JUDGMENT [ENTITY], J.
1. A complaint against the firm, M/s. D.D. Mittal and its partners (accused), was filed by the Income-tax Officer, Barnala, on March 17, 1986, under [SECTION] read with [SECTION] of the [ACT] and [SECTION] and [SECTION] of the [ACT] on the following allegations :
On January 20, 1978, the concerned Income-tax Officer conducted a survey under [SECTION] of the [ACT], [SECTION]1 (hereinafter referred to as " the Act"), in the premises of the assessee-firm and, during that process, found excess stock of the value of Rs. 23,445 lying there and, held that the assessee had, as such, suppressed the purchases of stock of cloth of the aforesaid value and had made investment in purchases from income from undisclosed sources. The Income-tax Officer further prepared an inventory of the closing stock. It was further alleged in the complaint that, in the return for the year 1978-79, a total income of Rs. 29,630 was declared by the firm. With these facts before the income-tax authorities, an opportunity was given to the firm and its partners to reconcile the difference between the closing stock found on physical verification and checking duly shown in* the account books of the assessee. The assessee did not respond to the opportunity offered and thereupon a show-cause notice for adding the amount of Rs. 23,445 was issued to the firm in its income but still no explanation was given by the accused-firm or its partners. The assessment was made by the Department under [SECTION] of the Act showing the total income at Rs. 53,074 which included the aforesaid amount of Rs. 23,445 on account of suppression of stock. Further action under [SECTION] was also initiated by issuing a penalty notice for having concealed the income. The assessee-firm went in appeal against the addition made by the Income-tax Officer and the appellate authority/ Assistant Commissioner dismissed the appeal, vide order dated May 19, 1982, and confirmed the addition made by the Income-tax Officer. The assessee filed a further appeal before the Income-tax Appellate Tribunal, Chandigarh, Patiala Range, but that also did not succeed. Thereafter, penalty of Rs. 13,870 was imposed by the Income-tax Officer under [SECTION] of the Act, vide its order dated October 26, 1982. The assessee again approached the Appellate Assistant Commissioner through a statutory remedy of appeal against the order of penalty imposed but the imposition of penalty was maintained. It is further alleged in the complaint that Shri [ENTITY], partner of the firm, had made a false statement in the verification in the report as required under the provisions of the Act and the rules framed thereunder and, as such, the accused deliberately furnished an untrue verification and had delivered a false account and thus an offence under [SECTION] and [SECTION] has been committed by the partnership (registered firm) by intentionally fabricating false evidence in the shape of bogus account books for being used in the income-tax assessment proceedings. In the complaint, it is also stated that offences under [SECTION] and [SECTION], [ACT], are also made out.
2. The complaint having been filed by an Income-tax Officer in his official capacity, his statement was not recorded and the accused were summoned. On putting in appearance before the court, the accused moved an application on the ground that the penalty imposed on the firm by the Income-tax Officer, Barnala, had been quashed by the Income-tax Appellate Tribunal, Chandigarh, vide its order dated April 29, 1986, and that the accused had not concealed any income and they had not filed any false return. It was also alleged in the application that the Income-tax Officer, Barnala, had already complied with the order of the appellate authority and had issued refund order of the penalty amount imposed by him. This application was contested by the complainant, Income-tax Officer, Barnala, on the ground that though the order of the Income-tax Officer dated October 26, 1982, imposing penalty of Rs. 13,870 has been set aside by the Appellate Tribunal, Chandigarh, yet the Revenue was contemplating to file an appeal against that order. The trial court gave ample time to the complainant to produce any document or any order showing that any appeal had been preferred but, in spite of ample opportunities granted, no such material was placed before the court.
3. The trial court heard counsel for the parties at length. The order of the Appellate Tribunal, Chandigarh, dated April 29, 1986, was perused wherein a positive finding had been recorded that there was no concealment of any income. The explanation given by the assessee had been opined to be bona fide and the Income-tax Officer's order imposing penalty was quashed. In support of its view, the trial court placed reliance on the authority reported as [ENTITY] v. ITO [1982] 134 ITR 8 (P & H) and, accordingly, the complaint was ordered to be dismissed. Against this order of dismissal dated May 22, 1987 of the trial Magistrate, the complainant filed an appeal in this court which was admitted by a Division Bench of this court, vide order dated December 11, 1987. Now, vide this judgment, the appeal is being disposed of finally.
4. We have heard learned counsel for the parties and perused the records as well. Mr. [ENTITY], counsel for the appellant, has not disputed the finality of the order passed by the Appellate Authority, Chandigarh, dated April 29, 1986, yet the sole argument raised by him is that the said order would not operate as a bar to the criminal prosecution of the accused and, in support of this contention, he has placed reliance on a few judicial pronouncements, namely :
(i) [ENTITY] v. S. K. Perumal, First ITO [PRECEDENT].
(ii) [ENTITY] v. ITO [1982] 134 ITR 8 (P & H).
(iii) [PRECEDENT].
(iv) [PRECEDENT].
(v) [PRECEDENT].
(vi) [PRECEDENT] and
(vii) [PRECEDENT].
5. A perusal of the aforesaid judgments goes to show that the last four authorities are not even remotely relevant to the facts and circumstances of the case in hand and, as such, being inapplicable, need no discussion. All the same, the authority at No. 1, i.e., [ENTITY]'s case [PRECEDENT] is squarely applicable to the facts of the case of the accused. At page 700 of this judgment, the apex court, while relying upon its previous judgment/decision rendered in [PRECEDENT], held that "the prosecution once initiated may be quashed in the light of a finding favourable to the assessee recorded by an authority under the Act subsequently in respect of the relevant assessment proceedings but that decision is no authority for the proposition that no proceedings can be initiated at all under [SECTION] and [SECTION] as long as some proceeding under the Act in which there is a chance of success of the assessee is pending".
6. These observations were made by the Supreme Court while rejecting the plea of the assessee holding that mere pendency of proceedings before the authorities does not bar the pendency of criminal proceedings in a criminal court. An assessee with mere expectation of success in some proceedings or any appeal or reference under the Act cannot come in the way of criminal proceedings under [SECTION] and [SECTION] of the Act. All the same, it was held that the criminal court has to give due regard to the result of any proceedings under the Act which has a bearing on the question in issue and, in a appropriate case, it may drop the proceedings in the light of an order passed under the Act. These observations of the Supreme Court are squarely applicable to the facts of the case in hand. The Appellate Tribunal under the Act, vide order dated April 29, 1986, recorded a positive finding in favour of the assessee after elaborate discussion and the operative part of the judgment is reproduced below :
"4. We have carefully considered the rival submissions. As noted earlier, there was a survey at the business premises of the assessee under [SECTION] on January 20, 1978. No day-to-day stock of goods available was prepared by the assessee. On the date of survey, the Departmental Officers prepared an inventory of the goods on physical verification which was taken as the stock available in the shop on that date which was valued at Rs. 84,374. In order to work out as to what should be the stock as per book, the survey officers estimated the same on the basis of the gross profit rate disclosed by the assessee in early years, i.e., at the rate of 6%.
The stock worked out was found to be of the value of Rs. 60,929. There was thus difference of Rs. 23,445 being the excess stock found as per inventory prepared by the survey team. The stock of Rs. 60,929 as on January 20, 1978, was worked out as under :
(Rs.) Opening stock 49,655 Purchases 4,87,289 5,36,944 Less goods returned 10,047 Balance goods available for sale 5,26,897 The value of goods sold is Rs. 4,95,710. Estimating 6 per cent, gross profit thereon, i.e., Rs. 29,742, the value of goods sold there against would work out to Rs. 4,65,968 as against the goods available for sale of Rs. 5,26,897. The difference of Rs. 60,929 will be the closing stock.
The contention of learned counsel for the assessee was that the Income-tax Officer had worked out the stock on the basis that the assessee had earned 6 per cent, gross profit throughout the period. He submitted that it is common knowledge that, in trade, there are always fluctuations in the margin of profit. Sometimes profit will be more and at other times there may be loss or low profits or profits lower than the overall gross profit throughout the period. He, therefore, urged that the application of 6 per cent, gross profit rate throughout the year would not give the correct stock and, therefore, the stock taken by the Income-tax Officer could not be the correct stock and these were mere estimates. He then referred to the inventory of the closing stock prepared at the time of survey. He pointed out that the inventory prepared did not indicate as to what was the basis of the rate mentioned therein, whether a cost price based on vouchers or the market price. He also pointed out that the quality of the goods in a number of cases was not good. For example, he referred to serial No. 13 of the inventory and pointed out that the name of the goods was only rubbia but the quality was not given. The submission by him, therefore, was that, on the basis of the above material, no penalty could be imposed. He further pointed out that the explanations given by the assessee were bona fide, and, therefore, keeping in view the proviso below [SECTION], no penalty was exigible. In our opinion, the Appellate Assistant Commissioner has not correctly applied the provisions contained in [SECTION]. He has not considered the proviso thereunder which envisages that even though the explanation furnished is not substantiated if the same is otherwise bona fide, no penalty could be imposed. The explanation of the assessee regarding stocks worked out by the Income tax Officer on estimate basis at Rs. 69,939, in our opinion, is bona fide as it is common knowledge that the same margin of profit is not there throughout the year. There are bound to be fluctuations. Similarly, the inventory of the goods prepared by the survey team does not indicate the basis as to whether it is based on purchase vouchers or the market price. The learned Departmental representative was unable to state at the time of hearing of the appeal about the basis of value adopted. We, therefore, hold that the explanation furnished by the assessee was bona fide and, taking into consideration the proviso below [SECTION] of the Act, in our opinion, no penalty was exigible. The penalty imposed is, therefore, cancelled.
6. In the result, the appeal is allowed. "
7. In view of the observations recorded by the Appellate Tribunal, under the Act, the trial court rightly placed reliance on [ENTITY] v. ITO [1982] 134 ITR 8 (P & H), wherein the facts involved were that prosecution was launched against the assessee for offences under [SECTION] of the Act along with [SECTION] and [SECTION] of the [ACT] on the basis of filing false returns, false accounts and inflated items of purchases. During the pendency of the criminal proceedings, parallel penalty proceedings for concealment of income were also pending before the Tribunal. The Tribunal examined the whole incriminating material against the assessee and arrived at the conclusion that none of the income-tax authorities has clearly established that particular items of purchases were inflated and as such there was no proof of the assessee having concealed his income or having furnished inaccurate and false particulars. Accepting the appeal of the assessee, the Tribunal recorded a finding that there was no concealment or submission of false accounts and as such cancelled the penalty. Under these circumstances, a Division Bench of this court opined that, in view of the finding of the Tribunal that there was no concealment and no inaccurate accounts were filed by the petitioners, the criminal proceedings against the petitioners could not continue and were to be quashed. In the present case also, the finding recorded by the Tribunal in its order dated April 29, 1986, is also to the same effect as recorded by the Tribunal in [ENTITY]'s case [PRECEDENT].
8. In view of the discussion made above, the trial court has not committed any error of fact or law in passing the order of acquittal in favour of the accused. The approach of the trial court is just and legal. Various provisions of law have been correctly interpreted and applied to the facts of the case. Even otherwise, the matter relates to the assessment year 1978-79 and the accused have faced the agony of proceedings before the Department and criminal courts throughout this long period. The State appeal being devoid of merit is ordered to be dismissed.