T.V.K.NATARAJA CHANDRAN, A.M. : - (1.) THESE appeals by the Revenue are consolidated and disposed of by a common order for the sake of convenience as they relate to the same assessee and arise out of the similar facts and circumstances of the case and the contention of the parties are also same. THESE appeals pertain to penalties levied under S. 271(1)(c) for the asst. yrs. 1977-78, 1978-79, 1979-80 and 1980-81 and arise out of the appellate orders of AAC for the asst. yrs. 1977-78 and 1978-79 and CIT(A) for the asst. yrs. 1979-80 and 1980-81 respectively. The ITO levied penalties under S. 271(1)(c) for concealment of income as a consequence of the reassessment proceedings completed for these years as a result of search conducted in the residence and business permises of the partners of the firm on 23rd Jan., 1981. During the search the ITO found kachha and pacca sets of accounts maintained by the assessee for these years and which according to the ITO revealed substantial concealment of income. During the course of scrutiny there was settlement effected by the CIT for these years according to which the income was determined at Rs. 53,890, 95,253, 1,25,262 and 1,12,583 respectively for the asst. yrs. 1977-78 to 1980-81. At this juncture it is necessary to mention that prior to reassessment proceedings the original assessments were completed on a total income of Rs. 13,185, Rs. 35,390, Rs. 48,958 and Rs. 47,583. After finalising the reassessment the ITO initiated penalty proceedings and after observing the due process of law and considering the objection raised by the assessee he rejected the explanation offered by the assessee as unsatisfactory and levied penalties for concealment of income as detailed in the penalty orders. In short the case of the ITO was that the kachha and pacca books of accounts seized at the time of search revealed substantial concealment of income and there was great discrepancy found in these two sets of accounts. The assessee also agreed to the total income determined by the CIT at the time of settlement.
(2.) On appeal the AAC passed a speaking order for the asst. yr. 1977-78 and this has been applied for the asst. yr. 1978-79 cancelling the penalties imposed by the ITO for the asst. yrs. 1977-78 and 1978-79. According to him the addition in the reassessment was made by a settlement by treating some expenses which were not supported by vouchers. The expenses related to payments made to producers. The CIT has allowed deduction of Rs. 5,000 only for probable expenses incurred by the assessee for procuring the films for exhibition. The AAC pointed out that the ITO has not established that the assessee obtained films without making payment in excess of Rs. 5,000. He has also pointed out that the ITO had not taken into account the details or particulars of films and prints purchased by the applicant so that the rough estimation of the case could be arrived at nor the ITO has cited example of market purchase cost of 16 mm film to arrive at the average market rate in this regard. He has also pointed out that the fact that the assessee purchased films for the purpose of exhibition could not be disputed and the deduction of Rs. 5,000 allowed in the settlement was only a guess estimate and the reassessment was also based on such guess estimate only. He has made a pertinent observation that the addition made in the reassessment could not be said to represent separate, distinct and deliberate concealed income of the assessee. The plea raised by the assessee, according to the AAC was probable that the addition did not represent concealed income. Relying on the various judgments cited by the assessee before him and for the reasons given by him he cancelled the penalties levied by the ITO for the asst. yrs. 1977-78 and 1978-79. As regards the asst. yrs. 1979-80 and 1980-81 the CIT(A) passed a consolidated order for both the years. He pointed out that the ITO has not made any addition of positive income which has not been disclosed by the assessee other than the expenses claimed which were disallowed for want of supporting evidence. Therefore, according to him it is a case of allowance of estimated expenditure and not positive case of concealment of income by collecting positive evidence in support of the same. He made a pertinent observation that the expenses allowed to the assessee were not even 5% of the total income estimated in the settlement. Therefore, the CIT(A) concluded that there was nothing on record to prove that such addition represented concealed income of the appellant and there was wilful negligence or attempt on the part of the assessee to conceal the income. According to the CIT(A) the addition made in the reassessment was obviously not on account of deliberate concealment but on account of inability of assessee to produce accounts actually incurred and, therefore, it was necessary for the ITO to have brought some positive evidence to prove that there was deliberate concealment on the part of the assessee and the assessee was in possession of or had some source of concealed income. Since the ITO failed to do so the penalty imposed by him were not justified. Therefore, he cancelled the penalties levied for asst. yrs. 1979-80 and 1980-81. At the time of hearing the learned Departmental Representative filed a copy of the settlement effected by the CIT(Inv.) Gujarat, Ahmedabad, as seen from the order-sheet extract dt. 29th June, 1983. In fact the AAC has reproduced the settlement in his appellate order. However, it is necessary to again mention certain salient features of the settlement order passed by the CIT which has bearing or live nexus with the issue of concealment of income. The CIT has mentioned as follows : "The main point of dispute was regarding the payment made to producers which were not supported by evidence. Admittedly some expenditure is there but in the absence of details it cannot be accepted." Therefore, it is clear that the issue before the CIT was evidence for the payments made to producers from whom the assessee has purchased 16 mm films for exhibition not in commercial theatres but in schools, clubs, etc. At the time of hearing, the learned Departmental Representative put up a valiant defence of the orders passed by the ITO and the settlement order passed by the CIT and contended that the resultant income amounted to concealed income and, therefore, the penalties imposed by the ITO for these years were justified. The further defence taken by the learned Departmental Representative was that the assessee was unable to establish the claim of expenditure incurred for procuring the films and, therefore, the assessee has resorted to settlement before the CIT and he has also agreed to the determination of income.
(3.) THE learned counsel for the assessee, on the other hand, reiterated the contentions raised before the first appellate authority and the CIT and also before the ITO in writing which were reproduced in the penalty orders. In short, the stand of the assessee was that there was no concealment of income in the kachha and pacca books maintained by the assessee and the assessee has only excluded the expenditure incurred for procurement of films from producers and also the corresponding receipts in the pacca books of accounts vis-a-vis the kachha accounts found at the time of search. It is only on account of inability to produce vouchers because the producers never give any vouchers for the films sold by them additional income was taken in reassessments. THE assessees business was dwindled and ultimately closed down. THErefore, the assessee sought settlement to purchase peace and also agreed to the settlement made by the CIT. THErefore, the disallowance of expenditure incurred on the ground of inability to produce vouchers did not mean the addition represented a concealed income of the assessee and, therefore, he strongly supported the orders passed by the AAC and also the CIT(A).;