TMI Blog1990 (3) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 71 and 78 of the Gold Control Act were commenced by the assessing authorities before the Deputy Collector of Customs before whom, a plea was taken by the assessee, inter alia, that some of the seized ornaments were pawned by customers and that the firm was not dealing in gold ornaments as alleged and that earlier statement that firm was dealing in gold ornaments was recorded under duress. The above statement, which was given on 26th May, 1978, was rejected by the Deputy Collector, Central Excise as being an afterthought, as there was no evidence to suggest that at the time, when originally the statement of Sri Gopi Krishna was recorded, he was under duress. The learned Deputy Collector further found that the number and varieties of seized new gold ornaments definitely indicated their commercial nature and as such it could not be believed that the firm from whose custody the said gold ornaments had been seized, did not deal in gold ornaments. 3. After recording the finding as above, the Deputy Collector, Central Excise imposed a fine of Rs. 10,000 on the firm and the further penalty of Rs. 5,000 and directed that on payment of the aforesaid amount the gold ornaments may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee firm. In his penalty order the ITO has explained that the income in respect of which the particulars were allegedly concealed by the assessee consisted of the following two items : Rs. Income from trading in gold ornaments 15,000 Unexplained investment in trading 81,365 ------------------- 96,365 ------------------- The assessee's explanation that he had not concealed income was, however, rejected by the ITO. The plea of the assessee that penalty could not, in any case, be imposed with reference to unexplained investment in trading to the extent of Rs. 71,365 as that amount had already been allowed to be set off by the assessee on account of loss of stock-in-trade was rejected by the ITO by saying that "mere deduction would not exonerate the assessee from the guilt of concealment in acquisition of the stock of gold ornaments..........." Penalty of Rs. 45,000 in all was imposed on the assessee on the aforesaid basis. 6. The assessee challenged the aforesaid order before the CIT (Appeals) and pleaded before him that the investment in gold ornaments as above could have been out of agricultural income; that part of it could be pawned ornaments and that, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee's explanation that he had agricultural income to explain partly the investment in the gold ornaments, was rejected by the learned CIT (Appeals) as being without any supportive evidence. On the contrary, pointed out the learned CIT (Appeals) there was evidence on record to show, vide the statement of Sri Gopi Krishna dated 4th March, 1980, that income from agriculture had not been declared by the family because there was no income from agriculture in any of the years except the year 1974-75, when income of Rs. 2,000 had been declared. In the face of this evidence, the learned CIT (Appeals) observed that the assessee's averment in penalty proceedings could not be accepted without there being further evidence on record on the point. His observations are contained in paragraphs 10, 11 and 12 in this regard. Similarly the assessee's explanation that some of the ornaments were pawned ornaments, was rejected by the learned CIT (Appeals) as there was no evidence to support the same. The relevant observations of the learned CIT (Appeals) are contained in paragraphs 8.1 and 9. The following observations made by the learned CIT (Appeals) deserved to be noted at this stage : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has changed all its old stands and it has produced fresh evidence regarding some contentions or the other before the CIT(Appeals). The assessee had not produced the books of account before the search party. It has also not produced any evidence regarding agricultural income before the ITO. It produced new evidence regarding business loss also before the CIT (Appeals). Although there is no legal restriction against this yet it proves the assessee's style of working." 11. In view of the observations made as above,the learned CIT (Appeals) confirmed the penalty imposed on the assessee and dismissed the assessee's appeal. 12. It is against the aforesaid finding of the learned CIT (Appeals) that the present appeal has been filed by the assessee before us. The same pleas, as were taken by the assessee before the authorities below, are reiterated before us and, in particular, it is stressed that the Explanation 4 to section 271(1)(c) does not apply to the facts of the present case and that penalty can only be imposed, if at all, with reference to those items, which were included in the total income, and in respect of which it can be said that the income in question was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression 'tax sought to be evaded' given earlier is a case to which Explanation 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed." 14. On the basis of the aforesaid submissions, it was urged by the learned departmental representative that the order of the CIT (Appeals), being correct should not be interfered with. 15. We have given careful consideration to the facts of the case and the rival submissions. In the present case, the facts stated above go clearly to show that, at the time of the search at the business and the residential premises of the partners of the firm, gold ornaments, which were altogether new and which were admittedly of commercial nature, were discovered. The assessee was not having licence for dealing in gold ornaments whereas it did possess licence for carrying on money-lending business and dealing in silver and silver ornaments. The assessee's explanation was asked for with regard to all the items, which were available at the business and residential premises. As has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid confession from Sri Gopi Krishna was obtained by the custom authorities under duress.There is nothing to suggest this. The assessee's plea is prima facie not only incorrect but against all human probabilities bordering on falsehood. We accordingly reject the claim. 16. As the assessee was doing business in gold ornaments, and as its income had not been disclosed by the assessee, the income, which has been estimated by the authorities below with regard to this business, namely, Rs. 15,000 is undoubtedly the concealed income of the assessee ; but under the head 'business income', the income from dealings in gold ornaments would not be Rs. 15,000. It would be a less figure of Rs. 15,000 minus Rs. 71,365, which represents the loss in stock-in-trade of this very business. In other words, the net result of business in gold ornaments has been determined by the ITO this year to be a loss of Rs. 56,365, and not an income of Rs. 15,000 as presumed by the learned CIT (Appeals). May be that the loss in question had not occurred during the accounting period under consideration, but in the present case, we are not hearing an appeal against quantum. Quantum is the given datum for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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