9911796707
TMI Blog1989 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... filed his return of income for the assessment year under consideration on 4-11-1981. The ITO completed the assessment on 30-7-1983. The assessee went in appeal against the order of assessment, before the CIT(A). Amongst the various grounds taken up by the assessee in his appeal before the CIT(A), one ground was that the assessment was bad in law as it had been made after the expiry of the period prescribed for the making of the assessment. The CIT(A) accepted the contention of the assessee that the assessment was barred by limitation. He, hence, struck down the assessment as being bad in law. The Department has felt aggrieved by the decision of the CIT(A) and has come up in appeal before us. The contention of the Department is that it was a case which fell within clause (c) of sub-section (1) of s. 271 and as such the provisions of s. 153(1)(b) were applicable. 3. Section 153 lays down the time limits for completion of assessments and reassessments. This section, as far as it is relevant for our purpose, is as under : " S. 153(1) : No order of assessment shall be made under section 143 or section 144 at any time after --- (a) the expiry of --- (i) . . . . . . (ii) . . . . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 595.30 Rs. 1,58,945 1558 bags of African raw nuts @ Rs. 367.73 Rs. 5,72,923 --------------------- Total Rs. 31,868 --------------------- 5. The assessee had not maintained any stock register. 6. Under the State Government Regulations, an exporter of cashew nuts is required to submit monthly return to the Cashew Special Officer, giving quantitative details of cashew nuts purchased, processed, exported and those lying in stock. On enquiry with the Cashew Special Officer, Quilon, the ITO gathered that the assessee had declared before the Cashew Special Officer that he had as on 31-3-1979 (the last date of the accounting year under consideration 738 bags of African raw nuts with him. The ITO thus found that whereas the assessee had stated before the ITO that he had 1558 bags of African raw nuts, he had stated before the Cashew Special Officer that he had only 738 bags of African raw nuts. Before the ITO, the assessee had declared total stock of 1825 bags of raw nuts, consisting of 1558 bags of African raw nuts and 267 bags of local raw nuts. The local raw nuts are costlier than the African raw nuts. The value per bag of local raw nuts was Rs. 595.30, whereas value per bag of Af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned departmental representative has assailed the above finding of the CIT(A). It was pointed out by the departmental representative that the assessee had deliberately furnished wrong particulars of his closing stock to the ITO. It was pointed out that the assessee had classified wrongly the raw cashew nuts lying in his stock. It was pointed out that whereas the assessee had only 738 bags of African raw nuts is on 31-3-1979 as was apparent from the declaration made by the assessee to the Cashew Special Officer, the assessee had in his statement of closing stock given to the Department shown 1,558 bags of African raw nuts and only 267 bags of local raw nuts. It was pointed out by the departmental representative that the assessee deliberately inflated the quantity of African raw nuts and deflated the quantity of local raw nuts in order to reduce overall value of his closing stock. 11. On the other hand, the learned authorised representative of the assessee stated that the CIT(A) was perfectly justified in coming to the conclusion that an addition on account of revaluation of stock would not make the case fall in clause (c) of sub-section (1) of s. 271. According to him, the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the value of 470 bags of raw nuts which the assessee had pledged with a bank, as there was no mention of these in the statement filed by the assessee before the ITO. The AAC levied penalty for this concealment under section 271(1)(c). The Appellate Tribunal confirmed the order levying penalty. On a reference, it was held by the Kerala High Court, following the decision of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696, that imposition of penalty was not legal. The Kerala High Court had held that since the departmental authorities had not brought on record any material to justify the conclusion that the value of 471 bags of raw nuts pledged with the bank represented the income of the assessee, penalty was not exigible. 13. The assessee had also relied upon the decision of the Bombay High Court in the case of CIT v. M. Bhuta & Co. [1976] 103 ITR 183. In that case also the High Court had not approved of the imposition of penalty u/s. 28(1)(c) of the IT Act, 1922 in respect of the addition made on account of a discrepancy in the stock declared before the bank and the stock declared before the ITO. 14. On the basis of the above cases, it was argued by the learned autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the present proceedings is markedly different from the law of penalty applicable to the cases on which the learned authorised representative of the assessee had relied. In this appeal, we are concerned with assessment year 1979-80. We have to take into consideration Explanation 1 to s. 271(1)(c) which had been put on the statute with effect from 1-4-1976. In the cases cited by the authorised representative of the assessee, penalty provisions prior to the insertion of the Explanation were interpreted. The legal position after the insertion of the Explanation is different. This Explanation says: "Explanation 1 : Where in respect of any facts material to the computation of the total income of any person under this Act, --- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income. Hence, we hold that the case of the assessee was such which fell within clause (c) of sub-section (1) of section 271 and hence the provisions of sec. 153(1)(b) became applicable. As such, the assessment which had been made by the ITO on 30-7-1983 was a valid assessment, since it had been made within the prescribed time i.e. within eight years from the end of the assessment year 1979-80 in which the income was first assessable. 19. The authorised representative of the assessee had also relied upon the decision of the Calcutta High Court in the case of M.B. Mercantile Co. v. CIT [1988] 169 ITR 201 in support of his contention that the extended time limit of eight years for the completion of the assessment was not available to the ITO in the case under consideration. We have gone through the decision of the Calcutta High Court very carefully. We do not find anything in that decision which may be of any help to the assessee. In that case, the Calcutta High Court had decided that the extended time limit laid down u/s 153(1)(b) was not admissible, since the High Court had found that the department had not brought any material on record within the period of four years, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case." The Calcutta High Court was of the view that the ITO should not sit over the assessment and allow the normal time limit to expire and then take the help of the provisions of sec. 153(1)(b) to raise the assessment which he otherwise had become incompetent to raise on account of the lapse of the normal time limit for the completion of the assessment. The Calcutta High Court was of the view that the extended time limit as per sec. 153(1)(b) will be available only if the ITO had brought on record, during the normal time limit, evidence to show that there was concealment of income. 20. The facts of the present case are altogether different from the facts of the case decided by the Calcutta High Court. In the case under consideration, the ITO, before the expiry of the normal period provided for the completion of the assessment, had brought sufficient material on record to show that it was a case of prima facie concealment of income. The normal period for the completion of the assessment in the case under consideration was up to 3-11-1982. Before the expiry of that period, the ITO had initiated the assessment proceedings and he had brought material on record sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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