9911796707
TMI Blog1983 (9) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974-75, the return showed an income of Rs. 15,830. The return was accompanied by a profit and loss account and a trial balance. The assessee had maintained account books for this assessment year. 3. The ITO took all these three assessments together for the purpose of enquiry and assessment. The first effective hearing was on 13-3-1975, when he scrutinised the account books for the year 1974-75. The books of account produced included a sales register and a ledger. The latter carried the sales account. The sales are entered, in the first instance, in the day-to-day account of the sales register. The total sales in a month are made out in the sales register and then entered in the sales account of the ledger. The ITO noted that the sales for the month of November 1973 were not credited to the sales account. This was on the examination made by him on 13-3-1975. He then impounded the books produced by the assessee. It may be mentioned at this stage that the practice of the assessee is to collect the bills through the banks and the sales for the month of November 1973 were also effected through the banks. 4. During the hearing on 13-3-1975, there was also a discussion regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee also enclosed a letter with the return on 22-7-1975. It was stated there that the assessee suspected some omissions in the account with regard to wage payments and the sales turnover credited in the accounts, that the basic records relating to these accounts were once again scrutinised and he had been able to find that there have been some omissions in the accounts. He also stated that this omission was with regard to the manufacturing wages, the sales turnover credited and the stock balance. According to him, there was a deficit of Rs. 56,412 in the wages account on the basis of the cloth actually produced. He also stated that the sales turnover did not include the turnover for the month of November 1973. He referred in this letter to the computation of income in the revised return filed along with this letter. In this computation, he has made three adjustments to the income originally shown. He added the sales for the month of November 1973 and also the increase in the value of closing stock to the extent of Rs. 12,964. He deducted the deficit claim by this account. The ITO sent a letter on 6-8-1975 to the assessee. In this letter he has pointed out that the scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1974-75 and Rs. 31,370 as the capital accumulated as on 1-4-1971 apart from the assets. He pointed out that the business had run for a number of years before 1-4-1971 and, therefore, this accumulation of capital of Rs. 31,370 was proportionately substantial. Yet another letter was written on 2-7-1976. The assessee filed along with this letter a balance sheet as on 31-3-1975 where the capital account showed a balance of Rs. 2,03,196. In this letter he pointed out that since the accounts have not been properly maintained, the income has been estimated on the basis of the increase in the assets over the liabilities for the year 1974-75 as well. The assessments for the years 1972-73 and 1973-74 were completed on a total income of Rs. 37,500 each, while the assessment for the year 1974-75 was completed on a total income of Rs. 49,000. The variation made by the ITO is on the ground that the assessee had not taken into account the proper quantification of expenditure for personal expenses for these assessment years. Additions of Rs. 2,500 for the earlier two assessment years and Rs. 4,000 for the assessment year 1974-75 were made by him. Otherwise, the ITO accepted the basis of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee without a finding that the assessee had earned this specific amount during the previous year. He also pointed out the decision of the Patna High Court in the case of Badshah Prasad v. CIT [1981] 127 ITR 601 and of the Delhi High Court in the case of Qammar-Ud-Din Sons v. CIT [1981] 129 ITR 703 and held that the penalty under section 271(1)(c) was not justified. He observed that the original return was filed by the assessee on an estimate, that when the assessee found subsequently on the basis of accretion to his wealth that the return filed by him did not disclose the correct income, the revised return was filed before the ITO initiated any enquiry into his affairs for this assessment year. The order for the assessment year 1973-74 was similar and he cancelled the penalties for the years 1972-73 and 1973-74. 11. In the appeal for the assessment year 1974-75, it is submitted on behalf of the assessee that the omission to ledgerise the sales for the month of November 1973 is an admitted fact but this was only a bonafide mistake. The discovery by the assessee of this omission was at the same time as by the ITO and the assessee had immediately taken all steps under his comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1972-73 and 1973-74. 12. The departmental representative, on the other hand, pointed out that the virtual admission by the assessee of concealment of income by comparison of the two sets of returns for these three assessment years clearly indicate that the assessee had omitted to show his income in the first set of returns filed for these three assessment years. It is submitted that the revised returns filed on 22-7-1975 cannot be considered to be voluntary. They were caused by the enquiry conducted by the ITO for the assessment year 1974-75. It is also submitted that merely because the income has been computed on the basis of an estimate, it cannot be said that there can be no question of penalty under section 271(1)(c) being levied. The departmental representative relied on the decision of the Delhi High Court in the case of Durga Timber Works v. CIT [1971] 79 ITR 63. It is submitted that the case of the assessee is on all fonts in that there was virtually an admission of concealment. Reliance is also placed on the decision of the Punjab and Haryana High Court in the case of Mahavir Metal Works v. CIT [1973] 92 ITR 513 in this regard. The further citations made by the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion of ours. The assessee had not merely tried to correct this omission but has scrutinised the account, scrutinised the reasonableness of the incomes returned for the three assessment years and had rejected the accounts maintained by him for the assessment year 1974-75 as providing any basis for the correct return of income, for these three assessment years. In the course of such examination the assessee has corrected not merely his omission but also certain other mistakes and has offered for assessment different higher figures for these years. These figures offered for assessment are on the basis of the accretion to the wealth of the assessee over the period of years. The ITO has also accepted such basis for making the assessments. Further, as pointed out by the Commissioner (Appeals), the return for the assessment years 1972-73 and 1973-74 were estimates based on the capital available with the assessee and the assessee had revised these returns upwards without any inquiry by the ITO into the affairs of the assessee for these two years. In these circumstances, it is difficult to accept the proposition of the revenue that there was concealment on the part of the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the assessee pointing out other mistakes in the accounts has to be taken due note of. 15. The Commissioner (Appeals) has referred to the decision of the Patna High Court in the case of Badshah Prasad and of the Delhi High Court in the case of Qammar-Ud-Din Sons. These decisions have analysed the position regarding the levy or non-levy of penalty under section 271(1)(c). In a similar case, the Patna High Court has held that if the revision of the return is an honest and bona fide one, that is to say, of an omission having been made inadvertently or without due knowledge of the state of affairs, it would not be a case for levy of penalty under section 271(1)(c). It was further held that it is imperative that facts must be established to indicate that the revision of the original return was to camouflage an omission deliberately made. We are of the opinion that such is not the case here. The observations of the Delhi High Court in Qammar-Ud-Din Sons' case, quoted by the Commissioner (Appeals), also point to the same effect. We feel that in these circumstances no penalty can be levied under section 271(1)(c) for these three assessment years. The penalty levied for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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