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TMI Blog1991 (2) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO recorded his satisfaction that the assessee has concealed income to the extent of Rs. 17,17,819 by way of suppression of stock and by furnishing inaccurate particulars of income within the meaning of section 271(1)(c) and that enquiry at that stage was likely to take some more time and, therefore, he was invoking the provisions of section 153(1)(b). He, therefore, extended the time limit for completion of assessment. Thereafter the assessment was completed on31-3-1987. In the assessment, so framed, the ITO made an addition of Rs. 17,17,819 on account of suppression of stock. 4. In the assessment order as well as in the order-sheet entry dated 13-3-1987, wherein the assessee recorded his satisfaction about concealment of income by the assessee, it is stated that the assessee showed the closing stock of raw-material and finished goods on 30th June, 1982 as follows :-- "Raw materials Items Quantity Rate Value (Rs.). 1. C.R. Coils 14.610 MT Rs. 4827 P.MT 70,522 imported 2. C.R. Coil 150.265 MT Rs. 4927 P.MT 7,40,356 3. Joist 6.135 MT Rs. 3300 P.MT 20,245 ----------------------- 8,31,123 Finished goods :-- 1. Steel Tubes 103.143 MT Rs. 4700 P.MT 4,84,722 2. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e papers on record regarding valuation of closing stock, entries made regarding writing back the interest due on loan accounts as well as claims for expenses incurred and credits appearing in the books of the company raise bona fide doubts about the 'accurateness' of the particulars of income. He repealed the argument that the ITO had no reason to have a bona fide belief in regard to concealment. It was, thus, held that the assessment made was within time. 9. Shri K.P. Bhatnagar, learned counsel for the assessee, has contended before us that it was not a case of concealment of income and, therefore, the case did not fall under section 271(1)(c), with the result that it was not open to the ITO to extend the limitation for framing the assessment by taking recourse to section 153(1)(b). In this connection it was pointed out that the addition on account of alleged suppression of stock, on the basis of which the ITO recorded his satisfaction, that it was a case of concealment of income or furnishing inaccurate particulars thereof and hence provisions of section 153(1)(b) were applicable, has been deleted in appeal by the CIT (Appeals) and against that deletion, no appeal has been pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation, which expired on 16-3-1987. Since the assessment was completed on31-3-1987, it was barred by limitation and was without jurisdiction. 11. Shri D.K. Singh, learned departmental representative, on the other hand fully supported the order of the CIT (Appeals) on the point under consideration. It was further submitted that for application of section 153(1)(b) it was not necessary that the penalty must ultimately be levied under section 271(1)(c). It was enough if the ITO entertained reasonable and bona fide belief that it was a case of concealment of income or furnishing of inaccurate particulars of income under section 271(1)(c) and that in view of the facts found by the ITO and recorded in the order-sheet entry dated 13-3-1987, he was justified in extending the period of limitation by invoking section 153(1)(b). Learned departmental representative, besides placing reliance on the decisions in Ram Bilas Kedar Nath's case, and S. Kanwal Tej Singh's case, cited on behalf of the assessee, also relied on the decision of the Madras High Court in T.B. Hanumantharaj v. CIT [1978] 111 ITR 414. 12. We have considered the rival submissions as also the facts on record. Under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court and, therefore, the decision of the Delhi Bench of the Punjab High Court would be binding on us. Moreover, no decision of any other High Court or of the Supreme Court, laying down a contrary view has been brought to our notice and for this added reason also we are bound to follow the aforesaid decision of Delhi Bench of the Punjab High Court. 13. Certain observations made by Their Lordships of the Calcutta High Court in the case, of Hansraj Dhingra, support the view canvassed before us on behalf of the assessee that before recording his satisfaction that it was a case of concealment of income under section 271(1)(c), the ITO should have given an opportunity of hearing to the assessee. These observations, appearing at page 402 of the report, are to the effect that the major obstacle to the application of section 271(1)(c) is the fact that in order to bring it within the said provision, the Income-tax Officer has to satisfy himself that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof. It was further observed that such a satisfaction had never been recorded in the proceeding. His Lordship entertained a gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.B. Hanumantharaj cited by the learned D.R., it was held that it was immaterial whether penalty was ultimately leviable of not as the question to be considered for the purpose of section 34(3) was only whether the provisions of section 28(1)(c) applied. This authority is not in conflict with the decisions cited on behalf of the assessee. For the purpose of ascertaining whether section 28(1)(c) applied, it has to be ascertained whether it was a case of concealment of income or furnishing of inaccurate particulars of such income. 17. In the background of the principles laid down in the aforesaid authorities, we now proceed to consider the question, whether, in this case the extended period of eight years, prescribed under clause (b) of section 153(1) was available to the ITO for completing the assessment beyond the normal period of limitation, which expired on16-3-1987. 18. Learned departmental representative has filed a paper book which includes a copy of the order-sheet, maintained by the ITO. It is available at pages 1 to 3 of the paper book. A perusal of the entries contained in the order-sheet goes to show that on 13-3-1987 the ITO recorded his satisfaction that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment in such cases would be available to the Assessing Officer under clause (b) of section 153(1). In order to obviate the difficulty that an Assessing Officer may have to face in cases of alleged concealment, the legislature has extended the period of limitation to eight years under clause (b). The period of eight years, prescribed under clause (b), commences from the end of the year in which the income was first assessable. In the instant case, the ITO has failed to determine the facts which would demonstrate that it was not possible to complete the assessment within the normal period of limitation available under clause (c) of section 153(1). The facts recorded by the ITO in his order dated13-3-1987were already available on the record. As stated above, after13-3-1987the ITO did not hold or conduct any enquiry into the allegation of concealment of income. The order-sheet entries shows that after13-3-1987the ITO did nothing except completing the assessment on31-3-1987. Under these circumstances the invocation of section 153(1)(b), in the instant case, was not bona fide. 19. The ITO invoked section 153(1)(b) on the basis of suppression of stock to the extent of Rs. 17,17,819. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate authority was not empowered to enlarge the basis and hold that ITO was justified in invoking section 153(1)(b). The other matters referred by the CIT (Appeals) while upholding the action of the ITO in extending the period of limitation u/s 153(1)(b) were not such as would have required a longer period for investigation or enquiry. Since those matters did not require any further investigation, the ITO did not invoke section 153(1)(b) on the basis that enquiry into those matters would require a longer time and hence he required extended period of limitation, prescribed under section 153(1)(b). In our opinion, on the facts of the case, the CIT (Appeals) was not justified in holding that the ITO had a reasonable or bona fide belief regarding concealment of income, particularly when the addition on the basis of which the ITO held that there was a concealment of income has been deleted by the CIT (Appeals) himself. 21. In view of the finding recorded above, the assessment has to be annulled. Therefore, we need not go into the merits of the other grounds raised in this appeal, challenging the additions of Rs. 1,76,371 and Rs. 1,17,000. 22. For the foregoing reasons, the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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