also be imposed taking it to be the minimum figure. It did not say that if there was no tax, penalty would not be imposed. The entire purpose of change in law on 1-4-1968 would be defeated if the law was interpreted in the aforesaid manner. In 1976, the law was again amended and the penalty was again linked to tax as measure, but the Legislature did not want to repeat the mistake or the lacuna that existed in the Act prior to 1-4-1968 on account of which if there was no tax payable as a result of final assessment, there would also be no penalty, for penalty was linked with tax as its measure. To avoid the recurrence of the earlier flaw in the law, Explanation 4 was brought in and it is not that Explanation 4 was brought in because even during the period 1-4-1967 to 31-3-1968, the flaw, as noted by their Lordships of the Hon'ble Supreme Court in the case of Mansukhlal Bros. v. CIT [1969] 73 ITR 546 subsisted. The point made out by the learned counsel for the assessee as to the scope of the Explanation to section 271(1)(c) was not disputed by the Ld. Departmental Representative. He, however, submitted that the case of concealment and of fraud and gross negligence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous petition moved by the assessee wherein it was indicated that there were various mistakes apparent from the original order of the Tribunal, which deserved to be rectified. The Tribunal could, therefore, in the present proceedings only confine itself to the rectification of the said mistakes and it could not proceed further and entertain fresh grounds of appeal or arguments including the one raised by the learned counsel for the assessee as above. 26. On behalf of the assessee, however, it was pointed out that the Tribunal had, by its order, in the Miscellaneous petition referred to above, recalled its earlier order as it was not clear to the Tribunal as to in what manner the mind of the Tribunal when they decided the appeal originally was effected or influenced by the mistakes of omission or commission, which were brought to the attention of the Tribunal, and which were apparent from record. When the original order is recalled, nothing of the original order remains and as such the entire appeal becomes open and in fresh proceedings for the disposal of the appeal, neither of the two sides can be confined only to the arguments or pleas which were taken in the original appeal. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as would be clear from the observations made in paragraphs 22.1 and 22.2 of its order. They rejected the Revenue's contention to remove the mistakes and leave the rest of the penalty order, as such. This being so, we are unable to accept the plea of the Ld. Departmental Representative on this account and as such, the preliminary objection raised by him regarding the scope of the present appeal, is decided against the Revenue's stand. In the present appeal, it is open to both the sides to raise all such pleas as they deem appropriate to fortify their respective stands and it would be obligatory on the Tribunal to give its decision on all the issues raised by either sides before it. 27A. In this view of the matter, let us now look at the merit of the legal point made out by the learned counsel for the assessee regarding the leviability of the penalty in the hands of the assessee whose total income for the assessment year under consideration is nil and, therefore, by whom no tax is payable. Before we examine the provisions of clause (iii) of sub-section (1) of section 271, we may note the colateral plea raised by the assessee's learned counsel regarding the scope of the Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28(1) of the Indian Section 271(1) of the Income-tax Act, Income-tax Act, 1922 1961 S. 28(1) If the Income-tax Officer, the S. 271(1) If the Income-tax Officer, or Appellate Assistant Commissioner or the Appellate Assistant Commissioner in the Appellate Tribunal, in the course the course of any proceedings under this of any proceedings under this Act, is Act, is satisfied that any person, satisfied that any person---- (a)..................... (a) .................... (b).................... (b) .................... (c) has concealed the particulars of his (c) has concealed the particulars of his income or deliberately furnished income or furnished inaccurate particulars inacurate particulars of such income, of such income, he, or it may direct that such person (i) .................... shall pay by way of penalty....... in the cases referred to in clauses (b) and (c), (ii)................. in addition to any tax payable by him, (iii) in the cases referred to in clause (c), in a sum not exceeding one and a half addition to any tax payable by him. A sum times the amount of the income-tax and which shall not be less than twenty per cent super-tax, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. " This substituted clause as can be readily seen from its plain language delinked the imposition of penalty from the tax avoided and, therefore, it is no more relevant for the purpose of quantification of penalty, whether any tax would have been avoided by the assessee if the returned income had been accepted. Whether or not tax had been avoided, the penalty would be quantifiable, with reference to the quantum of income concealed, if concealment is established. This quantification of penalty and change in the law cannot, in our opinion, be negatived or made otiose by treating the preceding phrase "in addition to any tax payable" by the assessee as governing the operation of the entire clause. This part of the clause is merely drawing attention to the fact that penalty would be in addition to the tax payable by an assessee. Its function is no more. Therefore, even if the tax payable by the assessee be nil, penalty may still be imposed on the assessee, if there is concealed income. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority. The amendment done by the Legislature would be negatived if interpretation, as above is placed on the wordings of clause (iii) of sub-section (1) of Section 271 as amended with effect from 1-4-1968. 30. The aforesaid system of quantifying penalty was re-amended with effect from 1-4-1976 by the Taxation Laws (Amendment) Act, 1975. The amended clause (iii) with effect from 1-4-1976 read as below :---- " (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. " 31. The measure of penalty has, thus, again become the tax sought to be evaded by the assessee as was the position prior to 1-4-1968, but there is one important difference in the two provisions. Under the old provision which was operative from 1-4-1962 to 31-3-1968, the tax sought to be evaded was not to be computed with reference to the concealment of income, but with reference to the difference between the tax on the returned income and the tax determined fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aware, while enacting the law as above that there would be situations where even though income had been concealed by the assessee, there might be no tax payable on the finally determined total income and in such a case the amount of tax sought to be avoided by reason of concealment of particulars of his income would naturally be nil, for nil tax was avoided in fact. Apparently, the Legislature did not want this situation to re-emerge and so it brought Explanation 4 to section 271(1)(c) on the Statute Book simultaneously giving meaning to the expression "the amount of tax sought to be evaded". Clause (a) of the said Explanation 4 provided that "in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income". In view of this Explanation where total income, as finally assessed, is less than the concealed income, which would be the case when the total income is nil or the total income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to comply with a notice, etc., which are the necessary ingredients under cls. (a) and (b). Again in the matter of computation of penalty under cls. (a) and (b) it would be seen that under the sub-cls. (i) and (ii) after cl. (c), the penalty imposed is geared to the tax payable or avoided; whereas in the case referred to under cl. (c), it is not necessarily geared to the tax payable, but is in addition to any tax payable (if no tax is payable this will not enter the reckoning), an amount not more than twice the amount of the income concealed or the inaccurate particulars furnished. " Their Lordships then referred to the decision of the Division Bench of the same High Court in India Sea Foods' case and elaborately quoted from the same wherein the contention of the assessee that penalty could not be determined with reference to the concealed income, but had to be determined with reference to the total income, was negatived by their Lordships. They then referred to the various judgments of the Hon'ble Supreme Court in which nil assessment was held to be an assessment in the eye of law and observed as follows : " There are decisions which recognise that for purposes of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is too technical to construe the section as creating a penal liability in abstract by clauses (a), (b) and (c) and quantifying the said penal liability by clauses (i), (ii) and (iii) of section 271(1). If the reasoning of the Gujarat High Court is to be accepted, the moment anyone of the defaults contemplated by clauses (a), (b) and (c) of section 271(1) has occurred, there is an automatic attraction of the liability, but the quantification of the liability may lead to no penalty being levied. As we pointed out already, if in every case the quantification of penalty will lead to a nil amount, it is reasonable to construe that the liability to penalty itself is attracted only, when tax is payable by an assessee. This conclusion of ours is in consonance with the object of the section, namely, to prevent evasion of tax. Once it is found that no tax is payable, there is no question of evasion of tax and consequently there could be no attempt to prevent such evasion. In our view, the very structure of the language of section 271(1) does not admit of such compartmentalisation as clauses (a), (b) and (c) creating in themselves a "penal liability" in abstract, and clauses (i), (ii) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of the said clause as below : " There is no mistaking the meaning of the language of section 271(a)(iii) as found in the text. Under this clause, there is both a minimum and a maximum penalty. The minimum penalty is equal to the income in respect of which particulars have been concealed. The maximum is double the income in respect of which particulars have been concealed. It will be seen that in both cases the validity of the penalty depends on its being relatable to the income in respect of which particulars have been concealed. This means that if particulars have been concealed in respect of one rupee of income, the minimum imposition will have to be one rupee by way of penalty .......... If in respect of one rupee particulars have not been concealed, then penalty cannot be levied on that rupee, either at a minimum of one rupee or at the maximum of two rupees or any amount in between. The reason why this penalty provision is so worded is not far to seek. The yoke of income-tax itself is already a heavy burden, especially on the higher income brackets, and a too high penalty would break the necks of most taxpayers. Besides, the measure of penalty is not on the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty would be nil, because the tax payable is nil. This result is repugnant to the very scheme of the change in clause (iii) brought about by the Finance Act, 1968. This result becomes all the more accentuated, when we consider clause (iii) as amended with effect from 1-4-1976 along with Explanation 4 thereof. We have indicated above that the situation visualized by Explanation 4 viz., where total income is less than the concealed income will come about when concealed income is set off against losses under heads declared and accepted. Such losses may be less than the concealed income, may be equal to the concealed income and may be more than the concealed income. In the first case, total income would be a positive figure, and may be that tax is payable thereon, if such income is more than the minimum income liable to tax. In the second case, total income will be nil, and in the third case, total income would be minus figure, i.e. loss. According to the Ld. counsel, Explanation 4 was introduced to avoid the escapement from penalty in the latter two situations. But if the phrase "in addition to tax payable" is held to be governing the operation of clause (iii) as above, Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : " Sub-clause (iii) of section 271(1)(c) states that in cases wherein assessee is found to have concealed particulars of his income or furnished inaccurate particulars of such income, he may be directed to pay by way of penalty, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which particulars had been concealed or inaccurate particulars had been furnished. The words "in respect of which the particulars have been concealed or inaccurate particulars have been furnished" qualify the preceding expressing the amount of the income. By using these qualifying words, Parliament had made it clear that the quantification of penalty under sub-clause (iii) is to be made with reference to that amount of the income of the assessee in respect of which there was concealment of particulars or furnishing of inaccurate particulars. Hence, it was not possible to construe the word "income" occurring in sub-section (iii) as connoting the total income of the assessee as assessed under section 143, 144, or 147. The word has to be understood as having been used in the same wide sense in which it has been used in clause (c) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been concealed by the assessee, non-existent. 40. Prima facie, the decision of the Hon'ble Punjab and Haryana High Court appears to give support to the interpretation placed by the assessee, but, in our opinion, that decision has proceeded on the footing that penalty became tax based once again as earlier in between the period 1-4-1962 to 31-3-1968 and that for working out the tax based penalty it was necessary that there should be tax payable, and if, there was no tax payable, according to their Lordships, there could be no imposition of penalty. Their Lordships did not consider the provisions of law as were operative for the purpose of the decision of the reference before them, namely, the law operative from 1-4-1968 to 31-3-1976. Instead, they decided the appeal on the basis of the law operative from 1-4-1976 and on the presumption mentioned above. It cannot, therefore, be regarded as an authority for considering the law during the aforementioned period. 40A. The decision of the Hon'ble Kerala High Court referred to above, namely Rowther Bros.' case gives in our humble opinion a comprehensive cogent and rational interpretation of section 271(1)(iii) as operative with eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's total income on account of low yield of groundnut oil, khali and soap represented concealed income of the assessee, for the unaccounted sale proceeds of the aforesaid is could have, no other character, but that of revenue receipts, which had not been disclosed by the assessee, though corresponding expenditure relating thereto stood debited in the accounts. The Ld. CIT (Appeals) has held and which finding has been supported by the learned counsel for the assessee, that the assessee has been able to show that the addition, in question, was made merely on estimate by rejecting the assessee's accounts and that such addition was not made on the basis of specific instances of sales outside the books of account or specific instances of suppression of production etc. and therefore the assessee had discharged the onus which lay on it by demonstrating as above. 43. Before we adjudicate upon these submissions, let us first look at what the Tribunal held in quantum proceedings on this subject. It is true that the findings in quantum proceedings are not binding in penalty proceedings, but, nevertheless it is on good authority that one can say that the finding of the Tribunal in quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record of the analysis of the actual purchases goes to show, as noted above, that whatever be the quality of the groundnuts crop purchased by the assessee during the year under consideration, in comparison to what it had purchased in the immediately preceding assessment year, its content of kernel was in any case 66.66% of the groundnuts purchased. This is the basic figure from which there is no getting away. So, the explanation that there was a poor crop this year, does not explain the 62% yield disclosed by the assessee. The second explanation given by the assessee's learned counsel was that the moisture contents of the kernel was 13.2% and, therefore, it would not be abnormal if about 4% to 5% moisture got evaporated, more particularly when, during the year under consideration, the assessee had done decortication over a longer period than in the immediately preceding assessment year. Without doubt there is a grain of truth in the above explanation of the assessee, but, then, it has to be remembered that the assessee has already claimed loss on account of driage separately to the extent of 381 quintals which, as noted above, works out to 4.8% of the kernel obtained after decortic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, is the absence of any denial on the part of the assessee of the averment made by the Income-tax Officer that in order to manufacture soap caustic soda solution of 36 degree BE was the ideal solution and that the consumption ratio of this solution to the oil is 1 : 2, that is, for 1 unit of the above solution of caustice soda 2 units of oil were needed, nor has the assessee disputed the computation given by the Income-tax Officer that 411 qtls. of 36 degree BE solution would absorb 878 qtls. of oil and that in order to prepare the aforementioned quantity of solution it would take 126 qtls. of solid caustic soda and further that 152 qtls. of, solid caustic soda had, in fact, been consumed by the assessee (of this 85 qtls. was directly purchased as solid caustic soda and 159 qtls. was purchased at 45% caustic solution which on conversion would give 67 qtls. of solid caustic soda (149 x 45/100). Again it has not been denied by the assessee that consumption of 152 qtls. of solid caustic soda would yield 494 qtls. of solution of caustic soda of 36 degree BE (1 of solid and 2.25 of water). The difference between the two figures, namely, 494 qtls. and 411 qtls., that is, 83 qtls. repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the penalty proceedings. Even re-appraisal of the facts on record cannot lead in our opinion to any other conclusion than the one reached by the Tribunal in the quantum proceedings. May be, the figures of production, which have been made the basis for penalty are estimated ones, but these estimates have been resorted to on the basis that the assessee's records were full of mistakes, cuttings, overwritings, erasures etc., that the assessee did not produce the books of original entry to justify the said cuttings etc., that the elaborate analysis report of the assessee's production showed much higher production of dana than disclosed by the assessee and that there was no proper explanation from the assessee for the aforesaid lower output and that the non-disclosure of part of dana extracted by the assessee would lead to the natural conclusion that the said dana had been crushed and its product obtained and sold. The above findings of the Tribunal are final by now and being findings of fact have to be relied upon, unless the assessee was unable to show, by some additional evidence, that the production was not as determined by the Tribunal. In the case of soap, it may be that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the present case, would not be correct. As such, we feel that the Ld. CIT (Appeals) was unjustified on merits in giving the finding that the onus, which was on the assessee, stood discharged with regard to the additions made on account of groundnut oil, khali and soap account. The additions sustained by the Tribunal in quantum appeal with regard to the Moongfali and soap account do, in our opinion, truly reflect the extent of concealed income of the assessee (i.e. Rs. 2,36,375) and, therefore to the extent of the said additions, penalty is imposable on the assessee on the above account in terms of section 271(1)(iii). The departmental appeal, in the circumstances, stands partly allowed. 46. In the assessee's appeal, we do feel that imposition of penalty with reference to the sum of Rs. 5,000 being expenses under the head Basa, and Rs. 5,620 on account of disallowance of General expenses, and Rs. 5,000 on account of expenses incurred on maintenance and running of cars was not justified by the Ld. CIT (Appeals). The assessee had added back Rs. 1,000 out of Basa expenses and Rs. 2,000 out of General expenses on the ground that they represented non-business expenses. Instead of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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