- (1.) The assessee is aggrieved of the order dated 9-2-1983 of the learned Commissioner (Appeals), Allahabad.
(2.) The assessee is a registered firm which deals in the purchase and sale of pumping set machinery parts, etc. For the assessment year 1977-78 on a turnover of Rs. 17,64,994, the assessee declared a gross profit of Rs. 1,28,433 at the rate of 7 per cent. An addition of Rs. 35,000 was made by ITO to the trading results, to cover possible leakages. Since the addition was made on agreed basis, no appeal was filed by the assessee. However, the ITO initiated penalty proceedings against the assessee under section 271(1)(c) of the Income Tax Act, 1961 (the Act). In reply dated 25-2-1982 in response to the ITOs letter dated 16-2-1982, the assessee stated that the proceedings initiated may be dropped. However, the ITO relied upon the following entry dated 22-11-1979 in the order sheet : "An addition of Rs. 35,000 made on agreed basis. Assessed 271(1)(c) : The ITO took the view that the assessee had not only agreed to an addition of Rs. 35,000 to the trading results but it also accepted that it was the concealed income as the order for issue of notice under section 271(1)(c) of the Act was also made in the same entry. According to the ITO, this was the reason why the assessee had not given any explanation for concealment of income. He, therefore, held that the addition of Rs. 35,000 represented the income of the assessee in respect of which the particulars had been concealed or were inaccurate. Accordingly, he levied a penalty a Rs. 21,000 with the prior approval of the IAC.
(3.) In appeal, the learned Commissioner (Appeals) held that on account of the words 271(1)(c) in the order sheet, the assessee was aware that penalty proceedings would be initiated and that the assessee was concerned by the facts and figures of this year and earlier years and since it did not put any condition that no penalty should be levied. The ratio of the decision of the Honble Allahabad High Court in the case of Banaras Chemical Factory v. CIT, 1977 108 ITR 96was applicable and that the levy of penalty was justified.;