JUDGEMENT
A. Kalyanasundharam, Accountant Member -
(1.)THE revenue has preferred these appeals for the four assessment years 1973-74 to 1976-77. THE CIT (A) had disposed of these four appeals by his common order dated 14th April, 1986. THE objection of the revenue is on the cancellation of the penalties levied on the assessee for the concealment of incomes under Section 271(1)(c) of the I.T. Act. THE quantum of penalties levied were Rs. 44,862, Rs. 30,395, Rs. 33,197 & Rs. 40,072 for the assessment years from 1973-74 to 1976-77
(2.)The brief facts of the case are brought out below. The business premises of the assessee firm and the residential premises of the partners were searched on 29th Dec. 1981. The seized documents included duplicate set of cash book and ledger which were marked for identification as Nos. 57 & 58, 59, 55 & 56, and 50 relating to the assessment years 1973-74, 1974-75, 1975-76 and 1976-77 respectively. The ITO co-relating the items appearing in the seized books and the regular books of accounts was able to establish that, the duplicate set of account books belonged to the assessee. He identified specific transaction that were unaccounted at the time of the original assessment. He accordingly issued the notices under Section 148 on 26-3-82, 17-2-83, 23-9-83 for the four assessment years under consideration. He after considering the explanations provided by the assessee completed the assessments Under Section 143(3) read with Section 148 on 31-1-84 for all the four assessment years. The additions fell broadly into five categories, viz., (1) sale shown as cash sale in regular books but shown as credit sale in the duplicate set of accounts with a view to introduce cash into the regular books; (2) difference in cash receipts as noted in regular books and as in duplicate books: Sales and expenses as noted in duplicate set of accounts; (3) payments made to parties for buying of timber whose names appear in abbreviation such as JPS, BDS & LNS, the profit element only considered; (4) difference in the closing cash balance between the duplicate set of accounts and the regular books; and (5) payments made appearing in duplicate books but not figuring in the regular books. The ITO made additions for unrecorded sale after adjustment of the unrecorded expenses as noted in the duplicate books at Rs. 39,862, Rs. 11,745, Rs. 12,197 and Rs. 20,192 for the assessment years 1973-74,1974-75 ,1975-76 and 1976-77 respectively. The ITO made additions to cover the suppressed profit arising out of timber purchased by relating the payments to three parties were Rs. 8,000, Rs. 20,000 and Rs. 45,000 for the assessment years 1974-75,1975-76 and 1976-77 respectively. Addition based on payments made but not figuring in the regular books were made for the two assessment years 1974-75 and 1975-76 at Rs. 4,040 and Rs. 1,000 respectively. For the assessment year 1974-75 the two other additions that were made in regard to, (a) difference in closing balance of cash between the duplicate and the regular books Rs. 3,257 and (b) introduction of cash in regular books by showing sales as for cash but the same appearing in the duplicate book as credit sales Rs. 3253. The assessee appealed to the CIT (A) against the additions made by the ITO for all the four assessment years.
2.1 During the pendency of the appeal before the CIT(A), the assessee moved its petition for settlement of its incomes before the CIT on 7-12-84. In this petition the assessee admitted that the seized records pertained to the four assessment years under consideration. The assessee had also stated in this petition that the additions are unjust and the later years' assessments had also been reopened and that since the appeals for the present four asst. years had not been completed, the ITO may want to follow the pattern of assessment made for these asst. years arid therefore it is seeking to settle its cases on fair, reasonable and just terms. In paras 7 to 9 of its petition it had brought the basis of additions made. In para 10 of its petition it had brought its broad proposal for the settlement which is reproduced below for facility.
Without prejudice to the assessment proceedings and penalty proceedings, we are now willing to pay taxes on the income actually earned and offer the following proposals and terms for your kind considerations :
1. The gross profit rate of 12% on sales suppressed may be added in on income of the respective years.
2. As the payments made to BDS, LNS & JPS are rotated from time to time, average investment of 1/5 of the payments made for unrecorded purchases may be adopted. If such investments exceed the accumulated funds of profits on suppressed sales of earlier years, the same may be added to the income for the respective years, otherwise it may be held that such an investment is made out of funds available with us.
No addition for petty cash payments and receipts be made as it is fully covered by the accumulated funds available with us out of profits offered for taxation.
(3.)THE above offer is subject to the condition that the department will not initiate penalty and prosecution proceedings against the firm and partners.
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