Commissioner of Income Tax vs Arjun Prasad Ajit Kumar

Affidavit of service has been filed.

Defect has been removed.

We have heard learned Counsel for the appellant-Department. No one has appeared from the respondent''s side.

The IT Department is challenging the order of Tribunal dt. 9th Oct., 1998.

The brief facts are that the assessee was a country liquor contractor/vendor. In the assessment proceedings, the account books of the assessee were rejected on the ground that the sales alleged by the assessee were not verified. Thereafter, following Section 145 of the IT Act, sales were estimated by the AO at 2-1/2 times of the licence fee and the net profit rate of 5 per cent was applied and, thereby, assessed the total income at. Rs. 2,03,200 as against the declared income of Rs. 1,20,740. Penalty of Rs. 60,000 was imposed u/s 271(1)(c) of IT Act for concealment of income in respect of the relevant assessment year, i.e., 1984-85. The penalty was set aside by the CIT(A). The relevant part of the decision of the said appellate authority is reproduced as below:

He doubted the sales but did not bring on record any material to suggest that the assessee had more sales than what was disclosed in its books of account. In other words, no material has been brought on record to prove actual suppression of sales by the assessee. Merely because the proviso to Section 145(1) has been applied and the sales have been estimated it cannot be said with certainty that the sales disclosed by the assessee as per its books of account were false. At best it could be said that the sales as declared by the assessee could not be substantiated by the assessee by evidence.

5.1 As regards the net profit rate, the assessee''s explanation has been that keeping in view the licence fee paid and the purchases of liquor made by it, the net profit disclosed at 4.3 per cent was reasonable and in fact, in the case of M/s Rama & Co. Jaunpur even net profit rate of 3.1 per cent on declared sales of Rs. 39,97,171 was accepted as reasonable. Even though, the assessee''s explanation has not been found to be satisfactory, there is nothing on record to show that the explanation offered by the assessee lacked bona fide. Only because the addition has been made in the assessment by applying the net profit rate and estimating the sales, the penalty for concealment cannot be levied.

The order of CIT(A) was upheld by the Tribunal.

On the finding given above, considered in the background of the proviso to Explanation of Section 271(1), we do not find any infirmity in the order of the Tribunal. For ready reference, the said proviso is quoted below:

Provided that nothing contained in this Explanation shall apply to a case referred to in Clause. (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.

No question of law arises.

The appeal is, accordingly, dismissed.