V.P Elhence, J.M:— The department is aggrieved of the order dated 12th April, 1985 of the learned CIT(A), Bareilly, whereby he cancelled the penalty of Rs. 11,658 levied by the ITO under s. 271(1)(c) for the asst. yr. 1978–79.

2. The assessee M/s Kamal Engineering Works, Civil Lines, Rampur, carries on the business of manufacture of distilate plant and repair work. For the assessment year in question, the assessee declared an income of Rs. 22,270 whereas assessment was completed by the ITO on an income of Rs. 1,22,070 after making the following additions:

(i) Extra profit addition Rs. 14,951 (ii) Addition by way of concealed sales to M/s Lalji Mentha (P) Ltd. Rs. 84,940 Total. Rs. 99,891

Accordingly, the ITO initiated penalty proceedings under s. 271(1)(c) and after considering the assessee's reply to the show cause notice, he levied a penalty of Rs. 11,658 under s. 271(1)(c).

3. In appeal the learned CIT(A) noticed that in the assessee's appeal only an addition of Rs. 27,552 on account of low gross profit had been sustained and that the explanation of the assessee regarding the difference in the sales to M/s Lalji Mentha (P) Ltd. was accepted. The learned CIT(A) held that the nature of the addition being related to estimates, the case did not call for the imposition of any penalty under s. 271(1)(c). Accordingly, he cancealled the penalty.

4. We have heard the learned representatives on both the sides. The contention raised on behalf of the department was that in terms of the Explanation to s. 271(1)(c) as applicable for the asst.-yr. 1978–79 in question, the penalty had been rightly levied by the ITO. Reliance was also placed by him on the decision of the Hon'ble Punjab & Haryana High Court in the case of New Bijli Foundry v. CIT, Amritsar, (1981) 23 CTR (P&H) 10 : (1982) 135 ITR 593 (P&H) wherein it was held that the findings in the assessment proceedings are relevant and that the imposition of penalty under s. 271(1)(c) based upon the finding in the assessment proceedings that the sale proceeds had been concealed, was valid. On the other hand Shri K.P Bhatnagar, the learned counsel for the assessee relied upon the order of the learned CIT(A) as also on the following decisions:

(i) M. Hussain Ali & Sons v. CIT, (1965) 58 ITR 787 (Mad);

(ii) D.M Dhanukar v. CIT, (1967) 65 ITR 280 (Bom);

(iii) Commr. Of Income Tax, Kerala v. H.A Mohamed Haneef, (1972) 83 ITR 215 (SC);

(iv) Hindustan Tools Mfg. Co. v. CIT, (1976) 102 ITR 174 (P&H);

(v) CIT v. Drapco Electric Corpn., (1978) CTR (Guj) 181 : (1980) 122 ITR 341 Guj); and

(vi) CIT v. Metal Products of India, (1984) 150 ITR 714 (P&H).

5. We have considered the rival submissions as also the decisions referred to above. The proposition laid down in the decisions referred to on both the sides are undisputed. However, each case has to be seen with reference to its own peculiar facts. The findings in the assessment proceedings are relevant in the penalty proceedings, though they are not conclusive. The assessee who was, in the past, doing only repair work, started fabrication work in the assessment year in question. He had also purchased a Mentha Plant where he did distilation of Mentha Oil. But during the year he sold out the building, machinery and plant to M/s S.S Industries, Moradabad. The ITO noticed that as per the assessee's accounts, he had shown to have received an advance of Rs. 80,106 from M/s Lalji Mentha (P) Ltd., Khempur but as per the said company's account, the said party had received machinery, tanks etc. during the year itself and the account had been squared up. Similar was the position regarding M/s Ishrat Chemicals, Rampur from whom the assessee had received and advance of Rs. 27,000. Advances from both these parties had been received for the fabrication of Mentha plants. The CIT(A) while agreeing with the ITO that the assessee's account books had to be rejected, had held that there was no justification for separately making any addition in respect of the sales to M/s Lalji Mentha (P) Ltd. He accordingly estimated the sales at Rs. 2.50 lakhs as against Rs. 1.70 lakhs estimated by the ITO. He applied a G.P rate of 20% as against the rate of 22% applied by the ITO. Accordingly, he estimated the G.P at Rs. 50,000 as against Rs. 22,448 declared by the assessee and upheld the addition of Rs. 27,552 as against 2 separate additions of Rs. 14,951 and Rs. 84,940 as mentioned above. The department went up in appeal before the Appell???te Tribunal (ITA No. 2124.Del/82) and the Appellate Tribunal vide its order dated 7th July, 1983 upheld the order of the learned CIT(A). Therefore, so far as the addition of Rs. 84,940 is concerned, it was completely knocked out. So far as the extra profit addition is concerned, as against the estimate of Rs. 14,951 made by the ITO, the CIT(A) and the Appellate Tribunal took it at Rs. 27,552. Although there was enhancement in the estimated rate of G.P, there is no finding in the assessment order or in the orders of the first or second appellate authorities that there was any suppression or concealment. The assessee had given an explanation for the discrepancy in the sales namely that it arose on account of the fact that the assessee had shown advances in a subsequent year. No doubt there is no bar to the imposition of penalty under s. 271(1)(c) in cases of estimate. But as we have already observed above, each case has to be seen with reference to its own facts. Normally penalty could not be levied for additions made on estimate unless it could be shown that an element of concealment was positively involved. In terms of clause (B) of Explanation 1 to s. 271(1)(c) as applicable for the assessment year in question, the assessee had offered an explanation which had been rejected by the ITO. However, the explanation has to be held to be bona fide as there is nothing on the record to establish otherwise. As we have already seen, it was a matter of one estimate over another without there being any specific material or finding to establish either the falsity of the explanation or any specific suppression. Therefore, having regard to the entirety of the facts and the circumstances of the case, we are of the considered view that no penalty was leviable on the assessee in terms of s. 271(1)(c) as applicable for the assessment year in question. The penalty was, therefore, rightly cancelled by the learned CIT (A) and his order is upheld.

6. The appeal accordingly fails and is dismissed.

Anand Prakash, A.M:30th Oct., 1987

As it has not been possible for me to agree with the conclusions of my learned brother Shri V.P Elhence, J.M, I am writing a separate order indicating my reasoning for not agreeing with him and giving my own conclusions on the facts of the case.

2. Assessee is an individual, who is doing business in the name of M/s Kamal Engineering Works. His accounting period for the asst. yr. 1978–79 commenced on 1st April, 1977 and ended on 31st March, 1978. He filed his return of income for the aforesaid assessment year on 28th July, 1978 declaring income of Rs. 22,270. The assessee was doing business of mechanical workshop wherein he undertook fabrication of machines and also their repairs. In addition, he also started during the previous year a Mentha Plant wherein distillation of Mentha oil had to be carried on for sometime. The said Mentha Plant was ultimately sold by the assessee during the accounting period itself to one M/s S.S Industries, Moradabad.

3. On examination of books of accounts of the assessee certain discrepancies, particularly with reference to two accounts, viz., M/s Ishrat Chemicals, Rampur and M/s Lalji Mentha (Pvt) Ltd., Khempur, were noted by the ITO. He pursued his enquiries and in this connection on examination of books of accounts of M/s Ishrat Chemicals and that of the assessee, he found that, whereas the assessee had sold to M/s Ishrat Chemicals fabricated machinery vide challan No. 107 dated 18th July, 1977,-the sale had not been credited in the books of account. The assessee accepted that he delivered the plants to the purchaser viz., M/s Ishrat Chemicals in July, 1977 for which price had been received by him as under: partly in advance and partly after goods had been delivered:

Date Amount 20-6-1977 Rs. 10,000 1-7-1977 Rs. 5,000 18-7-1977 Rs. 7,000 1-8-1977 Rs. 5,000 Rs. 27,000

4. The aforesaid amount of Rs. 27,000. which was received by the assessee from M/s Ishrat Chemicals Indu Rampur was not credited to the sales account but it was shown by him as liability due to M/s Ishrat Chemicals, Rampur. On being given an opportunity to explain why he had shown the said liability when the goods had been sold and delivered to said M/s Ishrat Chemicals, the assessee replied inter alia that he did not know English or Urdu and it appears that due to certain confusion it had been recorded and that the goods were also not included in the stocks of 31st March, 1978. It was later pleaded by the assessee that “since some dispute had arisen with the purchaser, bill against him was not drawn in the previous year under consideration and, therefore, it should not be treated as sale of this year”. This plea was rejected by the ITO by observing: “This is untenable and unacceptable. No evidence in respect of this explanation regarding dispute with the purchaser has been furnished. It is evident that the property in the shape of the goods had been passed to the purchaser during the year under consideration. The assessee had also received major portion of the consideration for the same during the year under consideration. The assessee's plea for treating the deal as sale for the next year is legally and factually untenable.”

5. With regard to sales made to M/s Lalji Mentha (Pvt.) Ltd., the ITO found out that the assessee had submitted quotations to the said party under his letter dated 6th Jan., 1977 against which the company placed order with the assessee for the supply of ten complete sets of machinery being Mentha Distillation Plant vide their order dated 10th Jan., 1977 to the assessee. A sum of Rs. 27,000 was paid on 10th Jan., 1977 and further payments to the extent of Rs. 60,000 were made as follows:

Date Amount 6-2-1977 Rs. 20,000 2-3-1977 Rs. 10,000 23-3-1977 Rs. 20,000 29-5-1977 Rs. 10,000 Rs. 60,099

6. Complete set of machinery was delivered by the assessee as per the version of the purchaser company at the premises of the aforesaid company on or before 25th May, 1977, i.e in the accounting year relevant to the asst. yr. 1978–79. The assessee, however, took the plea that the plant in question was supplied on 2nd April, 1978 and not on 29th May, 1977, but he could not produce any supporting evidence. As against it, the said company had acknowledged the receipt of the plant on 25th May, 1977 and had further stated that the company had used the said plant during the accounting period relevant to the asst. yr. 1978–79 and had also claimed depreciation on the plant and machinery. The ITO therefore came to the conclusion that delivery of the goods had been made during the accounting period relevant to the asst. yr. 1978–79 and that the consideration for the same had been received in the year and, therefore, according to him, sales to the extent of Rs. 84,937 pertained to the aforesaid year and accordingly the entire amount was added to the assessee's total income.

7. Apart from aforesaid concealment of sales, the ITO also rejected the assessee's trading results on the ground that gross profit rate had declined. He, therefore, estimated the assessee's sales at Rs. 1,70,000 and applied g.p rate of 22 % thereto, i.e made an extra profit addition to the declared results. While estimating the sales at Rs. 1,70,000, the ITO included the sales of Rs. 27,000 to M/s Ishrat Chemicals referred above.

8. The matter was carried in appeal to the CIT(A) by the assessee, who agreed with the ITO that the assessee's books of accounts had to be rejected but, at the same time, held that there was no justification for separately making an addition in respect of sales to M/s Lalji Mentha (Pvt.) Ltd., and the same should not be included in the estimate of sales, as was done with the sales of Rs. 27,000 to M/s Ishrat Chemicals. He accordingly estimated the sales at Rs. 2.50 lakhs as against sales estimated by the ITO at Rs. 1.70 lakhs and applied g.p rate of 20%.

9. The assessee accepted the above order of the CIT(A) but the Department appealed against it to the Tribunal who, after noting the facts as stated above confirmed the action of the CIT(A), viz?, estimating the sales at 2.50 lakhs (i.e increasing it by approx. Rs. 80,000 as against estimate of Rs. 1.70 lakhs made by the ITO) and did not accept the departmental contention that, while rejecting the assessee's books of accounts specific addition on account of undisclosed sales could also be made over and above the estimate of sales made by him. In other words, it appears that the Tribunal approved of the CIT(A) order that there were suppressed sales but the same should be included in the estimate of sales and the profits of the assessee should then be estimated by applying g.p rate of 20 %. In the bargain the sales as declared by the assessee were suitably enhanced by taking note of the sales to M/s Ishrat Chemicals and M/s Lalji Mentha (Pvt) Ltd. and income was estimated with reference to such enhanced sales.

10. On the above facts, the ITO imposed a penalty for concealment of the income on the assessee to the extent of Rs. 11,658.

11. The learned CIT(A) deleted the penalty in question by pointing out that “the nature of the above addition in this case being only related to estimates the case does not call for any imposition of penalty under s. 271(1)(c).”

12. It is the above order of the CIT(A) which was assailed before us. In my opinion observation of the CIT(A) that addition is merely on estimate is wrong. There is positive evidence of sales having not been declared by the assessee to the extent of Rs. 80,000 to M/s Lalji Mentha (Pvt.) Ltd. and to the extent of Rs. 27,000 to M/s Ishrat Chemicals. The estimates of sales by the CIT(A) and the Tribunal have been made keeping in mind the above two non-disclosures of sales. Non-disclosing the sales and the profits imbeded therein does amount to concealment and, therefore, penalty for this is justified. I, accordingly, accept the departmental appeal and reverse the order of the CIT(A).

13. In the result, appeal is allowed.

Order under s. 255(4) of the IT Act, 1961 1st Dec, 1987

As it has not been possible tor us to reach an agreed conclusion in this appeal, we refer the following question for the valued opinion of the Hon'ble Third Member:

“Whether, on the facts of the present case, it can be said that there is concealment of income and, if so, whether imposition of penalty for concealment is justified.”

The appeal may now be placed before the Hon'ble President for assigning the appeal to the Third Member.

Ch. G. Krishnamurthy, President: 4th May., 1989

This matter has come to me as a Third Member, under s. 255(4) of the IT Act, 1961 for my opinion as to : “Whether, on the facts of the present case, it can be said that there is concealment of income and; if so, whether imposition of penalty for concealment is justified.”

2. The assessee in this case is an individual, running a mechanical workshop undertaking fabrication and repair work at Rampur. For the year under appeal, a return was filed disclosing an income of Rs. 22,270. In this year, he was found to have started. a Mentha Plant for distillation of Mentha Oil but during the year itself sold off building, machinery and plant to M/s S.S Industries, Moradabad. This fact is relevant only for the purpose of showing that he was trying to experiment in the field of diversification of his activities. The ITO having become curious as to the magnitude of the activities conducted by the assessee made an attempt to confirm the closing balances shown by the assessee in his books of the debtors and creditors with their corresponding balances and found some discrepancies. In the account of M/s Lalji Mentha Pvt. Ltd., Khempur, the assessee showed an advance of Rs. 80,106.25 as received from him but the copy of the account received from that party showed ‘nil’ balance. The said party placed an order with the assessee for the fabrication of a Plant for Mentha distillation towards which he made advances of Rs. 80,106 uptil 31st March, 1978. Since the balances did not tally and since the assessee's account in the books of Lalji Mentha Pvt. Ltd. showed nil balance, the inference drawn was that the assessee completed the same by supplying the machinery after due fabrication but still did not account for the same in the profit and loss account and preferred to show the amount as advance, thereby suppressed the profit on the sale of this transaction.

3. Similarly, in another case of Janta Bricks, there was some discrepancy but not much was to be mentioned about that as it was not of much consequence but in the case of Ishrat Chemicals, Rampur, the assessee showed a receipt of Rs. 27,000 from him as advance whereas in the books of Ishrat Chemicals, the assessee was shown as their creditor, meaning thereby that here also the sale transaction was complete, goods were delivered, but still the amount received from that party was not shown as sale but only as an advance thereby suppressing the profit on this sale also. When the ITO required the assessee to explain these discrepancies, the assessee submitted that there was some discrepancy in accounting. He not being a person knowing accounts and intricacies of law and also an illiterate person, recorded faithfully what was received, under the impression that those amounts could be treated as sales only when the bills were submitted and goods were delivered and since there was some delay in the delivery of bills and also the delivery of goods, these amounts were not shown as sales but only as advances and that the bills were given in the next year when these transactions were shown as sales and the entire profit thereon was accounted for. This was the gist of the explanation offered by the assessee to the ITO in response to various enquiries made at different times. In proof of the explanation, the assessee submitted that in respect of Ishrat Chemicals, the bill was dated 10th April, 1978, which Was after the accounting year and in the case of Lalji Mentha Pvt. Ltd., the delivery of the goods also was given on 3rd April, 1978 and thereafter but not earlier. The ITO, however, was not prepared to accept this explanation as true and correct and faithful. He was of the opinion that the assessee had some deliberateness in showing these amounts still as advances, notwithstanding the delivery of the goods, delivery of the bills and the completion of the sales, thereby resorted to suppression of the turnover, sales and profits thereon. He, therefore, came to the conclusion that the sales disclosed by the assessee would have to be estimated. The sales disclosed were about Rs. 1,35,500 as against the estimated turnover of Rs. 1,70,000. He also found that the gross profit rate disclosed was lower and he enhanced it to 22% thereby he made an addition of Rs. 14,951 to the G.P disclosed. The entire amount of concealed sales of Lalji Mentha Co. (P) Ltd. was added back as income of the assessee, i.e Rs. 84,940. Thus the income was computed at Rs. 1,05,137.

4. Thereafter, there was an appeal before the CIT. On appeal, the CIT found that the ITO when he proposed additions on account of the concealed sales to both Ishrat Chemicals and Lalji Mentha (P) Ltd., in the proceedings under s. 144B, the addition on account of sales to M/s Ishrat Chemicals was directed to be merged to the trading account and sales were directed to be adopted at Rs. 1,70,000 as against declared sales of Rs. 1,35,500 and separate addition on account of the sales to Lalji Mentha (P) Ltd. was retained. Having added the sales made to Ishrat Chemicals to the book turnover and estimated the gross profit thereon, there was no justification to treat the entire turnover to Lalji Mentha (P) Lrd. as concealed income and that this discriminating treatment for these two sales Was uncalled for. Therefore, he directed the sales to be enhanced by the amount of the sales made to Lalji Mentha (P) Ltd., i.e from Rs. 1,70,000 to Rs. 2,50,000 and reduced the rate of gross profit to 20%, to be in conformity with the gross profit adopted in the earlier three years and succeeding year and thereby estimated the gross profit at Rs. 50,000 and deducting therefrom the gross profit shown by the assessee at Rs. 22,448 sustained an addition of Rs. 27,552. This was in substitution of the two additions of Rs. 14,951 and Rs. 84,940 made by the ITO.

5. The department then filed an appeal to the Tribunal against the deletion of the addition made by the CIT but that appeal was dismissed by the Tribunal. There is, however, no appeal filed by the assessee.

6. Now, the ITO in the mean time initiated proceedings for the levy of penalty for concealment of income. Taking note of the order of the CIT reducing the income to Rs. 27,552 and observing that on the facts of this case, the assessee was guilty of concealment of income, the ITO levied a penalty of Rs. 11,658 rejecting the assessee's contention that the difference in the income arose only on account of the enhancement in gross profit, that too on technical grounds which should not be treated as amounting concealment of income.

7. Against the levy of this penalty, there was an appeal filed before the CIT who cancelled the penalty on the ground that in a case where the rate of gross profit was enhanced, there ought to be no penalty for concealment of income and in any case, the discrepancy in the sales arose not because the assessee wanted to suppress any sales but because on a misunderstanding of the accounting position accounted for the sales in the next year, leading to no suppression of income.

8. The department then filed a further appeal before the Tribunal against the cancellation of this penalty. In that appeal, the Members have differed. The learned Judicial Member held that as against the additions made by the ITO for low gross profit and concealment of turnover of two separate amounts of Rs. 14,951 and Rs. 84,940, both the additions were deleted and they were substituted by another addition of Rs. 27,552 which represented only a difference in gross profit by estimating a higher turnover and the enhancement of turnover was not regarded in the assessment order as suppression or concealment of income and the assessee's explanation that these advances were shown as sales in the next year was a genuine one and factually correct. Further there was no bar to the imposition of penalty under s. 271(1)(c) in cases of estimate but they should have material to come to the conclusion that the estimate was as a result of concealment of income. In terms of cl.(B) of Explanation 1 to s. 271(1)(c) as applicable for the assessment year in question, the assessee did offer an explanation which was only rejected by the ITO but the explanation offered was not held to be mala fide and there was nothing on the record to establish that the assessee had not disclosed all the relevant facts and, therefore, the mere disbelief of the explanation of the assessee could not be regarded as equating the amount added as concealment of income. Ultimately he observed that it was a matter of one estimate or another estimate, that there being no specific material or finding to establish that whether the falsity of the explanation was any suppression. He. therefore, cancelled the penalty.

9. The learned Accountant Member, after tracing the entire history, right from the word start, came to the conclusion that the assessee was guilty of concealment of income because the enhancement of turnover to Rs. 2,50,000, from Rs. 1,35,500 shown by the books of the assessee was not a mere estimate in dark or a result of any guess work but the result of adding sales made to the parties referred to above. This meant that the estimate of turnover was only by adding the suppressed turnover. Therefore, this is a case where the asseessee was guilty of concealment of income to the extent of profit embedded in the suppressed sales. It could not be said that the estimate was an estimate made without any basis. Relying very heavily on the order of the Tribunal, confirming the estimate of tunrover made by the CIT(A), the learned Accountant Member observed that there were suppressed sales and there was no gain saying of the fact and merely because the rate of gross profit was estimated, it did not amount to saying that there was no suppression of income. As there was positive evidence of suppression of sales, the penalty was rightly imposed and, therefore, it should be confirmed. Hence the above difference, which was referred to me.

10. I have heard the learned counsel for the assessee Shri K.P Bhatnagar and Shri Durgesh Shankar, the learned Departmental Representative for quite some time on these two claims. While Shri Durgesh Shankar submitted, relying upon the order of the learned Accountant Member that since there was positive evidence of sales having been suppressed and since only the suppressed sales were added to the turnover shown by the books/the addition thus arrived at should not have been considered as an addition made in a routine way of estimating the turnover where except bare suspicion and possibility of two opinions to exist, there was no other evidence. By taking through the evidence that was collected by the ITO at the assessing stage, he submitted that the assessee knew fully well that the sales were complete, goods were delivered but yet the amount was not shown as turnover all because the assessee wanted to suppress the profit thereon. The fact that the turnover was shown in the next year was not relevant inasmuch as we have to look to the facts of this year as to whether there was any concealment of income and not to be guided by what was shown in the next year. At one stage the assessee even tried to manipulate the explanation by contending that the goods were not delivered and they were included in the closing stock. When the turnover involved in both these transactions was of the order of about Rs. 1,20,000 the closing stock of Rs. 70,000 dis closed by the assessee would not have included these finished products even if the margin of profit was deducted from the gross amount of turnover involved in both the transactions: The explanation that the closing stock included these undelivered goods was, therefore, a false explanation. The assessee could not, therefore, be said to have offered a bona fide explanation while disclosing all material facts. The explanation on which the learned J.M relied upon cannot, therefore, be of any avail to the assessee. The Tribunal also confirmed the assessment made by the CIT by adding the suppressed turnover to the book turnover. Thus in a case where the suppressed turnover was the basis for the estimate of addition, it is well high impossible to say that there was no concealment of income. Therefore, the penalty rightly imposed, had to be confirmed and ought not to have been cancelled. On the other hand, the learned counsel for the assessee Shri K.P Bhatnagar submitted that the whole approach of the department to the case was unfair because it has to be born in mind that the assessee was an illiterate person, not knowing at all about the methods of accounting or the implications of entries, depending solely on the adviser or the accountant Whose knowledge also was half baked, should not have been regarded as having attempted to conceal the income when all the transactions were shown in all good faith and not a pie of the amount received from the parties was suppressed and the amounts received not only included the receipts during the year but also in the earlier year and subsequent year, the assessee could not be said to entertain any idea of concealment of income, other than a miss-interpretation of the accounting procedure or for that matter a wrong accounting. This has to be seen in the light of the assessee's conduct of showing the entire turnover in the next year. Had the assessee entertained the idea of concealment of income, he would not have shown this turnover in the next year and would have still carried forward the advances to some other years which he did hot do. He honestly believed that the sale would be complete only when the bills were passed and since the bills were passed in the next year, he showed the amounts as sales in the next year. In the appeal filed against the assessment made for next year, the AAC deleted this turn over, for the reason that this turnover was already added in the income of the assessee in this year which showed more than the bona fides of the assessee. The department relied very heavily on the claim made by Lalji Mentha (P) Ltd., for depreciation on this plant to show that the plant was delivered by the assessee to them in the accounting year. By relying upon a letter written by the said Lalji Mentha (P) Ltd., Shri K.P Bhatnagar pointed out that in that letter they said that since the last payment was made on a date which fell within the accounting year, the goods must be deemed to have been received earlier to that date. He submitted that Lalji Mentha (P) Ltd. did not confirm positively with reference to any particular date the delivery of the goods. They only went by surmises and suppositions. It must have suited them to claim depreciation. That may be a wrong claim in their books but that does not mean that they received the goods in the accounting year from the assessee, unless they commit to a particular date of deli very. In the absence of such a commitment how can it be said that they received the goods or they claim a depreciation thereon. Since the assessee had shown, issued bills next year, showed the advances faithfully in his books of accounts, disclosed the turnover in the next year, there was no concealment of income at all except wrong accounting or miss-interpretation of the accounts. Therefore, the levy of penalty holding the assessee to be guilty of concealment of income, was unjust and unwarranted.

11. In my opinion, the claim made on behalf of the assessee ought to be accepted. It is no doubt true that the department made the estimate of turnover only with reference to the turnover said to have been suppressed by adding the entire amount of suppressed turnover to the book turnover, but in a case where there was a genuine doubt in the mind of the assessee as to when the sale was complete and when all the relevant particulars were shown not concealing even one fact or one pie and when the entire turnover was shown in the next year, long before the proceedings for this year were taken up for assessment, it is difficult to reach the conclusion that the assessee was harbouring an intention to suppress its income by suppressing the turnover. The ITO, in my opinion, was wrong in presuming that the assessee had suppressed the turnover for this year, particularly when the assessee entertained an honest belief that the sale was not complete in the accounting year and, therefore, the turnover was not to be shown as turnover of that year. The assessee had no advantage, to gain by not showing this turnover in this accounting year but by showing it in next year because the income disclosed in both the years was almost on a par. It is, therefore, immaterial whether the income relatable to those sales was shown this year or next year. The assessee is an illiterate. That is an admitted fact. Lalji Mentha (P) Ltd. did not commit any particular date as to when they received the goods. They only say that because the last payment was made on 29th May, 1977, the machinery must have arrived at their premises on or before that date. That was not a definite commitment made by Lalji Mentha (P) Ltd. to draw an inference that the machinery was received by them prior to the date of the last payment. This aspect has completely missed the attention of the ITO who levied the penalty. The CIT was, therefore, right in my opinion to cancel the penalty having regard to all these facts. That was why I am of the opinion that even though the estimate of turnover was made having regard to the suppressed turnover, the turnover could not be deemed to be suppressed turnover relatable to this year, particularly when this was shown in the next year in the ordinary course of business. Therefore, I am inclined to agree with the view expressed by learned Judicial Member when he observed that there was no material on record to show that the assessee was guilty of suppressing of turnover and cl. (B) of Explanation 1 to s. 271(1)(c) (sic). The explanation offered was bona fide and there was nothing on the record to establish otherwise. We should not go only by the technicalities of accounting but we must also have a broad view of the total picture and the totality of circumstances. That was a reason why the cl. (B) of Explanation 1 to s. 271(1)(c) provided in clear terms:

“Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,

(A) such person fails to offer an explanation or offers an explanation which. is found by the TTO or the AAC or the Commissioner (Appeals) to be false, or

(B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of cl. (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed:

Provided that nothing contained in this Explanation shall apply to a case referred to in cl. (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.”

There is nothing in this case to show that the explanation offered by the assessee was false nor the explanation offered was not bona fide and that all the facts relating to the same were not disclosed. This appears, therefore, to me a case where no penalty for concealment of income ought to have been levied. The matter will now go before the regular Bench to dispose of the appeal in accordance with the majority opinion.