1. In these appeals, assessee is challenging imposition of penalty under section 271(1)(c) of Income-tax Act, 1961 (the Act), on two grounds, viz., (i) legality of passing order on one of legal heirs instead of on all legal heirs of assessee, and (ii) on merits. 2. facts of case as summarised by AAC read as under: "2. deceased Shri V.R. Mistry carried on business as silversmith at Palitana. He was mainly doing work of preparing covers of silver for jail idols. In year 1976, there was search by customs department. During course of search, duplicate books of account, etc., as discussed in body of assessment order for assessment year 1970-71 were found and seized. books of account were found from possession of Shri Amritlal Hathichand Shah, friend of deceased. deceased also admitted during course of inquiries by customs department that duplicate books were kept at friends place for fear of detection by income-tax authorities in case of raid by that department at his house. All these and other material facts are discussed in body of assessment orders for all these years and these are not repeated here. After scrutiny of seized documents, reassessment proceedings were initiated under section 148 of Act for all years. details of total income as per original assessments, total income declared in return filed by representative of deceased and total income on reassessment for years under consideration are as under: Assessment Income Income Income year as per as per returns as original filed by determined assessment representative on under section reassessment 148 Rs. Rs. Rs. 1970-71 6,692 6,672 8,290 1971-72 5,376 9,398 12,930 1972-73 5,688 10,802 20,280 1973-74 8,422 9,364 15,200 1974-75 7,641 7,321 11,160 difference between income originally assessed and that assessed o n reassessment is mainly due to under assessment of majuri receipts as found in duplicate accounts and estimated profit on such receipts for assessment years 1970-71 to 1972-73. As for assessment years 1972-73 n d 1973-74, since seized books and documents contained details of expenses incurred profit is worked out after deducting such expenses from receipts. Penalties for all these years being levied on basis of concealment as detected on reassessment." 3. At time of hearing, learned counsel for assessee was fair enough to state that in view of decision of Honble Gujarat High Court in case of CIT v. Sumantbhai C. Munshaw [1981] 128 ITR 142, he would not address Court on legality of orders passed on one of legal heirs of assessee. However, he hastened to state that he is not giving up this ground. As regards merits of case, learned counsel for assessee invited my attention to letters dated 15-3-1982 and 22-3-1982 written to ITO in response to show-cause notice issued under section 274/271(1)(c) of Act, relevant portions of which are reproduced below: Letter dated 15-3-1982: cases were reopened as consequence of ledgers for ST 2026 to 2030 and other data seized by customs department in 1976. Though no penalty was levied by customs department and silver scraps seized weighing 1.117 kg. valued at Rs. 1,370 was returned, still, however, seized ledger, etc., were handed over to Income-tax Department. assessment was reopened on basis of data available from seized ledger. assessments were framed in some years on estimating gross profit and in some years without estimating and not relying on seized books, which were considered as real ones by department. We enclose herewith chart showing income declared as per return filed under section 148 and income assessed for ready reference: Assessment Income Income Remarks year declared as assessed as per return per AO under under section 148 section 148/143(3) Rs. Rs. 1970-71 6,692 8,290 Seized books have been considered as real ones; still results disbelieved, gross profit estimated at 21 per cent on sales of Rs. 30,480. 1971-72 9,398 12,930 Results as per seized books; sales Rs. 60,123, gross profit estimated at 21 per cent at Rs. 12,625. 1972-73 10,812 20,280 Sales Rs. 70,401 Expenses Rs. 50,425 Surplus Rs. 19,980 Gross profit estimated at 28 per cent. 1973-74 7,364 15,200 Sales Rs. 67,565 Expenses Rs. 51,664 Surplus Rs. 15,901 1974-75 7,321 11,160 Sales Rs. 47,232 Gross profit (23 per cent): Rs. 10, 863. But receipts/expenses as per seized books are disbelieved and gross pro-fit adopted as per seized books position is: Receipts Rs. 47,232 Expenses Rs. 43,713 Surplus Rs. 3,191 Income-tax Officer passing orders under section 148 have considered in various years receipts/income revealed by seized books as real one. In spite of this belief, income of deceased as revealed in seized books is not accepted because it is not beneficial to revenue. non-filing of appeals for any of these years does not lead to conclusion that assessee has agreed to total income assessed under section 143(3) read with section 148; but appeal is not filed only because: (a)The legal heir has no knowledge about business activities. (b)To avoid further litigation and further expenses on appeal, etc. Moreover, for purpose of considering concealed income, gross profit previously shown should have been deducted from profit/gross profit arrived at as per orders under section 148/143(3). This is not done. So, if at all there is any concealment, it is not brought home. Letter dated 22-3-1982: details of income shown in returns of income filed with help of data obtained from seized books, have been furnished in statement filed along with our letter dated 15-3-1982. This statement reveals in column (2), income declared in return under section 148, by estimating gross profit at 15 per cent on receipts obtained from impounded books, gross profit estimated at 15 per cent for all years, whereas assessing Income-tax Officer while passing orders under section 143(3)/147 has adopted higher gross profit. This gives difference between income returned as per return filed by representative in response to notice under section 148 and assessed income. aforesaid submission holds good for all years, i.e., from assessment years 1970-71 to 1975-76. 4. learned counsel for assessee vehemently argued that since difference between income returned and that assessed was mainly due to estimation of income by ITO, no penalty could be imposed under section 271(1)(c). According to learned counsel for assessee, if seized books were to be treated as genuine, ITO should have framed assessments on basis of seized books instead of estimating income at higher rate of gross profit in manner he did. learned counsel for assessee also highlighted fact that while framing assessment for first two years under appeal, ITO has totally ignored expenses incurred by assessee. He, therefore, urged that on proper appreciation of facts and circumstances obtaining in instant case, AAC ought to have cancelled penalty imposed by ITO under section 271(1)(c), instead of reducing same. learned representative for department, on other hand, kly relied on orders of income-tax authorities. He further submitted that since assessee himself had admitted before customs authority that he was keeping duplicate sets of books of account at his friends place with view to conceal his true income from revenue, mens rea is clearly established and, therefore, income-tax authorities were fully justified in imposing penalty under section 271(1)(c). He further submitted that ITO was forced to estimate income of assessee instead of accepting income as per seized books as even seized books were not complete. He, therefore, urged that I should uphold order of AAC under appeal. learned counsel for assessee, in his reply, once again highlighted fact that customs authority had found silver scrap weighing 1.112 kg. valued at Rs. 1,370, which was returned to assessee. In fact, no further action was taken by customs authority against assessee which clearly shows that too much importance need not be given to seized books as was done by income-tax authorities. He also highlighted fact that legal heirs of assessee had not preferred appeals in quantum proceedings as they were not fully aware about business activities of deceased and no useful purpose would have been served in prolonging litigation. 5. I have carefully considered rival submissions of parties as well as material on record, and I am of opinion that in view of aforesaid decision of Honble Gujarat High Court, there is no infirmity in order of AAC in respect of legality of orders passed on one of legal heirs of assessee. As regards merit of case, I am of view that this is not fit case for imposing penalty under section 271(1)(c). I have come to this conclusion as I find from records that ITO himself has not given that much importance to seized books as he had proceeded to estimate income of assessee by adopting higher rate of gross profit. It is no doubt true that assessee might have made statement before customs authority that his books were kept in residential premises of Shri Amritlal Hathichand Shah because of fear of income-tax raid. However, under what circumstances assessee was required to make this confession is not available on record. Perhaps, he might have made this statement due to nervousness and old age. I entirely agree with submission of learned counsel for assessee that if ITO had accepted book results as per seized books then, perhaps assessee would not be in position to resist penalty. However, as mentioned above, this is not case as ITO has estimated income of assessee by adopting higher rate of gross profit disregarding book results as per seized books. In other words, instead of accepting book results of assessee, ITO estimated higher income of assessee. Surely, under these circumstances, assessees case could not be brought within mischief of section 271(1)( c). In this view of matter, it is not possible to uphold imposition of penalty imposed by income-tax authorities in each of years under appeal. 6. In result, all appeals are allowed. *** BIPIN V. MISTRY v. INCOME TAX OFFICER