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TMI Blog1995 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... for 106 parties gave rate difference of Rs.24,90,941 to the following sister concerns:— Rs. 1. Jaylaxmi Enterprises 10,87,170 2. Balkrishna Silk Mills 8,11,750 3. Ambaji Silk Mills 6,89,021 The Assessing Officer(AO) found that the aforesaid parties had not credited in their books of accounts the said amount of rate difference received from the assessee during the year whereas the assessee in its books of accounts passed debit entries at the close of the year regarding rate difference to sister concerns. The assessee failed to explain the basis for such rate difference given to sister concerns nor the assessee could satisfactorily explain as to why such rate difference was given during the current year when no such rate difference was given in the earlier year and why the recipients made no entries in their books of accounts when they also followed the same accounting year. The AO, therefore, held that the claim was not genuine and the assessee reduced its income to the extent of Rs. 24,90,941 in the guise of rate difference. The AO accordingly disallowed the claim. 3. On appeal the first appellate authority con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(2) in particular. 4.1 The Tribunal also admitted an additional ground at the time of hearing to the effect that the amount of commission of Rs. 24,90,941 if disallowed in the asst. yr. 1987-88 ought to be allowed in the asst. yr. 1988-89. The Tribunal on the facts and in the circumstances directed that if the AO comes to the conclusion that any part of the rate difference relating to asst. yr. 1987-88 is deductible then deduction for the same should be allowed in the asst. yr. 1988-89. The AO while giving effect to the Tribunal order on the basis of the evidence brought on record by the assessee to prove that the rate difference is allowable, allowed the said amount of Rs. 24,90,941 on account of rate difference for the asst. yr. 1987-88 from the income of the asst. yr. 1988-89 in his order dt. 10th Feb., 1993 a copy of which has been filed before us. 5. While disallowing the claim for rate difference of Rs. 24,90,941 for the asst. yr. 1987-88 the AO initiated penalty proceedings under s. 271(1)(c). The assessee failed to reply to the show cause notice given, The AO, therefore, relying upon the order of the first appellate authority sustaining the disallowance of Rs. 24,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as given on business consideration. The learned counsel has further pointed out that the AO treating the claim as genuine has allowed the same in the following asst. yr. 1988-89 in consequence of the order of the Tribunal. The learned counsel has therefore, pleaded that on given facts there is neither any concealment of income involved nor there is furnishing of any inaccurate particulars of income and the penalty levied is totally unjustified. 8. The learned Departmental Representative on the other hand relied upon the orders of the lower authorities. 9. We have considered the facts and submissions made. It is evident from the facts given that the assessee had paid commission on account of rate difference to the sister concerns as well as other parties for whom job work was done and as per the counsel of the assessee the net rate charged for job work after adjusting the commission paid both from the sister concerns and the other parties is almost the same. The Revenue has not brought on record any material to show that on payment of rate difference the net rate charged from sister concerns was lower than that charged from the other parties. The AO rather while giving effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Raj). He also made a submission that even otherwise the assessee firm did not have taxable income during the year under consideration as the assessee declared in the return filed a loss of Rs. 3,20,770. This was also a reasonable cause for the delay. 13. The learned Departmental Representative, on the other hand, relied upon the orders of the lower authorities and it was submitted that as per s. 271(1)(a) penalty is leviable at 2% of the assessed tax of every month of default and a month is reckoned of 30 days and not of 31 days. He, therefore, submitted that there being no reasonable cause shown and the default being for one complete month the penalty levied was justified. 14. We have considered the facts and rival submissions. The Hon'ble Allahabad High Court in the case of CIT vs. Laxmiratan Cotton Mills Co. Ltd. (1974) 97 ITR 285 (All) reckoned the month as of 30 days whereas the Hon'ble Karnataka High Court in the case cited supra agreeing with the view of the Hon'ble Madras and Calcutta High Court in CIT vs. Kadri Mills 1977 CTR (Mad) 51 : (1977) 106 ITR 846 (Mad) and CIT vs. Brijlal Lohya Mahavir Prasad Khemka (1980) 18 CTR (Cal) 163 : (1980) 124 ITR 485 (Cal) respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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