1983-VIL-65-ITAT-DEL

Equivalent Citation: TTJ 019, 493,

Income Tax Appellate Tribunal DELHI

Date: 27.04.1983

MADAN GOPAL BANSAL & SONS.

Vs

INSPECTING ASSTT. COMMISSIONER OF INCOME TAX (ASST.).

BENCH

Member(s)  : P. V. B. RAO., BISHAN LAL.

JUDGMENT

These six appeals, three filed by the assessee and the other three filed by the Revenue, arise out of the order dt.1st Dec., 1981in Appeal Nos. 138, 178 and 174/80-81/M of the CIT(A),Meerutand are disposed of by a common order.

2. the assessee is an HUF of which Shri Madan Gopal Bansal is the Karta. The previous years for the asst. yrs. 1976-77, 1977-78 and 1978-79 ended on31st March, 1976,31st March, 1977and31st March, 1978respectively. For the asst. yr. 1976-77 the assessee filed an return of income on12th Aug., 1976declaring income of Rs. 10,685. This amount comprised;

(1) Rs. 4,124 as income from house property;

(2) Rs. 6,409 income from money lending business; and

(3) Rs. 152 being income from other sources.

A revised return of income was filed on9th March, 1979showing income at Rs. 10,665. There was a slight decrease in income from house property otherwise the income shown was from the same sources as shown in the original return. For the asst. yr. 1977-78 the return of income was filed on20th Aug., 1978declaring income of Rs. 11,240. This amount comprised:

(1) Rs. 3,864 income from house property;

(2) Rs. 7,318 interest income; and

(3) Rs. 58 interest on securities.

For the asst. yr. 1978-79 the return of income was filed on7th Sept., 1978declaring income at Rs. 10,220. This amount comprised:

(1) Rs. 3,864 being income from house property;

(2) Rs. 6,248 being income from interest; and

(3) Rs. 112 being interest on securities.

3. A search was conducted at the residential premises of the assessee on 24/25th Nov., 1978. During the course of the search cash amounting to Rs. 1,15,062 was found and seized. Jewellery of the value of Rs. 1,32,603 was found from two lockers and residential premises. At the time of the search two refrigerators, two television sets and one stereo set were also found, the value of which was estimated at Rs. 14,700. Certain books of account which were marked 'Shri I', 'Shri II' and 'Shri III' and which were shown at serial numbers 18, 19 and 20 of Annexure 'A’ to the Panchnama were also seized. On inspection of these books account the sales in respect of yarn business and the interest received were as under:

These books of account did not contain any capital account nor were the purchases found recorded in the said books. The assessee filed a written note in the month of March, 1980 the date is mentioned at page 14 of the paper book and offered for assessment on compromise basis the following amounts:

(1) After excluding Rs. 17,407 from the cash of Rs. 1,15,062 the Balance sum of Rs. 97,575 was offered the assessment:

(2) In respect of the investment in refrigerators and televisions, etc. it was stated that a sum of Rs. 12,400 remained unexplained:

(3) It was submitted that the income from the yarn business may be determined as the income of the assessee on the basis of net rate of profit. It was also submitted that the investment in yarn business may also be determined on fair estimate basis. It was submitted that comparison for the purpose of determination of undeclared investment could be made from the books of account of M/s Ram Chander Bhagat Dayal and M/s Bansal Boot Bhandar, In M/s Ram Chander Bhagat Dayal, a firm, M/s Shri Madan Gopal bansal and Krishna Gopal Bansal were equal partners and in the firm M/s Bansal Boot Bhandar the partners were Shri Sudhir Kumar Bansal, Smt. Shashi Jain and Smt. Dena Rani. Another letter was filed on5th March, 1980before the IAC (Assessment) and it was claimed that from out of the cash of Rs. 97,575 which was offered for assessment on compromise basis, a deduction of Rs. 27,899 should be allowed. The sum of Rs. 27,899 comprises two items. One item was a sum of Rs. 10,000 which was said to have been received as a gift by Shri Krishan Gopal Bansal from his mother, Smt. Shashi Bala Bansal, on23rd Oct., 1974, after she had withdrawn the money from the books of M/s Ram Chander Bhagwat Dayal. A gift-tax assessment was said to have been made. The amount received by Shri Krishan Gopal Bansal was said to have been advanced to the HUF of Shri Madan Gopal Bansal and Sons and that amount was said to have been utilised by the family in the business recorded in the books seized and referred above as 'Shri I, II & III'. The second amount was a sum of Rs. 17,899. It was explained that Shri Krishan Gopal Bansal (individual) had made a disclosure of Rs. 25,000 under the disclosure scheme of 1975 and after paying the taxes and after making the investment in Government Bonds, the balance of Rs. 17500 was deposited in a fixed deposit on30th Dec., 1975with Allahabad bank. On maturity of the said fixed deposit on 15th June, 1976 Shri Krishan Gopal Bansal received Rs. 17,099. This amount was also said to have been advanced to the family of the assessee which was utilised in the business carried on the books called 'Shri I, II and III'. The assessment for the year 1976-77 was completed on5th March, 1980. In this assessment the income from yarn business shown in the seized books marked 'Shri I, II and III' was on the basis of the assessee’s own admission, added to the income of the assessee. Since the seized books of accounts did not contain the actual Trading and Profit & Loss Account, a profit of Rs. 1,470 was estimated on the sales of Rs. 79,010 and the rate adopted was 1.86%, which was the rate shown in similar business carried on by M/s Ram Chander Bhagwat Dayal,Meerut. The balance sum of Rs. 77,540 (Rs. 79,010 minus Rs. 1,470) was treated as the assessee’s income from undisclosed sources on the ground that the investment to this extent in the yarn business had not been satisfactorily explained. The sales of Rs. 78,010 were found to have been made during the period16th April, 1975to22nd March, 1976and these sales were shown as credit sales. Since no material was made available to the IAC regarding the dates on which the sale proceeds were received the IAC formed the opinion that the entire sum of Rs. 77,540 remained unexplained and in such circumstances that amount was treated as the assessee’s income from undisclosed sources. For the purpose of taxing interest income received during the course of yarn business the assessee’s submission was that the amount of interest may be taxed on receipt basis but in the absence of any details, the IAC estimated the income pertaining to the yarn business at Rs. 21,000 but through an oversight this amount was not included in the original assessment. The interest income of Rs. 21,000 was included in the assessment by an order under s. 154 dt.27th March, 1980. A show cause notice was issued to the assessee and the assessee offered no objection. According to this order, the total income was determined at Rs. 1,10,700. No appeal was filed against this assessment.

4. For the asst. yr. 1977-78 the assessment was completed on31st March, 1980and the total income was determined at Rs. 1,24,57. This amount included a sum of Rs. 1,15,000 by way of income from undisclosed investment. Against the sales and undisclosed cotton yan business shown in the seized books of account at Rs. 7,50,417 and interest of Rs. 1,651, the IAC estimated the sales of Rs. 20,00,000 and by applying the profit rate of 3 1/2%, determined the business income at Rs. 70,000 and to that figure was added interest income of Rs. 20,000 and unaccounted investment of Rs. 25,000. For purposes of working out the unaccounted investment in the yarn business the ratio adopted was 2/13 on the turnover of Rs. 20,00,000 and the investment was thus worked out at Rs. 1,35,000. After giving credit for the income of Rs. 1,00,000 estimated from the yarn business and loan of about Rs. 98,000 from Shri Krishan Gopal Bansal, the unexplained investment would have been only Rs. 7,000 but the unexplained investment was determined at Rs. 25,000. There was no appeal against this assessment also.

5. For the asst. yr. 1978-79 the assessment was completed on31st March, 1980and the total income was determined at Rs. 2,00,160. This amount included a sum of Rs. 1,92,000 on account of income from undisclosed cotton yarn business as also unexplained investment and interest from the same business. The sum of Rs. 1,92,000 comprised of three items:

(i) Rs. 50,000 being profit at 1% estimated on sales of Rs. 50,80,000. These sales were estimated against the sales of Rs. 34,07,286;

(ii) Rs. 50,000 being interest from yarn business estimated against the interest received shown at Rs. 45,428; and

(iii) Rs. 92,000 unaccounted for investment in the undisclosed yarn business.

For the purpose of working out the unaccounted investment in the undisclosed yarn business, the ratio of 2/30 was adopted on the estimated turnover of Rs. 50,00,000 and in this manner the investment was worked out at Rs. 35,000. After giving credit in respect of the loan of Rs. 28,000 from Shri Krishan Gopal Bansal, Rs. 1,00,000 being income for the asst. yr. 1976-77, Rs. 1,15,000 being income for the asst. yr. 1977-78, the total being at Rs. 2,43,000, the balance was worked out Rs. 52,000 and it is in this manner that the unaccounted for investment in the yarn business was worked out. There was no appeal against this assessment also.

6 Penalty proceedings under s. 271(1)(c) were initiated at the time of completing the assessments. In response to the show cause notices it was submitted that even though the assessee had agreed to be taxed on the income from yarn business and the interest income received from the same business with a view to purchase peace. From the perusal of the books of account seized it could not be ascertained as to which entity had carried on the business in yarn. The submission made was that there were two firms under and style of Ram Chander Bhagwat Dayal and M/s Bansal Soot Bhandar, the partners of these firms were regular assessees and Shri Krishan Gopal Bansal in the individual capacity had advanced the undisclosed funds to the assessee. Thus it was submitted that any entity may have carried on business but in order to avoid any controversy and to avoid litigation the assessee family agreed to be taxed on the income from interest and business income from the yarn. It was thus submitted that no penalty was required to be levied because firstly, it was not established as to which entity carried on the yarn business and secondly, the entire income in the yarn business, interest from yarn business and the unaccounted for investment in the yarn business was estimated. It was prayed that the penalty proceedings for these three years may be dropped. The IAC did not accept the assessee’s submission. He referred to all the facts of the case, including the statement of Madan Gopal Bansal, wherein he had admitted that yarn business was carried on by the assessee HUF and recorded a finding that the assessee was guilty of concealment of income or furnishing inaccurate particulars of income in all these three years. The IAC levied penalties of Rs. 70,000, Rs. 70,000 and Rs. 1,21,000 under s. 271(1)(c) for the asst. yrs. 1976-77, 1977-78 and 1978-79 respectively.

7. Aggrieved by these orders, the assessee filed appeals to the CIT(A). A written submission was made before the CIT(A) and this is at pp. 47 to 56 of the Paper book filed before us. It is pointed out that when even the ownership of the yarn business had not been established on the basis of the seized books of account and when the income from the said business was purely on an estimated basis, there was no question of levying any penalty for the simple reason that with a view to buy peace of mind the assessee had agreed to be taxed on certain amounts. The submission made was that the mere agreement of the assessee to be taxed on certain amounts is not adequate material for the levy of penalties and the department should have placed some positive material on record to justify the levy of penalties. Reference was made in the judgments in New Bijli Foundry vs. CIT (1976) 104 ITR 330 (P&H), CIT vs. Gordhan Das Mool Chand (1979) 116 ITR 893 (Mad) and Fairdeal Motors vs. CIT 1978 CTR (J&K) 60 : (1979) 117 ITR 137 (J&K). It was also submitted that the initial contribution of the assessee HUF in the said yarn business was not established and without any cogent material on record and only on the basis of the assessee’s own admission for being taxed on certain incomes, it could not be held that the assessee was the owner of the said business as also the assets seized. Reference was made to the judgments in Gumani Ram Siri Ram vs. CIT (1972) 85 ITR 67 (P&H), Krishanlal Shiv chand Rai vs. CIT (1973) 88 ITR 293 (P&H), CIT vs. C.V.C. Mining Co. Gudur (1976) 102 ITR 830 (AP), CIT vs. Vinay Chand Hari Lal (1979) 8 CTR (Guj) 247 : (1979) 120 ITR 752 (Guj) and Sohinder Singh & Bros. vs. CIT (1979) 9 CTR (P&H) 23 : (1980) 121 ITR 834 (P&H). Reliance was placed on the judgments in Bombay Hardware Syndicate vs. CIT 1978 CTR (Mad) 273 : (1978) 114 ITR 586 (Mad), Addl. CIT vs. Smt. V. Kanakmmal (1979) 118 ITR 94 (Mad), CIT vs. Lal Babu (1980) 15 CTR (Pat) 173 : (1980) 122 ITR 1006 (Pat) for the submission that the mere estimate of income did not call for any penalty. It was thus submitted that the penalties levied may be cancelled. The CIT(A) upheld the levy of penalties but directed that penalty should be levied with reference to the income of Rs. 22,470 for the asst. yr. 1976-77, Rs. 90,000 for the asst. yr. 1977-78 and Rs. 1,00,000 for the asst. yr. 1978-79. He directed that on unaccounted for investment of Rs. 77.540 for the asst. yr. 1977-78, similar investment of Rs. 25,000 for the asst. yr. 1976-77, similar investment of Rs. 92,000 for the asst. yr. 1978-79, no penalty should be levied. Both the parties are aggrieved by this order of the CIT(A).

8. The ld. counsel for the assessee submitted that no penalties were required to be levied with reference to the income of Rs. 22,470 for the asst. yr. 1976-77. With reference to the income of Rs. 90,000 for the asst. yr. 1977-78 and with reference to the income of Rs. 1,00,000 for the asst. yr. 1978-79. He submitted that there must be positive evidence that the investment in business belonged to the assessee HUF and then alone penalties could be levied but there was no positive evidence to show that the investment in business belonged to the assessee HUF. For this submission he relied on the judgments in New Bijli foundry vs. CIT, CIT vs. Gordhan Das Mool Chand and Fairdeal Motors vs. CIT. He then submitted that admission was not conclusive but was rebuttable with circumstances and evidence. In other words, he submitted that only on the basis of admission no penalty was required to be levied. On this point he relied on the judgments in Gumani Ram Siri Ram vs. CIT, Krishan Lal Shiv Chand Rai vs. CIT, CIT vs. P.N. Nagaraj & Anr., CIT vs. Vinayhand Harilat, Sohinder Singh & Bros. vs. CIT, CIT vs. V.L. Balakrishanan (1981) 21 CTR (Mad) 326 : (1981) 130 ITR 138 (Mad), Addl. CIT vs. Aggarwal Misthan Bhandar (1981) 131 ITR 619 (Raj) and CIT vs. Chiranjji Lal Naranglal (1981) 24 CTR (Cal) 304. He then submitted that mere estimate of income was not sufficient for levy of penalties. On this point he referred to the judgments in Bombay Hardware Syndicate vs. CIT and Addl. CIT vs. Smt. V. Kanakmmal. He also submitted that the alleged unexplained investment could not, in any case, to be made the basis for levy of penalties. On this point, he relied on the judgments in CIT vs. Jewels Paradise (1975) 101 ITR 265 (Kar), and CIT vs. Lal Babu as also CIT vs. suchitra Sen (1982) 26 CTR (Cal) 8 : (1982) 135 ITR 797 (Cal). He thus submitted that the part penalties which had been sustained by the CIT(a) should also be deleted.

9. The ld. Departmental Representative relied on the judgments in Durga Timber Works vs. CIT (1971) 79 ITR 63 (Del), CIT vs. Krishna & Co. (1979) 13 CTR (Mad) 24 : (1979) 120 ITR 144 (Mad), Western Automobiles (India) vs. CIT 1977 CTR (Bom) 303 : (1978) 112 ITR 1048 (Bom), CIT vs. P.B. Shah & Co. (P) Ltd. (1978) 113 ITR 587 (Cal), CIT vs. Dr. R.C. Gupta & Co. (1980) 15 CTR (Guj) 23 : (1980) 122 ITR 567 (Raj), Addl. CIT vs. Bhartiya Bhandar (1979) 13 CTR (MP) 159 : (1980) 122 ITR 622 (MP), Mirzapur Construction Co. vs. CIT (1980) 122 ITR 828 (All), Rathnam & Co. vs. IAC (1980) 14 CTR (Mad) 310 : (1980) 124 ITR 376 (Mad) and CIT vs. Mir Mohd. Ali (1981) 128 ITR 215 (Mad), for the submission that when the assessee had agreed to be taxed on the income from yarn business, the income from interest from the yarn business and the unexplained investments made in the same business, penalty is clearly exigible in this case. He submitted that sub-cl. (2) of Expln. 1 to s. 271(1)(c) was applicable and as the assessee had admitted that the yarn business belonged to it and had further agreed to the income from yarn business, the income from interest from yarn business and the certain unaccounted for investments to be taxed as its income, penalties would be clearly exigible. He submitted that the CIT(A) erred in giving a direction that no penalty as required to be levied with reference to the unexplained investment of Rs. 77,540 for the asst. yr. 1976-77, Rs. 25,000 for the asst. yr. 1977-78 and Rs. 92,000 for the asst. yr. 1978-79. He submitted that the penalties levied by the IAC should be fully restored.

10. We have carefully considered the rival submissions. The income shown for the asst. yr. 1976-77 is Rs. 10,665 and the income finally assessed is Rs. 1,10,700. For the asst. yr. 1977-78 the income declared is Rs. 11,240 against which the income assessee is Rs. 1,24,579. For the asst. yr. 1978-79 the income shown is Rs. 10,224 as against the assessed income of Rs. 2,00,160. The Expln. 1 to s. 271(1)(c) is clearly applicable to the facts of this case. This Explanation provides that wherein in respect of any facts material to the computation of the total income, the assessee fails to offer an explanation or offers an explanation which is found to be false, or which he is not able to substantiate, he should be deemed to have concealed the particulars of that amount which is consequently added or disallowed in the assessment. The proviso to the Explanation, however, states that if the explanation offered is bona fide and all the materials facts are disclosed, his mere inability to substantiate the explanation would not bring into operation the legal presumption of concealment embodied in this Explanation. The Explanation has to be construed in such a manner that it harmonizes with the principles of justice and fairness. It is unnecessary to go into the facts of each and every case cited on behalf of the parties because the question whether penalty would be exigible in a given case would depend on the facts of the case.

11. Now let us examine the facts of this case very carefully. The books of account which contained entries in respect of the yarn business were recovered from the premises of the assessee. The presumption, therefore, would be that these books of account which were recovered from the premises of the assessee belong to the assessee. If the assessee wanted to take up the position that these books of account did not belong to it, then it was for the assessee to lead necessary evidence. Instead of leading any specific evidence to prove that the books of account in which the business dealings in yarn business were recorded did not belong to it, the assessee made a categorical admission during the course of assessment proceedings that these books belonged to the assessee family. The admission was also made in the statement recorded by Shri Madan Gopal Bansal. In the penalty proceedings the assessee argued that there were two firms under the name and style of M/s Ram Chander Bhagwat Dayal and M/s Bansal Soot Bhandar, who alongwith their partners were separate assesses and Shri Krishan Gopal Bansal in his individual capacity had advanced his declared funds. Thus, it was argued that the yarn business which the assessee admitted to be its own business could be the business of the other entities which were also regular assessees. The members of the assessee family are Shri Madan Gopal Bansal (Karta), Smt. Shashi Bala (Karta’s wife), Shri Krishan Gopal Bansal and his wife Smt. Usha Rani, Shri Sudhir Kumar Bnaal and his wife Smt. Kavita Rani and Shri Sushant Kumar Bnasal. Madan Gopal Bansal and Krishan Gopal bansal are the partners of the firm M/s Ram Chander Bhagwat Dayal and they are also members of the assessee family. the partners of M/s Bansal Soot Bhandar are Shri Sudhir Kumar Bansal, Smt. Shashi Bala an Smt. Usha Rani. All these three persons are also members of the assessee family. If the income from the yarn business belongs to either M/s Ram Chandar Bhagwat Dayal or M/s Banal Soot Bhander or to the partners of these two firms in their individual capacities, then the assessee family should have brought evidence on record proving the real identity of the persons to whom the income from the yarn business etc. belonged. It would not have been difficult for the assessee to lead evidence because the partners of the aforesaid two firms were members of the assessee family. It was within the special knowledge of the assessee as to whom the yarn business in the respect of which the books of account were seized belonged and when the assessee admitted that the income from yarn business and also the income from interest earned during the course of yarn business belonged to it, it cannot now be allowed to say that it is for the department to prove that the books of account in respect of yarn business belonged to the assessee and that further the income from the yarn business and the income from interest earned during the course of yarn business also belonged to the assessee. The nature of cases relied on by he ld. Departmental Representative would support the Revenues’ submission that when the assessee itself admits that the income from yarn business and the income from interest during the course of yarn business belonged to it, then no further proof is required to hold that the yarn business does not belong to the assessee but belongs to somebody else. The line of judgments relied on by the ld. counsel for the assessee on the point that here admission is enough for purposes of levying penalty does not help to the assessee in this case because this is not a case where the assessee has offered an explanation which it is not able to substantiate. This is a case where instead of offering an explanation the assessee has admitted the ownership of the business in respect of yarn and had agreed to be taxed on certain incomes in different years. Penalty is, therefore, clearly exigible in respect of the income from the yarn business as also the income from interest earned during the course of yarn business. Even though we hold that the penalty is exigible in respect of income from yarn business and the income from interest earned during the course of the yarn business but we do not agree with the CIT(A) that the entire income estimated from yarn business and the interest from yarn business should be subjected to penalty.

12. We will take each year separately. For the asst. yr. 1976-77 the direction of the CIT(A) is that penalty should be levied on the business income of Rs. 1,470 and on interest income of Rs. 21,000, the total being Rs. 22,470. We agree with the CIT(A) that penalty should be levied with reference to the sum of Rs. 1,470 which has been estimated as income from yarn business. We, however, do not agree with the CIT(A) that even the interest income of Rs. 21,000 estimated from yarn business should be subjected to levy of penalty because this amount was not found recorded in the books of account which were seized. This is a pure and simple estimate. The sale of Rs. 79,010 in this year has been accepted and after excluding the profit of Rs. 1,470, the unaccounted investment itself has been taken at Rs. 77,540. It is unconceivable that on the interest of Rs. 77,540 the assessee would have earned interest of Rs. 21,000. The assessee may have agreed to pay tax on the estimated amount of interest but as there is not even an iota of evidence to show that the assessee received any amount of interest in this year. We direct that no penalty should be levied on the sum of Rs. 21,000 taxed for that year. The question of levy of penalty in respect of unaccounted investment in respect of all the years will be considered separately.

13. For the asst. yr. 1977-78 the sales disclosed were at Rs. 7,50,417 against which the IAC estimated the sales at Rs. 20,00,000 and by applying the net profit rate of 3 1/2% estimated the business income from yarn at Rs. 70,000. There is no material on record to suggest that in this year even the seized books of account did not record of sales correctly. Accepting that the assessee earned profit at the rate of 3 1/2 per cent in that year, such profit on sales of Rs. 7,50,417 would amount to only Rs. 26,264. At best it can, therefore, be said that in respect of the sum of Rs. 26,264 the assessee had concealed income and that amount only can be made the subject-matter of penalty. We, therefore, direct that instead of levying the penalty on the estimated figure of Rs. 70,000 penalty should be levied only on the income of Rs. 26,264. The assessee had shown interest of Rs. 1,651 in its books of account against which the income estimated from interest is Rs. 70,000. The estimate of interest income over and above the figure of Rs. 1,651 is held estimate not based on any evidence and we would, therefore, direct that penalty should be levied only with reference to the interest income of Rs. 1,651 and not with reference to the interest income of Rs. 20,00. The assessee may have paid tax on higher income both in respect of business income as well as interest income but that by itself would not justify the levy of penalty in respect of that portion of income which is purely an estimated figure.

14. So far as the asst. yr. 1978-79 is concerned, the seized books of account disclosed sales of Rs. 34,37,286, the profit at 1% on these sales would amount of Rs. 34,073 against which the profit has been estimated at Rs. 50,000 by estimating the sales at Rs. 50,00,000 and by applying the net profit rate of 1%. There is no evidence that even in the seized books of account the assessee had not recorded the sales properly. We would, therefore, direct that penalty should be levied with reference to the sum of Rs. 34,073 only and not with reference to the sum of Rs. 50,000 which was estimated as the income from business. So far as the income from interest is concerned, the seized books of account disclosed interest income of Rs. 45,420 against which the IAC estimated the income at Rs. 50,000. In our opinion the income shown in the seized books of account at Rs. 45,520 alone can be made the subject-matter of penalty. We would, therefore, direct that penalty should be levied with reference to the sum of Rs. 45,520 and not with reference to the sum of Rs. 50,000 which is purely on estimated figure.

15. We would now take up the question of the levy of penalty on unaccounted for investments in all the three years. The assessee’s explanation before the IAC was that for carrying on the yarn business Shri Krishan Gopal Bansal had advanced the sum of Rs. 10,000 during the financial year 1974-75 relevant to the asst. yr. 1975-76. He had provided a further sum of Rs. 17,899 but that amount was available only after15th June, 1976which could be made use of only during the previous year relevant to the asst. yr. 1977-78. Thus according to the assessee, a sum of Rs. 10,000 was available for carrying on the business during the previous year relevant to the asst. yr. 1976-77. The IAC estimated the unaccounted for investment for the asst. yr. 1976-77 at Rs. 77,540 on the ground that the entire sales of Rs. 79,010 were credit sales and no material was made available before him to prove that out of those sales any recoveries were mad during this year. We are unable to accept the reasoning given by the IAC for estimating the unaccounted investment in this year. The assessment order records the names of the persons to whom the sales were made and if proper enquiries were made from the parties to whom the sales were made, it would perhaps have been possible to make a correct estimate of the unaccounted investment in that year. That, however, was not done. In the subsequent years, the IAC himself accepted the ratio of2 : 30in respect of the turnover. The turnover in this year is Rs. 79,010 and if the ratio of2 : 30is applied, then the investment needed would be only Rs. 6,270. The assessee’s claim that it had received Rs. 10,000 from Krishan Gopal Bansal during the financial year relevant to the asst. yr. 1975-76 has not been controverted by any evidence. Thus, it cannot be said that over and above the sum of Rs. 10,000 the assessee had made further unaccounted investment in the yarn business. we, therefore, do not accept the Revenue’s submission that penalty should be levied with reference to the sum of Rs. 77,840 also. The assessee may have paid tax on the sum of Rs. 77,540 but there would be no justification for levying penalty on that amount as that amount is a purely estimated income. The unaccounted investment in the asst. yr. 1977-78 had been taken at Rs. 25,000. By taking the ratio 2:30 on the estimated turnover of Rs. 20,00,000 the investment, according to the IAC would work out to Rs. 1,35,00 and if the assessee is given credit for Rs. 28,000 being loan from Shri Kishan Gopal Bansal and Rs. 1,00,000 which had been assessed as income during the asst. yr. 1976-77, totalling Rs. 1,20,000 the balance unexplained investment would be only Rs. 7,000. Against this figure the unaccounted investment had been estimated at Rs. 25,000. In our opinion, the CIT(A) was right in holding that the sum of Rs. 25,000 should not be made the subject matter of penalty because this is purely an imaginary income. We are not inclined to hold that penalty should be held to be exigible even in respect of the sum of Rs. 7,000 because that amount also becomes merely an estimated amount. The assessee may have paid tax on the unaccounted investment of Rs. 25,000 but that by itself would not lead to the inference that on the same amount penalty should also be levied for concealment of income. We may also state that if the ratio of2:30was applied on the sales of Rs. 7,50,417 declared in the seized books, the amount of investment would be about Rs. 50,000 and this amount would be easily available from the income for the asst. yr. 1976-77 and the loan from Shri Kishan Gopal Bansal. On this score also no penalty is required to be levied in respect of the sum of Rs. 25,000 for the asst. yr. 1977-78. For the asst. yr. 1978-79 the unaccounted investment had been taken at Rs. 92,000. The sales recorded in the seized books of account for that year are at Rs. 34,07,286 and if the ratio of2:30is applied to these sales the investment required would be Rs. 2,27,152. This amount would be easily available from the income of Rs. 1,00,000 assessed for the asst. yr. 1976-77, income of Rs. 1,13,000 for the asst. yr. 1977-78 and the loan of Rs. 20,000 from Shri Kishan Gopal, totalling Rs. 2,43,000. The IAC worked out the investment at Rs. 3,35,000 (2 : 30of Rs. 50,00,000) and then gave credit for Rs. 2,43,000 and thus worked out the unexplained investment at Rs. 92,000. This figure is a purely estimated figure and it does not call for any penalty. We would, therefore, agree with the CIT(A) that no penalty is required to be levied in respect of any of the three years on the unaccounted for investment on which tax had been paid by the assessee. It is unnecessary for us to discuss the facts of any of the judgments cited by the parties because as already stated, the question of penalty has to be determined on the facts of each case.

16. In the result, I.T.A. Nos. 292, 293 and 294/Del/1982 are partly allowed and I.T.A. Nos. 910, 911 and 912/Del/1982 are dismissed.

 

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