JUDGEMENT
Mehra J., Judicial Member -
(1.)THE assessee, by the present appeal, challenges the order dated February 6, 1986, of the learned Appellate Assistant Commissioner of Income-tax, New Delhi, for the assessment year 1976-77, inter alia, on the following effective and comprehensive ground ;
" That the learned Appellate Assistant Commissioner was not justified in upholding the penalty of Rs. 10,214 levied by the learned Income-tax Officer under Section 271(1)(c) of the Act without appreciating the facts op the case ? "
(2.)In this case, a return declaring nil income was filed on July 28, 1980. It was mentioned in the return that due to disputes amongst the partners, no business was done. Subsequently, a revised return was filed on March 26, 1981, declaring a total income of Rs. 40,400 on an estimate basis. Thereafter, a revised return was filed declaring a total income of Rs. 18,400. Books of account were not produced during the assessment proceedings and only purchase and sale vouchers were produced from which the learned Income-tax Officer could not verify whether the details declared by the assessee were correct. Against the above background, the assessee's income was estimated at Rs. 42,000 as against Rs. 18,400 declared in the revised return which resulted in an addition of Rs. 23,600. Penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961, for concealment of income or particulars thereof were initiated. The penalty notice appears to have not been complied with by the assessee. Thus, a penalty of Rs. 10,214 was imposed, vide order dated March 28, 1985, framed under Section 271(1)(c) of the Act with the following observation :
" Under these circumstances, I am left with no alternative but to complete the penalty proceedings on the basis of the material available on record. The assessee filed the return declaring a total income of Rs. 18,400 and in the absence of books of account it was estimated at Rs. 42,000. The difference of Rs. 23,600 (42,000 - 18,400) is to be treated as income from undisclosed sources in respect of which the assessee has not furnished any explanation. I am satisfied that the assessee has furnished inaccurate particulars of income to the extent of Rs. 23,600 and the penalty provisions under Section 271(1)(c) are attracted in this case. I, therefore, impose a penalty of Rs. 10,214 being 100% of the tax sought to be evaded which is calculated as under."
The said penalty order was subsequently contested by the assessee. It was "argued before the learned Appellate Assistant Commissioner that income was returned on estimate basis and that was subsequently revised by applying various net profit rates of the last 5 years on sales of Rs. 2,55,397. It was also pointed out that the learned Income-tax Officer also assessed the income on estimate only. The assessee's contention was that no return was filed and since income was determined on estimate basis, the proviso to Section 271(1)(c) was not attracted. Mention was also made of some case-law. The assessee's appeal was dismissed by the learned Appellate Assistant Commissioner, after considering the submissions in the following manner :
" I have considered these submissions. The fact is that the appellant had been maintaining books of account for the period and these were not produced before the Income-tax Officer on the plea that they were with one of the partners who was not co-operating, the Income-tax Officer estimated the income since I am unable to agree that penalty under Section 271(1)(c) is not attracted merely because the income has been determined by estimate. From various decisions of the courts when under similar circumstances on the facts of the case penalty for concealment has been held to be leviable. For instance, A.K. Bashu Sahib v. CIT [1977] 108 ITR 736 (Mad). I agree with the ITO's finding that the appellant has furnished inaccurate particulars of his income. The penalty levied is correct. It is upheld. The appeal is dismissed."
(3.)THEREFORE, the present appeal by the assessee before us, inter alia, on the ground mentioned hereinabove. It was argued before us by Shri J.N. Sehgal, learned advocate on behalf of the assessee, that penalty proceedings were not required to be initiated in this case and that the erroneous action should not have been confirmed by the learned Appellate Assistant Commissioner. He also mentioned that a reply dated December 29, 1984, was filed before the learned Income-tax Officer and a copy whereof is said to be placed at page 4 of the assessee's paper book. A copy of some sort of reply is said to be placed at page 6 of the paper book also. Mention was also made of page 1 of the paper book being some sort of a chart showing the turnover, net profit income declared, income assessed, etc. It was contended that, when the assessment was framed on estimate basis, penalty under Section 271(1)(c) was not exigible and, in this connection, mention was also made of the ratio in the case of CIT v. K.L. Mangal Sain [1977] 107 ITR 598 (All) and CIT v. Nawab and Bros. [1977] 107 ITR 681 (All).