1992 (3) TMI 129 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) for concealment of income.
2. Whether the omission of income was intentional or a bona fide mistake.
3. The impact of agreed additions on the imposition of penalty.
4. The relevance of judicial precedents cited by both parties.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) for Concealment of Income:
The primary issue in this case is whether the penalty under section 271(1)(c) for concealment of income was rightly imposed on the assessee. The Income-tax Officer (ITO) found that the assessee had not accounted for credit notes amounting to Rs. 21,701 from M/s Texmo Industries in the assessment year 1979-80. The ITO concluded that this omission was not a bona fide mistake but an attempt to postpone income recognition. Consequently, a penalty of Rs. 12,182 was levied under section 271(1)(c).

2. Whether the Omission of Income was Intentional or a Bona Fide Mistake:
The assessee argued that the omission was a bona fide mistake and that the credit note amounts were entered in the Credit Notes account instead of the Sales account due to an error by the Accountant. The explanation was that the amounts were later corrected in the subsequent year. However, both the ITO and the Appellate Assistant Commissioner (AAC) found this explanation unconvincing. The AAC noted that the quantum of the credit notes and the timing of the entries indicated that the partners were aware of the amounts and intentionally deferred recognizing them to reduce tax liability. The Tribunal agreed, stating that the credit notes were unconditional and should have been recognized as income in the assessment year 1979-80.

3. The Impact of Agreed Additions on the Imposition of Penalty:
The assessee contended that since the addition of Rs. 21,701 was made on an agreed basis, no penalty should be imposed. The Tribunal examined the sequence of events and found that the assessee initially contested the inclusion of the credit note amounts as income but eventually agreed to the addition only after being cornered by the ITO. The Tribunal clarified that an "agreed addition" should be immediate and voluntary, not a last resort after exhausting all other options. Therefore, the penalty was justified even though the addition was eventually agreed upon.

4. The Relevance of Judicial Precedents Cited by Both Parties:
The assessee cited several judicial precedents to argue against the imposition of penalty, including CIT v. Dajibhai Kanjibhai, CIT v. S. V. Angidi Chettiar, and CIT v. Gurudayalram Mukhlal. The Tribunal found these cases inapplicable to the present facts. For instance, in Dajibhai Kanjibhai's case, the issue was the absence of the ITO's satisfaction during assessment proceedings, which was not the case here. Similarly, the other cases cited did not support the assessee's contention that penalty could not be imposed on agreed additions.

On the other hand, the Department cited Rathnam & Co. v. IAC and Addl. CIT v. E. Bhoopathy, which supported the view that penalties could be sustained even for agreed additions. The Tribunal concurred with these precedents, emphasizing that the penalty under section 271(1)(c) does not depend on the assessee's consent but on the presence of concealment or furnishing of inaccurate particulars.

Conclusion:
The Tribunal concluded that the assessee had indeed concealed income or furnished inaccurate particulars by not including the credit note amounts in the assessment year 1979-80. The penalty imposed by the ITO was deemed valid and sustainable. The appeal was dismissed, and the orders of the lower authorities were upheld.