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TMI Blog1992 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... that the correct stock position was reflected by the "Unofficial stock book". 3. On an examination of the data contained in the seized material including the said two registers, the Assessing Officer found that, as on 31-3-1982, 358.551 M.T. must have been available as closing stock. The assessee had, however, disclosed a closing stock of only 232.610 M.T. The Assessing Officer took the line that the difference in the said quantities, namely, 125.941 M.T. represented the stock which was not disclosed by the assessee for tax purposes. He, therefore, called upon the assessee to reconcile the discrepancy. The assessee's case before the Assessing Officer was that the aggregate production of 3696.514 M.T. relating to the relevant previous year included 128.06 M.T. of rerolled angles which were produced for others for a fee. These goods did not, therefore, belong to the assessee. If the said quantity was ignored, there would be no discrepancy. It was also the assessee's case that the rerolled angles produced for others by charging a fee was not included in the RGI register. 4. The said explanation did not find favour with the Assessing Officer, because, on verification he found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271(1)(c) of the Act. 6. The said explanation found favour with the Assessing Officer who dropped the penalty proceedings initiated under section 271(1)(c) of the Act. This was on 15-5-1985. It may here be mentioned that the said order dropping the penalty proceedings was passed by the same officer who had passed the original assessment order on 16-1-1985. 7. Subsequently, invoking the powers vested in him by and under section 263 of the Income-tax Act, 1961, the Commissioner of Income-tax, Coimbatore, called for and examined the assessment records of the assessee. On such an examination, he found that the assessment order passed on 16-1-1985 was erroneous in that it was prejudicial to the interests of the revenue, because it had been passed "without proper scrutiny of the materials available with the Department". After hearing the assessee on this issue, the Commissioner, on 30-3-1987, passed an order in revision setting aside the impugned assessment order and directed the Assessing Officer to make the assessment de novo after perusing all the evidence. He further directed the Assessing Officer to collect details from the Sales-tax and the Central Excise Departments an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject matter of any order in revision. 12. It is in these circumstances that the assessee is now before us. 13. Smt. Meenakshi Krishnaswamy, the learned counsel for the assessee, took us through the facts and circumstances of the case and urged that the C.I.T. (Appeals) was not justified in confining the penalty under section 271(1)(c) to the extent of Rs. 3,26,312. She first contended that irrespective of what had happened during the original assessment proceedings, the assessee had, in the course of the penalty proceedings, reconciled the figures and shown to the satisfaction of the Assessing Officer that there was no discrepancy at all. Secondly, the assessee had successfully contended before the Assessing Officer during the first round of penalty proceedings that the statement made by the Managing partner at the time of the raid could not be relied upon because even at that time he was 75 years' old and hence was unable to give proper explanation. In any event, in the course of the penalty proceedings, the figures were reconciled to the satisfaction of the Assessing Officer who dropped the proceedings. 14. The next limb of Smt. Meenakshi Krishnaswamy's argument was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fresh order passed on 27-3-1989, was that there had been under-statement of closing stock by about 126 M.T. and that, for a fact, the said quantity was valued at the rate of Rs. 4,000 per M.T., being the value adopted by the assessee itself for valuing the closing stock disclosed by it. In such situation, the Tribunal wanted to know, how it could possible be argued that the addition was made not on account of under-statement of closing stock but on account of 126 M.T. of angles sold by the assessee in the market. Shri Tilakchand's response was first that the orders in question were not happily worded and secondly, that, if anything, the Assessing Officers were very reasonable in making the addition. It would not, however, follow that there was no concealment by the assessee. 22. The Tribunal solicited the response of Shri Tilakchand on another aspect of the matter also. 23. In the first round of penalty proceedings, on a consideration of the explanation submitted by the assessee, an Inspecting Assistant Commissioner of Income-tax, a Senior Officer, had obviously concluded that this was not a fit case for levying penalty. In the second round of the penalty proceedings, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(c) got automatically set aside. We are unable to agree. Given the well-settled position in law that assessment proceedings and penalty proceedings are totally different proceedings, the mere fact that the assessment order was set aside does not necessarily mean that, in law, the order of the I.A.C. (Asst.) dated 15-5-1985 dropping the penalty proceedings also got automatically set aside. Here the principles underlying the concept of nullity come into play. In the case of Anisminic Ltd. [1969] 2 AC 147 (HL), it was held: " If it is a nullity, that could only be established by raising some kind of proceedings in Court. " Again, in the case of V. Raju v. CIT [1984] 147 ITR 212 (Mad.), the jurisdictional High Court observed : " So long as the order is passed under a statutory provision, it continues to be enforceable, unless it is set aside by the appropriate forum constituted under the same Act. Therefore, the assessee will be acting at his risk and peril if he ignores the order as being null and void. " The said warning, as we see it, will equally apply to the Department. 28. As long as the order passed by the I.A.C. (Asst.) on 15-5-1985 dropping the penalty proceedings i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the question that arises for consideration is whether the finding recorded by the Assessing Officer in the second round of proceedings that penalty is exigible in the facts and circumstances of the case is maintainable in law or not. Here, the significant point to be noted is that in the fresh assessment made on 27-3-1989, all that had happened was that the addition of Rs. 5,04,000 was repeated; and no fresh additions were made. Secondly, in the first round of the penalty proceedings, the assessee had reconciled the discrepancies which were found in the assessment proceedings and which the assessee could not reconcile then, with the result that the quantum addition of Rs. 5,04,000 came to be made. While levying the impugned penalty in the second round of proceedings, the Assessing Officer has clearly failed to take into account the reconciliations made by the assessee in the course of the penalty proceedings in the first round. The factum of such reconciliation having been made is a material fact which the officer who levied the impugned penalty in the second round of proceedings ought to have taken into account. As we see it, the said officer failed to take into account the sai ..... 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