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Commissioner of Income-tax (Central) Vs. Sanitary Improvement and Tiles Manufacturing Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Case No. 56 of 1979
Judge
Reported in[1982]133ITR334(P& H)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax (Central)
RespondentSanitary Improvement and Tiles Manufacturing Co.
Appellant Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Respondent Advocate G.C. Sharma,; E.D. Helms and; S.S. Mahajan, Advs.
Excerpt:
.....been enjoined upon the tribunal to look at all the circumstances of the case before arriving at a decision whether there had been any deliberate concealment of his income by an assessee or not......business of sanitary fittings and manufacture of tiles. it maintains separate trading accounts of cement tiles, cement glazed tiles and fire bricks. in the trading accounts relevant for the assessment year 1972-73, for cement tiles, glazed tiles and fire bricks, the assessee showed the sales at rs. 4,25,729, rs. 3,40,809 and rs. 58,300, respectively. in the course of assessment proceedings, the ito found that these trading accounts were not fully verifiable. he, therefore, enhanced the sales by rs. 50,000, rs. 5,000 and rs. 3,500 in the trading accounts of the three items, respectively. he also added a sum of rs. 12,800 in the cement account. the ito was also of the view that prima facie the assessee had deliberately concealed its income. he, consequently, referred this case to the iac,.....
Judgment:

M.R. Sharma, J.

1. In this petition under Section 256(2) of the I.T. Act, 1961 (hereinafter called 'the Act'), a prayer has been made that we should direct the Income-tax Appellate Tribunal to refer the following questions of law to us for our opinion :

'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that though the case fell under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, nopenalty was leviable as additions to the income were made by the income-tax authorities on estimate basis ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the Inspecting Assistant Commissioner had no jurisdiction to pass the penalty order in view of the amendments to Section 271(1)(iii)/274 of the Act by the Taxation Laws Amendment-Act, 1975 (Act XLI of 1975) '

2. The brief facts of the case are that the assessee-company carries on the business of sanitary fittings and manufacture of tiles. It maintains separate trading accounts of cement tiles, cement glazed tiles and fire bricks. In the trading accounts relevant for the assessment year 1972-73, for cement tiles, glazed tiles and fire bricks, the assessee showed the sales at Rs. 4,25,729, Rs. 3,40,809 and Rs. 58,300, respectively. In the course of assessment proceedings, the ITO found that these trading accounts were not fully verifiable. He, therefore, enhanced the sales by Rs. 50,000, Rs. 5,000 and Rs. 3,500 in the trading accounts of the three items, respectively. He also added a sum of Rs. 12,800 in the cement account. The ITO was also of the view that prima facie the assessee had deliberately concealed its income. He, consequently, referred this case to the IAC, who, after notice to the assessee, imposed a penalty of Rs. 20,655 on it.

3. Against this imposition, the assessee filed an appeal before the Appellate Tribunal. It was allowed, inter alia, on the ground that there was no deliberate concealment of income made by the assessee.

4. This time, the revenue felt aggrieved and applied to the Tribunal that it should refer the aforementioned two questions of law to us for our opinion. This application was dismissed. Hence, the present petition.

5. After hearing the learned counsel for the parties, we are of the view that there is no merit in this petition.

6. A perusal of para. No. 8 of the appellate order passed by the Appellate Tribunal shows that the Tribunal was alive to the fact of the Explanation to Section 271(1)(c) of the Act. It also observed that no concrete sale was pointed out by the ITO which had in fact been made by the assessee but had not accounted for. Towards the penultimate part of this paragraph, the Tribunal observed as under :

'The case of the assessee is that in the closing stock relating to the cement meant for sale to the public, there is no stock at all and the assessee itself having shown 326 bags in the closing stock relating to manufacturing of cement tiles, it cannot be said that any stock of cement meant for manufacturing of cement tiles was detected by the Income-tax Officer. The Inspecting Assistant Commissioner is, therefore, not correct in observing that a case of definite suppression of sales and a case of sale of cement outside the books had been made out by the Income-tax Officer. On the otherhand, the assessee succeeded in establishing that the impugned addition had been made due to the difference of opinion. Our conclusion that no penalty is leviable on the facts and circumstances of the case under Section 271(1)(c) read with the Explanation is fortified by : [1977]106ITR532(All) (CIT v. Harnam Singh and Co.) and [1977] 106 ITR 720 (Addl. CIT v. Hofilal Kunj Behari Lal). In both the rulings, the Allahabad High Court clearly held even if the Explanation to Section 271(1)(c) is applicable, no penalty can be levied when some income was determined on the basis of estimate. '

7. The learned counsel for the revenue has taken exception to the approach made by the Appellate Tribunal. It has been argued by him that the Tribunal has given a decision on an express proposition of law that whenever an assessment is based on estimate basis no penalty can be imposed on an assessee even if the case falls under Section 271(1)(c) read with the Explanation of the Act. In this connection, the learned counsel drew our attention to A. K. Bashu Sahib v. CIT : [1977]108ITR736(Mad) . That was, however, a case in which the assessee had in fact maintained the accounts and in spite of ' that it submitted a false return. In that situation, a Division Bench of the Madras High Court held that it was not correct to hold that where the estimate of an assessee amounted to deliberate understatement no inference of concealment of income could be drawn. The case relied upon on behalf of the revenue is Addl. CIT v. Brij Nandan Prasad Deen Dayal : [1979]119ITR959(All) . In this connection, it has been submitted that the Allahabad High Court had departed from the earlier, view taken by it in CIT v. Harnam Singh and Co. : [1977]106ITR532(All) . In this case also, the Bench observed that action under Section 271(1)(c) of the Act could appropriately be taken in a case where an assessment is based on a best judgment assessment. However, the condition laid down was that even in that case the Tribunal should apply its mind to the facts and see whether it was a case of concealment, or furnishing of inaccurate particulars and if so, whether the assessee had been able to establish that the same was not as a result of gross or wilful neglect on his part. The cases relied upon on behalf of the revenue are clearly distinguishable. At best it can be said that it had been enjoined upon the Tribunal to look at all the circumstances of the case before arriving at a decision whether there had been any deliberate concealment of his income by an assessee or not. These cases nowhere lay down that where a Tribunal has recorded a finding after taking into consideration all the material, even then, a question of law arises.

8. The relevant portion of the order passed by the Tribunal has been extracted above. At the cost of repetition we might add that the Tribunal gave a firm finding that the ITO could not point out any sale made by the assessee which had been suppressed by it. It has also given a finding that 326 bags of cement were shown in the stock register. In the beginning of para. No. 8, the argument raised by the learned counsel for the assessee relating to the applicability of the Explanation to Section 271(1)(c) of the Act has also been noticed by the Tribunal. After making a cumulative consideration of all these points, the Tribunal came to the conclusion that, in the facts and circumstances of this case, the explanation rendered by the assessee should be accepted. In our considered opinion this is a pure finding of a fact and no question of law arises therefrom. The view which we have taken finds support from three Division Bench judgments of this court in Addl. CIT v. Karnail Singh V. Kaleran , Telu Ram Jain (Sirsa Airfield) v. CIT and CIT v. Sunanda Trading Corporation .

9. For the aforementioned reasons we find no force in this petition and dismiss the same. No costs.


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