Allahabad H.C : Whether, on a true and correct interpretation of the provision of law as contained in s. 139(5) r/w s. 271(1)(c) of the IT Act, 1961, and Explanation thereto and application of such provisions to the facts of the case, the penalty for concealment and/or gross or wilful neglect was leviable in the instant case ?

High Court Of Allahabad

Cheap Cycle Stores vs. CIT

Sections 139(5), 271(1)(c)

Asst. Year 1978-79

R.K. Agrawal & Prakash Krishna, JJ.

IT Ref. No. 253 of 1991

15th March, 2005

Counsel Appeared

Rakesh Kumar, for the Assessee : A.N. Mahajan, for the Revenue

JUDGMENT

By the court :

The Tribunal, Allahabad, has referred the following question of law under s. 256(2) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court, relating to the asst. yrs. 1981-82 and 1982-83 : “Whether, on a true and correct interpretation of the provision of law as contained in s. 139(5) r/w s. 271(1)(c) of the IT Act, 1961, and Explanation thereto and application of such provisions to the facts of the case, the penalty for concealment and/or gross or wilful neglect was leviable in the instant case ?”

2. Briefly stated, the facts giving rise to the present reference are as follows : The reference relates to the asst. yr. 1978-79 in proceedings arisen out of imposition of penalty under s. 271(1)(c) of the Act. The applicant has been assessed to the income-tax in the status of a firm. Its accounting period for the assessment year in question ended on 31st of March, 1978. Return for the aforesaid previous year was filed by the applicant originally declaring an income of Rs. 38,590 which was accepted under s. 143(1) of the Act. Subsequently, the matter was taken up for scrutiny and notice was issued to the applicant. Vide order-sheet entry dt. 27th Sept., 1978, the applicant was asked by the AO to furnish the details of the purchase and sale of cycles. The applicant thereafter filed a revised return showing an income of Rs. 57,069 along with which it had filed a chart in which closing stock of cycles purchased within UP was shown at Rs. 19,941 as against Rs. 15,287 shown in the original return. With regard to the Ex-UP Cycle Account, the closing stock was now declared to be Rs. 52,899 as against Rs. 45,486 declared earlier. The applicant stated that the revised return has been filed on detecting mistake in the closing stock valuation and it was not its intention to conceal its income when it originally filed its return of income declaring lesser closing stock. The ITO did not accept the above submission of the assessee and held that there was a definite device adopted by the assessee for understating the closing stock. He, therefore, made an addition of Rs. 11,562 to the applicant’s income. Penalty proceedings under s. 271(1)(c) of the Act were also initiated, and after considering the explanation, the ITO had imposed a sum of Rs. 15,000 as penalty. Feeling aggrieved against the imposition of the penalty, the applicant preferred an appeal before the AAC who had held that the applicant had detected mistake itself and which was bona fide and, therefore, penalty was not imposable and set aside the penalty order. The Revenue feeling aggrieved, preferred an appeal before the Tribunal. The Tribunal has restored the penalty order.

3. We have heard Shri Rakesh Kumar, the learned counsel for the applicant and Shri A.N. Mahajan, learned counsel for the Revenue.

4. The learned counsel for the applicant submitted that it is incorrect and not borne out from the record that the ITO had detected the concealment and only thereafter the applicant had filed revised return. He invited attention of the Court to the entry dt. 27th Sept., 1978, in this behalf and submitted that having detected the concealment, the factum of concealment does not find mention at all. According to him as the applicant has filed revised return bona fide no penalty was called for. The learned standing counsel, however, submitted that only after the concealment had been detected, the applicant was forced to file revised return and, therefore, penalty had rightly been imposed.

5. Having heard the learned counsel for the parties, we find that the order-sheet entry dt. 27th Sept., 1978, does not mention anything about concealment in the closing stock having been detected by the AO. Entry dt. 27th Sept., 1978, is reproduced below : “27th Sept., 1978. Nirdhariti ke bhagidar Shri Imran Ahmed upasthit hua. Anshik sunvayee ki gaee. Cycle kharid aur pharokht ka vivaran dene ko samay chaha. Dinank 4th Oct., 1978 ko 2:30 baje pesh ho.” Prior to 27th Sept., 1978, the order-sheet entry shows that on 7th Sept., 1978, notice fixing 27th Sept., 1978, had been issued. Thereafter, the matter was got adjourned on two dates and revised return was filed on 26th Oct., 1978. It may be mentioned here that the applicant having filed original return within the statutory period as provided under s. 139(1) of the Act, it was entitled to file a revised return under the provisions of s. 139(5) of the Act. Thus, the revised return filed under s. 139(5) of the Act was a valid return and was to be taken into consideration. No concealment having been found in the revised return, the penalty in respect of the income declared in the return originally filed could not have been taken as the concealment had not yet been detected by the AO up till the time revised return was filed. The AAC had rightly considered the order-sheet entry dt. 27th Sept., 1978, while recording finding that till then no concealment had been detected.

6. In view of the foregoing discussion, we are of the considered opinion that the Tribunal was not justified in upholding that the applicant had concealed the particulars of the turnover and revised return was only a cover up. We accordingly answer the question referred to us in negative i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.

[Citation : 281 ITR 166]

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