9911796707
TMI Blog1991 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... id year, the opening stock of salt was 57,646 tonnes and the assessee had produced 91,132 tonnes making a total of 1,48,778 tonnes. Out of that figure, the assessee reduced 10%, that is, 14,250 tonnes. The assessee had actually transported 39,660 tonnes of salt to Tata Chemicals, Mithapur. It had thus shown the closing stock at 94,868 tonnes which if deduction of 10% due to rain wash was not shown, should have been 1,09,118 tonnes. The assessee had thus claimed adjustment of Rs. 57,000 not only by determining the closing stock but also as a separate item in the trading account. It appears that the Income-tax Officer had written a letter dated February 4, 1974, to the assessee enquiring as to the basis on which 10% adjustment for rain wash was claimed and pointing out that the assessee had received an amount of Rs. 17,194 from Tata Chemicals for rain wash in the year and since that amount was allowed by Tata Chemicals as rain wash, the assessee should not have claimed the amount of Rs. 57,000. It appears that, for the earlier assessment year 1970-71, in the appeal which was before the Appellate Assistant Commissioner, though the excess rain wash was not the subject-matter of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the letter dated February 4, 1974, written by the Income-tax Officer to the assessee which suggested an addition of Rs. 57,000 on different grounds as observed by the Inspecting Assistant Commissioner and which, though it did not directly refer to the double claim of rain wash, brought out that the claim of the assessee of Rs. 57,000 for rain wash was not properly made, as observed by the Tribunal. The Inspecting Assistant Commissioner had found that the revised return was prompted by the investigation which was started by the Income-tax Officer regarding the rain wash allowance. He found that the assessee had furnished inaccurate particulars of income even in the single claim of 10% of reduction due to rain wash as the actual loss due to rain wash was much less as reflected in the books of account of Tata Chemicals. The Inspecting Assistant Commissioner found that since the Explanation to section 271(1)(c) was attracted, it was for the assessee to establish that the difference between the income finally determined and the income shown in the return submitted by the assessee after adjustments for expenses, etc., disallowed was not due to concealment of income. The Insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge requested the Appellate Assistant Commissioner to add the amount of Rs. 32,764 for that year even though the deduction due to rain wash was not an issue involved in that appeal. He submitted that the conduct of the assessee in requesting the Appellate Assistant Commissioner in appeal to add the said amount was bona fide and voluntary and since a similar mistake was committed in respect of the subsequent years, the assessee had hastened to file revised returns for those years. He submitted that the Tribunal did not take into account such bona fide conduct of the assessee but simply relied upon the letter dated February 4, 1974, even though that letter did not refer to the aspect of double deduction. He submitted that, in the books of account, in the trading account, the entry was shown while the other deduction reflected in the statement of accounts was due to the mistake of the accountant as pointed out in the letter dated February 28, 1974, of the assessee's chartered accountant. Mr. Patel also argued that though the Income-tax Officer has stated that, by putting a double claim for rain wash, the assessee was guilty of furnishing inaccurate particulars of its income while initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such wrong statement comes to his knowledge for the first time after the filing of the return, he may furnish a revised return at any time before the assessment is made. Therefore, deliberate omissions and false and fraudulent statements fall outside the purview of sub-section (5) of section 139. This is why it has been consistently held by the courts that mere filing of revised returns will not absolve a person from penal liability under section 271(1)(c) and it has not been disputed before us that the original return can be made the basis for the applicability of section 271(1)(c) as also its Explanation which, for the relevant year, read as under: "271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person ... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty - . . . Explanation. -Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in the Explanation referred to as the correct income) as assessed under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10% as was claimed by the assessee. The Tribunal did not notice that the Inspecting Assistant Commissioner was oblivious of the fact that the Income-tax Officer had ultimately upheld the claim of the assessee for 10% deduction due to rain wash. The Tribunal also did not notice that the approach of the Inspecting Assistant Commissioner that it was for the assessee to establish that there was no concealment of income was not warranted because the ground which was mentioned by the Income-tax Officer while initiating the proceedings was that the assessee was guilty of furnishing inaccurate particulars and not that he was guilty of concealment of income. The Tribunal, therefore, in our opinion, erred in upholding the order of the Inspecting Assistant Commissioner, which proceeded on the reasoning not warranted by the settled legal position as reflected in CIT v. Lakhdhir Lalji [1972] 85 ITR 77 (Guj). The Explanation to section 271(1)(c) of the Act came to be considered by this court in Addl. CIT v. Chandravilas Hotel [1987] 165 ITR 300 and, after reviewing the decisions of other High Courts, this court observed that it was clear that the Explanation created a legal fiction if the condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it by the Explanation will stand discharged. The material on record would include the conduct of the assessee as reflected from the record and all the relevant factors which may have a bearing on the question whether he had conducted himself fraudulently or by any gross or wilful neglect. If the material on record made the explanation of the assessee plausible or if, in other words, on the basis of preponderance of probabilities, it was reasonably possible to accept the explanation, then the burden will stand discharged. The said Explanation to section 271(1)(c) indicates rule of evidence and the authority which imposes penalty is competent to invoke the Explanation in reaching the final conclusion on the question of concealment. It, therefore, follows that merely because the Explanation has not been specifically referred to at the time when the proceedings were initiated, there would be no legal bar against invoking the Explanation during the course of the proceedings. In the instant case, the original return showed income less than 80% of the income ultimately assessed and, therefore, the Explanation stood attracted and it cannot be said that, because the Income-tax Officer, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn due to the letter dated February 4, 1974, is a conclusion which cannot be reasonably arrived at in view of the contents of the said letter which in no way indicate that the Income-tax Officer had the aspect of double deduction even remotely in his mind. The finding of the Tribunal is, therefore, not at all warranted by the evidence on record and is based on an erroneous inference from the said letter of the Income-tax Officer. There is one more important aspect of the matter which clearly shows that the Tribunal adopted an inconsistent and incongruous stand for upholding the penalty in respect of the year 1971-72. Admittedly, the assessee had for the year 1970-71 voluntarily requested the Appellate Assistant Commissioner to add a sum of Rs. 32,000 to its income which was claimed due to the said mistake of double deduction even though there was no appeal as regards the item of the claim for rain wash. Admittedly, while adding that amount to the income, the appellate authority did not find any case for issuing notice under section 271(1)(c) for the year 1970-71. The Tribunal accepted the explanation of the assessee as regards the revised return filed for the year 1972-73 on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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