9911796707
TMI Blog1987 (4) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be evaded on the concealed income of Rs. 1,84,711. The particulars of the income held to be concealed income by the Income-tax Officer are as under : Rs. (i) Disallowance on account of expenses 44,436 relating to furnace oil : (ii) Disallowance on the previous year's 10,897 expenses amounting to : (iii) Fixed deposit and interest for 27,790 which the assessee has not been able to provide any evidence : (iv) Closing stock : 13,260 (v) Bad debts : 88,328 ---------------- 1,84,711 ---------------- Before the Income-tax Officer the assessee had contended that on the facts of this case no part of the income should be treated as concealed income and secondly it was submitted that no penalty was leviable because after adjustment of carry forward losses the assessed income will be in the negative figure. On both the issues the Income-tax Officer did not accept the contention of the assessee and he held that the additions made as indicated above represented concealed income of the assessee within the meaning of section 271(1)(c) and penalty could be levied under Explanation 4 to section 271(1)(c)(iii). For this he relied on the decision of the Kerala High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... starting of the crushing season. It was also pointed out that the issue of oil between18-2-1974to30-3-1974exceeded the quantity of oil available. In spite of fall in crushing, the consumption had gone up from 72,500 litres to 90,970 litres. The Income-tax Officer had made an addition of Rs. 24,436 which was upheld by the C.I.T. (Appeals). Before the Tribunal it was submitted that the Accountant of the assessee-company had mixed up high speed oil with crude oil. If both the articles were considered, the consumption could not exceed the available stock. The Tribunal, however, did not accept this explanation as the company was maintaining detailed accounts where there was no possibility of mixing up of high speed diesel oil with crude oil. The Tribunal further held that the claim was highly excessive and upheld the addition. 7. The above two additions have been held to be part of income in respect of which particulars had been concealed and thus they represented concealed income of the assesses. It was submitted that a proper explanation was given before the lower authorities and there could be no presumption of concealment only on the ground that the consumption was held to be exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed it in this year on the ground that these expenses could not be claimed in the earlier years. According to the Income-tax Officer these expenses should have been claimed in the earlier years and not in this year. Before the Tribunal details were filed. The Tribunal found the explanation of the assessee in respect of Rs. 15,699 represented payment to the North Eastern Railways,Lucknowto be bona fide and allowed the claim of the assessee on the ground that the assessee came to know about this liability in this accounting year. However, in respect of the balance the Tribunal was not so satisfied. From the order of the Tribunal it appears that there was no suggestion that these expenses had not been incurred in the earlier years and the only objection was to their allowance in this year, as according to the Tribunal this should have been claimed for allowance in the earlier years. The plea of the assessee was that the assessee had various branches and sometimes some expenses remained to be claimed and claimed in a later year without there being any mala fide about such a claim. After considering the facts, we are of the view that the addition of Rs. 10,897 should not be taken as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock was taken as the opening stock in the next year. This was agreed to. After considering the facts, we are of the view that this addition should not be considered as representing concealed income of the assessee. The assessee was not showing the lime-stone in the closing stock or the opening stock in the earlier years and the same practice was followed in this year. While agreeing to the addition of the closing stock, he requested for taking the same as the opening stock of the next year. Thus, in fact, no intention to evade tax was involved. We are, therefore, of the view that the addition of Rs. 13,260 could not be considered as a part of the concealed income of the assessee. 12. The last addition is in respect of an addition of Rs. 88,328 representing bad debts. It had been pointed out earlier that out of this Rs. 58,126 had been surrendered by the assessee himself in the revised return as the earlier figure was an inadvertent mistake. It had been claimed by the assessee that the above amount of Rs. 58,126 was merely a provision made and had wrongly been classified under the claim of bad debts, and this was a bona fide mistake and there was no intention to conceal. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no income there could be no question of concealment. It was submitted that where the effect of an addition was to reduce the loss or the carry forward losses it could not be said that the assessee had concealed 'income'. According to the assessee, for the purpose of levying penalty under section 271(1)(c), there must be some taxable income. Referring to Explanation 4(a) to section 271(1)(c), it was submitted that total income assessed should be a positive figure and not a negative figure. It was contended that the use of the words 'total income' and 'income' makes it amply clear that total income could not include an amount of loss. Reliance was placed on certain case laws including the decision of the Madras High Court in the case of Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99 at page 103. The Departmental Representative, on the other hand, has submitted that Explanation 4 to section 271(1)(c) was added precisely to cover such cases where the act of concealment takes place but the assessee instead of trying to reduce the income tries to increase losses or carry forward of losses. It was pointed out by the Departmental Representative that the income of this year after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the order of the Chandigarh Bench but in view of the decision of the Kerala High Court in the case of Rowther Bros. and the Explanation 4 to section 271(1)(c), we hold that penalty can be levied under section 271(1)(c) even in a case where no tax is payable by the assessee as a result of the adjustment of certain carry forward of losses if there is a finding regarding concealment of income. The Kerala High Court has clearly held that it is not necessary that the assessee should have a total income on which any tax was payable. Even in respect of a case where total income was below taxable limit penalty was leviable. The position of a loss return is also the same insofar as the question of evasion of tax is concerned. It was in view of this doubt that Explanation 4 was added in section 271(1)(c). We do not see how the case of loss could not be covered under Explanation 4(a). In the present case the amount of income in respect of which particulars have been concealed is a positive figure though the total income determined is a figure of loss as a result of carry forward of earlier years' losses. In such a situation, the law presumes that the concealed income be treated as the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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