Commissioner of Income Tax vs Satish Medical Agencies

The Income Tax Appellate Tribunal, New Delhi, has referred the following question of law u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no penalty u/s 271(1)(c) was leviable in respect of the trading addition of Rs. 18,446 ?"

The reference relates to the assessment year 1979-80. The facts giving rise to the present reference are that the respondent is a dealer in medicine. On October 25, 1979, there was a search on the business premises of the respondent as well as on the residential premises of its partners. During the search certain purchase vouchers were found which were not recorded in the regular books of account. Similarly, certain papers were found which showed that some sales had also not been recorded. During the course of the assessment proceedings the Income Tax Officer took recourse to the proviso to Section 145 of the Act and estimated the assessee''s income by estimating its sales at Rs. 10 lakhs as against Rs. 9,09,710 and applying the G. P. rate of 10 per cent. The income finally after appeal effect came to Rs. 64,469 as against the disclosed income of Rs. 32,285.

The assessing authority initiated penalty proceedings u/s 271(1)(c) of the Act and after hearing the respondent, he imposed a sum of Rs. 20,000 as penalty. The order was sustained by the Appellate Assistant Commissioner to the extent of Rs. 6,822. Feeling aggrieved by the said order, the Revenue preferred an appeal before the Tribunal. The Tribunal has dismissed the appeal.

We have heard Sri Shambhu Chopra, learned standing counsel for the Revenue. No one appeared on behalf of the assessee.

Learned standing counsel submitted that as the income assessed was more than double the income disclosed, the Explanation to Section 271(1)(c) of the Act was attracted and the onus was on the respondent to prove that there was no wilful or gross negligence on its part in disclosing the income and as the onus has not been discharged by the respondent-assessee, the Tribunal was not justified in upholding the order of the Appellate Assistant Commissioner, deleting a part of the penalty.

Having given our anxious consideration to the plea raised by learned standing counsel, we find that it is not disputed that the assessed income is more than double the returned income and, therefore, the Explanation to Section 271(1)(c) of the Act was attracted. The difference was not on account of any guess work but on the ground that there has been suppression of purchases and concealment of sales.

Thus, the respondent was guilty of concealment of income and it had failed to discharge the onus. In this view of the matter we are of the considered opinion that the Tribunal was not justified in upholding the order of the Appellate Assistant Commissioner deleting a part of the penalty. We, therefore, answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.