1988 (9) TMI 94 - AT - Income Tax

Assessment Year, Closing Stock, Revised Return, Voluntary Disclosure Of Income And Wealth Ordinance

Summary

Issues Involved:
1. Validity of the initiation of penalty proceedings.
2. Vagueness in the imposition of penalty for concealment of income or furnishing inaccurate particulars.
3. Basis for penalty calculation-whether it should be income-based or tax-based.
4. Merits of the penalty imposition based on the revised return and alleged concealment.

Detailed Analysis:

1. Validity of the initiation of penalty proceedings:
The assessee argued that the penalty proceedings were not validly initiated, rendering the penalty order void ab initio. The original assessment order was passed on 26-9-1978, with a penalty notice issued concurrently. A fresh assessment order on 27-3-1982 followed the CIT (Appeals) setting aside the original order for re-examination of a disputed addition. The assessee contended that the penalty notice issued on 27-3-1982 rendered the original notice inoperative. However, the Tribunal found no merit in this argument, stating that the original penalty proceedings were validly initiated and continued until the penalty order was passed. The fresh notice on 27-3-1982 was redundant and did not nullify the original proceedings.

2. Vagueness in the imposition of penalty for concealment of income or furnishing inaccurate particulars:
The assessee claimed that the penalty order was vague as it imposed penalties for both concealment of income and furnishing inaccurate particulars. Citing the case of CIT v. Manu Engg. Works, the assessee argued that the ITO must clearly specify the offense. The Tribunal rejected this argument, noting that certain fact situations could be described as both concealment of income and furnishing inaccurate particulars. The Tribunal found that the ITO's order was not vague, as it pertained to the same item throughout the proceedings.

3. Basis for penalty calculation-whether it should be income-based or tax-based:
The assessee argued that the penalty should be tax-based, as the final assessment order was passed in 1982, and the law at that time should apply. The Tribunal referenced the Supreme Court's judgment in Brij Mohan v. CIT, which supports income-based penalties. The Tribunal found no indication that the Supreme Court's decision in Maya Rani Punj overruled Brij Mohan. Consequently, the Tribunal upheld the income-based penalty calculation.

4. Merits of the penalty imposition based on the revised return and alleged concealment:
The Tribunal scrutinized the discrepancies between the original and revised returns. The original return showed a closing stock of Rs. 2,20,150, while the revised return reduced it to Rs. 46,750, with corresponding changes in purchases and sundry creditors. The Tribunal noted that the assessee failed to provide a satisfactory explanation for these discrepancies and did not maintain a stock register. The Tribunal concluded that the revised figures were not based on any inventory but were adjusted to align with reduced purchase figures. The Tribunal also rejected the assessee's claim that part of the stock was covered by voluntary disclosures made by the firm and its partners. The Tribunal found that the assessee did not discharge its onus to prove that the discrepancies did not arise from fraud or gross neglect. Consequently, the Tribunal upheld the penalty of Rs. 1,24,050 for concealment of income.

Conclusion:
The Tribunal confirmed the imposition of the penalty, rejecting all grounds raised by the assessee. The penalty was upheld based on the sustained addition of Rs. 1,24,050, and the appeal was dismissed.