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TMI Blog1984 (4) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... gs (each containing one quintal approximately) of sugar and partial shortage in few of the bags also was noticed. He required the assessee to explain the shortage. The assessee stated that the shortage was detected at the time of taking delivery from railway wagons for which claims and suits have been instituted before the appropriate authorities and there was no certainty as to the actual reimbursement of the claim vis-a-vis their value and, therefore, the same was kept aside to be credited on cash basis after the amounts were realised. The ITO did not accept the explanation of the assessee as in his view the loss which the assessee had claimed has not yet materialised. From the list and date furnished by the assessee, the ITO observed that when the whole amount was not realised from the railway authorities, suits were preferred and ultimately most of the amounts were realised and even if small loss occurred at a stage, it occurred only when the assessee finally accepted after all the possible remedies have been exhausted. According to the ITO, the amount claimed should have been brought at par with the sales and credited to the trading account. He also noted that the judgments ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, which was contradictory to the assessee's own claim. The ITO pointed out that it was not understood as to why the assessee was silent in respect of these accounts till the shortage was detected. Accordingly, Rs. 91,653 was added back as income of the assessee. 4. In the course of assessment proceedings the ITO initiated penalty proceedings under section 271(1)(c)/274, etc. He noted in the assessment order that proceedings under the above sections have been initiated separately. From the order of the IAC dated 14-3-1978, it is seen that the ITO referred the penalty proceedings under section 271(1)(c) read with section 274 to the IAC for disposal. The IAC noted in the impugned order that the show cause notice was issued by him and served on the assessee on 16-12-1977. But hearing was adjourned at the request of the assessee. When the case was fixed for bearing later on, nobody attended and there was no response from the assessee. He, therefore, proceeded to complete the proceedings on the merits of the case. 5. As indicated earlier, the assessee before us challenges jurisdiction of the IAC to pass order under section 271(1)(c)/274(2). According to the assessee's learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 274, and the consequent simultaneous penalty proceedings were without jurisdiction. It is urged, therefore ; that on the ratio of the decision, both the authorities below would have no jurisdiction to pass any penalty order on the facts of the present case. 7. Although this point of appeal cannot be said to have arisen out of the order of the IAC impugned before us, yet the above ground of appeal has to be taken into consideration by us as it would go to the root of the matter. 8. The learned departmental representative, on the other hand, resists the submissions made on behalf of the assessee contending that this point of jurisdiction was not before the IAC and even otherwise, the penalty proceedings are procedural and any defect, if at all, would be cured under section 292B of the Act. According to the learned departmental representative, it was the ITO who has to initiate the penalty proceedings in the course of the assessment proceedings, if the ITO is satisfied that there was concealment or furnishing of inaccurate particulars and the IAC would simply take over when the case was referred to him by the ITO as required under section 274(2) and, therefore, there was no wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged by the assessee it is seen that it was the ITO who should have been satisfied in the course of the assessment proceedings regarding matters mentioned under section 271(1)(c). As held by the Hon'ble Supreme Court of India in the case of D.M. Manasvi v. CIT [1972] 86 ITR 557, satisfaction precedes the issue of notice and it would not be correct to equate the satisfaction of the ITO with the actual issue of notice. In other words, the satisfaction of the ITO could be recorded much earlier before the issue of the notice actually. By this notice issued by the ITO, the assessee was informed that proceedings under section 271(1)(c) have been initiated, otherwise the assessee would not have known of the proceedings as the ITO recorded his satisfaction in his records only. From the assessment order dated 12-7-1976, it is seen that the return was filed on 19-3-1975, i.e., prior to 1-4-1976. 11. Similar is the view of the Hon'ble Calcutta High Court in the case of Appejay Steel Works (P.) Ltd. v. IAC [1976] 103 ITR 806 in which it was held that the ITO, on the facts of that case, was satisfied during the course of the assessment proceedings about the need for imposition of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we may refer to the decision of the Hon'ble Allahabad High Court in Hargu Charan Srivastava v. CIT [1979] 119 ITR 622 in which the dispute regarding the period of limitation for imposition of penalty was involved. It was held therein that the period of limitation is a matter of procedure. After considering the provisions of section 271(1)(c) read with section 274(2), we are of the opinion that the penalty proceedings under section 271(1)(c) read with section 274 are procedural matters. 13. We may at this stage refer to the decision in the case of Addl. CIT v. M. Y. Chandragi [1981] 128 ITR 256 (Kar.) in which under similar situation, it was held that after the amendment, the ITO was conferred jurisdiction to impose penalty in all cases where the concealment did not exceed Rs. 25,000 and he was required to refer to the IAC only such cases of concealment where the amount concealed exceeded Rs. 25,000. It may be pointed out here that in the above case the Hon'ble High Court referred to the decision of the Hon'ble Madras High Court in the case of Continental Commercial Corpn. v. ITO [1975] 100 ITR 170. But the Hon'ble Karnataka High Court disagreed with the view expressed by the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decision of the Karnataka High Court in the case of Addl. CIT v. C.V. Bagalkoti Sons [1978] 115 ITR 131 in which an identical view was expressed on a similar situation. It is pertinent at this stage that we should refer also to the decision of the Hon'ble Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1, in which it was held, amongst other things, that the concealment of particulars of income was affected by the assessee when he filed the return and, therefore, the law as is operating on the date on which wrongful act was committed would govern the issue. The Hon'ble Madhya Pradesh High Court in the case of CIT v. Ramchand Kundanlal Saraf [1975] 98 ITR 474 has expressed an identical view, as also given by it in the case of Addl. CIT v. Hiralal Munnalal [1980] 124 ITR 728. 16. Again as mentioned earlier, the assessee filed the return on 19-3-1975 and, therefore, the law as applicable or that date would govern the issue and not the law as per amended section. In this view of the matter, we are of the opinion that the ITO had properly initiated the proceedings and the IAC had validly continued the proceedings and passed the order on the case referred to him by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the railway authorities were not realised. But no material fact has been placed before us to substantiate this claim. The IAC, on the other hand, has dealt with this aspect of the matter and he has referred to the findings of the ITO given in the assessment order. At this stage we may refer to the facts as noted by the ITO. The ITO observed that the assessee has been following the mercantile system of accounting and the assessee did not disclose the income in the form of receipts from railway claims as discussed briefly by us at paras 2 and 3 of this order. In addition to the railway claims, the ITO noted in the assessment order that the assessee has claimed Rs. 49,055 on account of Motia Majuri account, details of which were filed before the ITO who checked the same and found some vouchers could not be given. He pointed out that six vouchers from 2-5-1971 to 7-5-1971 for Rs. 200, one voucher for Rs. 112.51 for 5-7-1971 and nine vouchers of 22-3-1972, 3-11-1972 and 18-3-1972 amounting to Rs. 1,600, etc., could not be shown. That apart, he also mentioned that one or two vouchers may be missing but not so many. Accordingly, he disallowed Rs. 2,500. 20. In the travelling account, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the stand taken by the assessee at this stage. In fact, the ITO has observed that it was not understood as to why the assessee was silent in respect of receipts from the railway claims on account of shortage, till the shortage was detected. The assessee in his letter to the IAC dated 11-4-1978, copy of which has been placed in our file, submitted that there was no concealment of income on the part of the assessee but only a change of opinion regarding the maintenance of accounts. It was also stated therein that a statement on which the addition was made was supplied by the assessee during the course of the assessment. This fact would go to show that the assessee did not originally furnish the particulars in respect of items connected with the above additions till the same were asked for by the ITO. We have given our careful consideration of the different aspect of the matter and the submissions made before us. Having regard to the facts of the case and the findings of the authorities below, we are of the opinion that the IAC was justified on the facts of the case in passing the penalty order. We are of the opinion that the order of the IAC impugned before us is valid. We find no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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