J.C. D''souza and Co. vs Commissioner of Income Tax

D.R. Dhanuka J.

The Income Tax Appellate Tribunal has referred the following question to this court for its opinion u/s 256(1) of the Income Tax Act, 1961 :

"Whether, on the facts and circumstances of the case, the Tribunal was justified in law in sustaining the penalty of Rs. 24,137 for the assessment year 1971-72 ?"

At the material time, the assessee was carrying on business as a vendor of foreign liquor. On September 14, 1971, the assessee filed their return declaring total income of Rs. 28,263. Along with the said return, the assessee submitted a trading account, profit and loss and other relevant documents. The Income Tax Officer issued notice u/s 143(2) of the Act and the case was adjourned from time to time. On December 22, 1971, the assessee filed a revised return declaring a total income of Rs. 35,396. By an order dated January 31, 1972, the Income Tax Officer computed the total income at Rs. 63,980 by estimating the sales at Rs. 7 lakh and the gross profit at 12 per cent. By his order dated March 18, 1972, the Appellate Assistant Commissioner computed the income of the assessee at Rs. 52,400. The Income Tax Officer initiated penalty proceedings against the assessee u/s 271(1)(c) of the Act after invoking the Explanation thereto. After examining the explanation of the assessee in response to the show-cause notice, the Income Tax Officer passed an order on March 20, 1972, levying penalty of Rs. 24,137 by invoking section 271(1)(c) of the Act. The order of the Income Tax Officer imposing penalty was sustained by the Appellate Assistant Commissioner on appeal as well as by the Income Tax Appellate Tribunal. The Explanation to section 271(1)(c) of the Act was clearly attracted having regard to facts of this case. The authorities below found the explanation of the assessee unconvincing. We see no reason to interfere with the view taken by the authorities below.

We have gone through the orders passed by the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal carefully. After appreciating all the facts, the Tribunal came to the conclusion that the accounts maintained by the assessee were manipulated and the explanation given by the assessee was false. During the course of its order, the Tribunal observed as under :

"The Income Tax Officer in the course of hearing fond that the accounts maintained by the assessee were not written during the course of business, that entries from bank accounts were nowhere incorporated in the cash book, that the amounts required for payment of sales tax or excise duty were shown as payments on the respective dates but the cash required for the purpose of the said payments was manipulated by crediting the amounts without any details and that the results shown could not, therefore, be relied upon. All these facts were discussed threadbare in the assessment order and the Officer finally came to the conclusion that the income was to be estimated only. Accordingly, he estimated the total income of the assessee at Rs. 63,975 by estimating sales at Rs. 7 lakhs and the gross profit at 12 per cent. In short, the Income Tax Officer noticed that the books of account did not reflect the correct picture of the state of affairs of the assessee so far as the income shown in the two returns was concerned."

Learned counsel for the assessee has attempted to assail the reasoning and conclusion arrived at by the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal. We are of the opinion that the view taken by the Income Tax Tribunal is correct.

In view of the above, we answer the question referred to us in the affirmative and in favour of the Revenue. No order as to costs.