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Commissioner of Income-tax Vs. Kalicharan Agarwalla and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 73 of 1979
Judge
Reported in[1984]146ITR634(Cal)
ActsIncome Tax Act, 1961 - Sections 145 and 271(1)
AppellantCommissioner of Income-tax
RespondentKalicharan Agarwalla and Co.
Appellant AdvocateA. Dhar, Adv.
Respondent AdvocateNone
Excerpt:
- .....act, by itself, does not prove that the assessee had concealed income. the difference between the income returned and the income assessed is due to the honest belief of the parties as to what should be the gross income in the rice business and nothing else. this, by itself, is not sufficient to establish the charge of concealment of income or furnishing inaccurate particulars thereof as envisaged in section 271(1)(c) of the 1961 act. in this view of the matter, we cancel the order of the iac made under section 271(1)(c) of the 1961 act.'mr. dhar, appearing on behalf of the revenue, has argued a number of points of law before us. nobody has appeared on behalf of the assessee. but we are of the opinion that in view of the findings of fact made by the tribunal, it is not necessary to go.....
Judgment:

Suhas Chandra Sen, J.

1. The Tribunal has referred the following questions of law under Section 256(2) of the I.T. Act, 1961:

'1. Whether, on the facts and in the circumstances of the case, the Tribunal had any evidence to hold that the penalty, under Section 271(1)(c) of the I.T. Act, 1961, was imposed by the IAC on an altogether different charge than that on which the ITO had initiated the penalty proceedings and whether such finding was otherwise unreasonable or perverse ?

2. Without prejudice to question No. 1, whether, on the facts and in the circumstances of the case and in view of the fact that the assessee had disclosed an incorrect figure of closing stock while filing the original return of income and on a correct interpretation of the Explanation to Section 271(1)(c) of the I.T. Act, 1961, there was any onus on the Department to prove that the assessee had concealed its income or had furnished inaccurate particulars of such income ?

3. Whether, on the facts and in the circumstances of the case, and in view of the Tribunal's finding while disposing of the assessee's appeal against the assessment order that the ITO had detected certain unaccounted for purchases and sales, the Tribunal misdirected itself in law in holding that the IAC was not justified in imposing a penalty under Section 271(1)(c) of the I.T. Act, 1961 ?'

The relevant facts as set out in the statement of the case are as under :

During the course of assessment proceedings, the ITO found that purchases and sales of rice were duly vouched according to the assessee's books. However, in order to verify some of the transactions, he issued notice under Section 131 of the 1961 Act on M/s. Satyanarayan Rice Mills, with whom the assessee had dealings. On examination of the books of M/s. Satyanarayan Rice Mills, the ITO found that the assessee had purchased rice worth Rs. 6,207.50 on January 1, 1963, Rs. 4,420.80 on January 6, 1963, Rs. 4,144.30 on January 15, 1963, and Rs. 4,929.18 on February 25, 1963, on credit but the same were not disclosed in the assessee's books. The assessee's representative was also present when the books of M/s. Satyanarayan Rice Mills were examined by the ITO. Therefore, the ITO concluded that the assessee had suppressed certain purchases and sales of rice. The ITO also held that the G.P. at 2% shown by the assessee was low. Accordingly, in his assessment order dated October 30, 1965, the ITO estimated the sales as at Rs. 19,50,000 in place of Rs. 19,11,004 disclosed by the assessee. Again, the ITO adopted a gross profit rate at 3.3% as against 2% disclosed by the assessee and made an addition of Rs. 66,250 to the trading results of the assessee. Simultaneously, he initiated penalty proceedings under Section 271(1)(c) of the Act, 1961, and referred the matter to the IAC as the minimum penalty imposable exceeded Rs. 1,000.

2. The IAC in his order dated October 23, 1970, stated that in its original return filed on June 16, 1966, the assessee had shown loss of Rs. 567 under the head 'Business'. Subsequently, on September 7, 1967, the assessee filed a revised return showing income of Rs. 29,449 under the head 'Business'. The assessee's explanation about the discrepancy was that some mistakes had crept in totalling the value of the closing stock when the original return was filed. The original closing stock figure was takenat Rs. 30,827 instead of Rs. 60,827 which was subsequently taken while filing the revised return. On these facts, the IAC concluded that the assessee had suppressed the gross profit by Rs. 30,000. In this connection, the IAC observed that ' in fact, it is a clear case of deliberate attempt on the part of the assessee to suppress the profit of the business to the tune of Rs. 30,000 in the original return for which he is liable to penalty under Section 271(1)(c) of the Act '. Accordingly, he imposed a penalty of Rs. 11,760 on the assessee under Section 271(1)(c) of the Act.

3. The assessee appealed to the Tribunal. The Tribunal, on a review of the facts and also the findings of the ITO and the IAC, cancelled the order of penalty. The Tribunal observed :

'We have carefully considered the rival submissions of the parties and are of the view that the assessee must succeed in this appeal. The IAC's imposing penalty on an altogether different charge is not permissible in view of the Gujarat High Court decision in the case of CIT v. Lakhdhir Lalji : [1972]85ITR77(Guj) . The addition made by the ITO by invoking the provisions of Section 145 of the 1961 Act, by itself, does not prove that the assessee had concealed income. The difference between the income returned and the income assessed is due to the honest belief of the parties as to what should be the gross income in the rice business and nothing else. This, by itself, is not sufficient to establish the charge of concealment of income or furnishing inaccurate particulars thereof as envisaged in Section 271(1)(c) of the 1961 Act. In this view of the matter, we cancel the order of the IAC made under Section 271(1)(c) of the 1961 Act.'

Mr. Dhar, appearing on behalf of the Revenue, has argued a number of points of law before us. Nobody has appeared on behalf of the assessee. But we are of the opinion that in view of the findings of fact made by the Tribunal, it is not necessary to go into the questions of law raised in this reference at all. The Tribunal has held that sufficient facts had not been brought on record to establish a charge of concealment of income or of furnishing inaccurate particulars as envisaged in Section 271(1)(c) of the 1961 Act. The Tribunal has pointed out that the addition that was made by the ITO was by invoking the provisions of Section 145 of the 1961 Act and that this did not prove that the assessee has concealed its income. The Tribunal further found that the difference between the income returned and the income assessed was due to the honest belief of the assessee as to what should be the gross income in the rice business and nothing else. The Tribunal did not apply any legal principle in coming to the conclusion that there was no concealment of income in this case. It is for the Revenue to establish a case of penalty by producing sufficient evidence. The Tribunal has considered the evidence on record and has come to the conclusion that the income that was returned by the assessee was due to its honest belief as towhat should be its gross income in the rice business and nothing else. Inour opinion, the questions raised in this reference really do not bring outthe controversy between the parties. The finding of the Tribunal that theincome that was returned was due to honest belief was not really challenged. When no question has been raised on this aspect of the matter and solong as this finding stands, it is very difficult to find fault with the orderof the Tribunal. In that view, of the matter, the questions that have beenraised have really become academic and we decline to answer thequestions.4. In the facts of this case, there will be no order as to costs.

T.K. Basu, Actg. C.J.

5. I agree.


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