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TMI Blog1991 (3) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... eme in its letter dt. 28th Oct., 1985 represented understatement of stocks; (ii) There was no independent evidence to show that the amount was represented by stocks; and (iii) It was against the accounting principles to debit the amount offered for assessment in the earlier years to the P&L account. In the process the assessee's explanation that the amount of Rs. 52,66,963 offered for assessment under the amnesty scheme for the earlier years represented the understatement of stock which was corrected and included in the value of the closing stock as on 30th April, 1986 was rejected by the ITO. The assessee's explanation that the additional stock representing the income declared was inducted in the accounts only in the year ended 30th April, 1986 did not also find favour with the ITO. The assessee carried the matter in appeal. 3. The assessee contended before the first appellate authority that under the provisions of the amnesty scheme it was under no obligation to satisfy the manner or the form in which the additional income offered for assessment is held by it. However, the assessee had passed the necessary entries in its accounts for the previous year ending on 30th April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion before the CIT on 28th Oct., 1985. However, in the course of the discussions the assessee explained the reason for coming out with disclosure of higher income voluntarily under the amnesty scheme and it was at the suggestion of the CIT the spread over was shifted from the asst. yrs. 1983-84 to 1984-85 and onwards. Then, when the assessment for the asst. yr. 1984-85 was taken up by the IAC (Asst.) the assessee had specifically stated at para 3 of its letter dt. 17th Feb., 1987 that the declared income of Rs. 60 lakhs was in the form of stock. Again, in the course of assessment for the asst. yr. 1987-88, to a particular question from the ITO whether any records are maintained relating to stock, the assessee had stated that as the stocks were unaccounted for stocks, there was no record for the same as a result of which the disclosure had to be made. That does not mean that the income declared by the assessee did not represent understatement of stocks. If the ITO had found any material that such income was represented in the form of any other investments, the assessee would be having no case, but, no such finding has been given or could even be made in the facts and the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting entries are not determinative of the legal character of the income or deductions. Income that is one assessed cannot be assessed in another year. Therefore, the assessee in order to have a correct display of the items of understatement of stock from the asst. yrs. 1984-85 to 1986-87 has redrafted the training account and the profit and loss account which are to be found in pages 54 to 57 of the paper book and that should be considered as stating the correct picture. 5. Shri A.D. Menon, the learned Departmental Representative, objected to the admission of the redrafted trading account and the profit and loss account as found in pages 54 to 57 of the assessee's paper book as the same was not before the ITO or before the first appellate authority. 6. We have carefully considered the matter. No new figures are introduced in the redrafted account. The only change that had taken place in the redrafted statement is to put the three items amounting to Rs. 52,66,963 in the trading account from its original place of P&L Account, i.e., 'above the lines' as against 'below the line'. Another change is that whereas these items were described as income declared under the amnesty scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us heard rival submissions and perused the records. In its petition dt. 25th Oct., 1985 the assessee had offered higher income under the amnesty scheme for the asst. yr. 1983-84 and onwards upto the asst. yr. 1987-88 as seen in para 3 thereof. However, in its statement filed with the CIT on 4th Nov., 1985 presumably after discussions with the CIT, the amount of Rs. 60 lakhs was spreadover the asst. yrs. 1984-85 to 1987-88. Thus, ultimately the assessee had come under the amnesty scheme for and from the asst. yr. 1984-85 instead of 1983-84 as originally proposed. There is no specific mention that the income represented understatement of stock. However, in its petition dt. 28th Oct., 1985 offering an income of Rs. 60 lakhs under the amnesty scheme the assessee has stated as follows: "As our accounting year closes on 30th April and the offer being made hereby takes into account the income that has accumulated upto the time of the offer, the disclosure will bring within its amplitude the asst. yr. 1987-88 also, the previous year relevant to which commences on 1st May, 1985 and ends on 30th April, 1986. This aspect will be taken care of when estimate for the payment of advance tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily disclosed income was kept. This clarification is found in the paper book at pages 69 and 70 as contained in the Kerala Kaumudi on 1161 Kumbham 28 (M.E.) (in the month of March, 1986). Therefore, we hold that the assessee's failure to specifically state the form in which the concealed income was held when it presented the petition to the CIT on 28th Oct., 1985 or when it filed another statement seeking spreadover of the amount on 4th Nov., 1985 is not fatal to his case. However, as early as on 17th Feb., 1987, the assessee, in the course of the assessment for the asst. yr. 1984-85 has stated specifically in its reply to the IAC (Asst.) as follows: "3. Disclosure of income An income of Rs. 60,00,000 which had not been assessed before was offered for assessment under the Amnesty Scheme. The disclosure was made before the CIT, Cochin by a letter dt. 28th Oct., 1985. The income thus offered for assessment was lying in the form of stocks at the time of disclosure and consisted of the total of the stocks understated in the closing stock inventories of the accounting years ended 30th April, 1983, 30th April, 1984, 30th April, 1985 and stocks under-estimated in respect of the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Central Circle, Ernakulam. The statement is as follows: "No records relating to the stocks which represented the income declared under the Amnesty Scheme have been kept or are available now. The very fact that the said stocks were not accounted rules out the possibility of any records relating to them being available or preserved. We may point out in this connection that assurances had been held out in the various circulars that made up the Amnesty Scheme that no probe would be made into or roving enquiries conducted about the source or the nature of the income declared under Amnesty Scheme. The persons making declarations were also not required in any of the said circulars to indicate at the time of declaration the form in which the income declared was lying." From this, the learned Departmental Representative wants us to infer that the assessee has no evidence or material to say that the income declared under the Amnesty Scheme referred to understatement of stocks. 11. We have carefully gone through this statement. It is no doubt true that the assessee was not maintaining day-to-day stock register, nor was it having a stock register worth its name in all the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement had taken place. For the asst. yr. 1986-87 the assessee filed the statement on 3rd June, 1987 and by that time the clarification had come. However, the previous year of the assessee for the asst. yr. 1986-87 ended on 30th April, 1985. But the entries were passed in the books of the assessee bringing on record the understatement of stock only on 30th April, 1986 relevant to the asst. yr. 1987- 88. Moreover, the assessee appears to have realised the understatement only by about 25th Oct., 1985 (that is much later on 30th April, 1988) when it presented the petition to the CIT. Therefore, the assessee could have been under the bona fide impression that there was no occasion for it to mention about the stock in relation to the previous year ending on 30th April, 1985 relevant to the asst. yr. 1986-87. Hence, no adverse inference can be drawn against the assessee on the basis of the statement filed on 21st Jan., 1986 or 30th June, 1987 in relation to the asst. yrs. 1984-85 to 1986-87. 13. We have already indicated that a mere display of the items in the profit and loss account portion rather than in the trading account is not fatal to the case of the assessee because at best i ..... 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