1990 (1) TMI 158 - AT - Income Tax

Summary

Issues Involved:
1. Imposition and cancellation of penalties under Section 271(1)(c) of the Income Tax Act.
2. Method of accounting followed by the assessee.
3. Revised returns filed by the assessee.
4. Validity of penalties imposed by the Income Tax Officer (I.T.O.).
5. Quantum of penalty, if warranted.

Detailed Analysis:

1. Imposition and Cancellation of Penalties Under Section 271(1)(c):

The primary issue revolves around the penalties imposed by the I.T.O. under Section 271(1)(c) for the assessment years 1974-75 to 1976-77 and 1978-79 to 1980-81. Both the C.I.T.(A), Nashik, and the A.A.C., Aurangabad, cancelled these penalties, holding that "in the totality of circumstances and facts of the case as well as conduct of the assessee, there was no conscious attempt to conceal any income or furnish inaccurate particulars of income."

2. Method of Accounting Followed by the Assessee:

The assessee, a registered firm dealing in readymade garments and hosiery, maintained regular books of accounts. However, it was found that the assessee did not account for credit sales recorded in 'Jangad' books and did not adjust goods returned to suppliers in the purchases account. The method of accounting followed was such that sales were recorded when cash was realized, and goods returned were shown separately in the balance sheet.

3. Revised Returns Filed by the Assessee:

Upon realization of the correct method of accounting during the assessment proceedings for the year 1981-82, the assessee filed revised returns for the assessment years in question. These revised returns included the net accretion in the 'Jangad' account and 'Mal Parath account,' which were previously not accounted for. The I.T.O. regularized these returns by issuing statutory notices under Section 148.

4. Validity of Penalties Imposed by the I.T.O.:

The I.T.O. issued show-cause notices for the levy of penalties under Section 271(1)(c), arguing that the revised returns were filed only after the detection of concealment. The I.T.O. was satisfied that the assessee had concealed particulars of income and furnished inaccurate particulars in the original returns. However, the appellate authorities found that the assessee had cooperated with the department and had voluntarily filed revised returns upon understanding the correct method of accounting. They concluded that there was no conscious attempt to conceal income.

5. Quantum of Penalty, if Warranted:

The learned counsel for the assessee argued that if penalties were to be levied, they should be based on the new law effective from 1-4-1976, which considers the tax sought to be avoided. Several court decisions were cited to support this argument. The Tribunal, after considering the facts and submissions, upheld the orders of the first appellate authority, concluding that penalties were not warranted in this case.

Conclusion:

The Tribunal dismissed the appeals by the revenue, upholding the orders of the first appellate authority that cancelled the penalties imposed by the I.T.O. under Section 271(1)(c). The Tribunal found that the assessee had not deliberately concealed income or furnished inaccurate particulars and had voluntarily filed revised returns upon understanding the correct method of accounting. Consequently, penalties were not justified, and the appeals were dismissed.