1984 (11) TMI 134 - AT - Income Tax

Advance Tax, Assessment Proceedings, False Estimate, Inaccurate Particulars, Levy Of Penalty, Penalty For Concealment

Summary

Issues Involved: Imposition of penalties under sections 271(1)(c) and 273 of the Income-tax Act, 1961 for the assessment years 1970-71 and 1971-72.

Issue-wise Detailed Analysis:

1. Assessment Year 1970-71:

The primary issue for the assessment year 1970-71 revolves around the imposition of penalties under section 271(1)(c) for concealment of income due to the omission of copper stocks from the stock register.

- Assessee's Argument:
The assessee's representative, Mr. M.L. Borad, argued that the omission of 9,149 kgs. of copper valued at Rs. 1,28,065 was a genuine mistake. The copper was issued for conversion and was shown as such in the stock register, resulting in a nil balance. This mistake was detected during the assessment proceedings for the subsequent year, and there was no deliberate attempt to exclude the stocks. The same stocks were included in the next year's stock records, indicating no mala fide intention. The assessed income remained nil due to unabsorbed depreciation, development rebate, and brought forward losses, negating any intention to furnish inaccurate particulars. Mr. Borad cited several case laws to support the argument that genuine mistakes should not attract penalties.

- Department's Argument:
Mr. S.S. Ruhela, representing the department, contended that the omission was detected by the ITO and the assessee's subsequent inclusion of stocks in the next year's records indicated mala fide intention. The penalty was rightly levied, invoking Explanation 1 to section 271(1)(c).

- Tribunal's Analysis:
The Tribunal emphasized the distinction between omission and concealment, noting that concealment implies a deliberate intention. The omission in this case was due to procedural lapses and lack of effective accounting systems, not a deliberate act. The explanation offered by the assessee was not found to be false, and therefore, Explanation 1 to section 271(1)(c) was not applicable. The penalty of Rs. 1,30,000 was quashed.

2. Assessment Year 1971-72:

The issues for the assessment year 1971-72 involved penalties under section 271(1)(c) for two reasons: trading addition due to gross profit rate estimation and excess stock of copper found.

- Trading Addition:
- Assessee's Argument:
The assessee argued that there was no positive concealment of income and that routine trading additions should not attract penalties. The fall in gross profit was explained by increased raw material prices and discounts allowed to buyers. The company, being an artificial juridical person, cannot consciously conceal income.

- Department's Argument:
The department reiterated the findings of the Commissioner (Appeals) and the ITO, asserting that the penalty was rightly levied due to the assessee's concession to the gross profit rate and the significant difference between assessed and returned incomes.

- Tribunal's Analysis:
The Tribunal held that the assessee failed to substantiate the reasons for the fall in gross profit with concrete evidence. The trading addition was not considered routine, especially since the assessee conceded to it. This amounted to acceptance of concealment or furnishing inaccurate particulars, and the penalty was upheld.

- Excess Stock:
- Assessee's Argument:
The assessee explained the excess stock by attributing it to burning loss and transit loss, which the ITO found incorrect.

- Department's Argument:
The department maintained that the explanation was not reasonable, and the excess stock indicated unrecorded purchases, amounting to deliberate furnishing of inaccurate particulars.

- Tribunal's Analysis:
The Tribunal noted that the assessee failed to provide a quantitative tally of materials, and the explanation was not plausible. The penalty for excess stock was upheld, confirming the total penalty of Rs. 1,50,000.

3. Penalty under Section 273 for Assessment Year 1971-72:

- Assessee's Argument:
The assessee argued that the penalty for wrong filing of the estimate for advance tax was unjustified as the positive income resulted from unexpected additions.

- Department's Argument:
The department asserted that the assessee's concession to trading addition and unexplained excess stock justified the penalty.

- Tribunal's Analysis:
The Tribunal held that the estimate filed was improper and inaccurate, confirming the penalty of Rs. 2,600.

Conclusion:

The assessee's appeal for the assessment year 1970-71 was allowed, quashing the penalty. However, the appeal for the assessment year 1971-72 was dismissed, and the penalties were upheld.