1990-VIL-81-ITAT-
Equivalent Citation: TTJ 038, 012,
Income Tax Appellate Tribunal BOMBAY
Date: 01.01.1990
STAR GALVANIZERS.
Vs
ASSISTANT COMMISSIONER OF INCOME TAX.
BENCH
Member(s) : L. N. AGGARWAL., N. R. PRABHU.
JUDGMENT
This is an appeal filed by the assessee against the order of the CIT(A) dated 28th March,1989 for the asst. yr. 1983-84 against an order for levy of penalty of Rs. 1,09,807 under s. 271(1)(c) of the IT Act.
2. The brief facts are that the return was filed in this case declaring a loss of Rs. 5,71,570. During the course of assessment proceedings, the ITO investigated the consumption of raw materials during the course of manufacturing process of the assessee. He found that zinc consumption of this year was as high as 44,104 kg. As against 18,630 kg. of last year. Since the assessee did not show the labour charge receipts to the extent increase in consumption of raw materials, the ITO concluded that the consumption of zinc should have been less and closing stock was suppressed by the assessee. He, therefore, after taking the entire facts into consideration calculated the gross profit at 2.5 per cent and made addition of Rs. 2,00,000 on account of suppression of closing stock, treating the same as the assessee's concealed income. The assessee did not file an appeal against the said order but filed a revision petition under s. 264 before the CIT, but the same was rejected. Thereafter, penalty proceedings were initiated and after hearing the parties a penalty of Rs. 1,09,807 under s. 271(1)(c) was imposed. The said order was also confirmed by the learned CIT(A). The assessee being aggrieved has come up in appeal before the Tribunal.
3. The learned Counsel for the assessee has stressed that firstly there was no concealment of income. The addition was made by the ITO only disbelieving the accounts and without having any substantive evidence on that score. The assessee did not file an appeal only to purchase peace and paid tax. Consequently, he has stressed that the enhancement of tax in such cases did not attract the provisions of s. 271(1)(c) as it did not amount to any concealment of income. Secondly, the learned counsel for the assessee has stressed that it was an assessment of loss and even after enhancing the income the assessment was turned out to be of loss. Even in the subsequent year, the assessment was of loss and there was no income. Under these circumstances, it has been stressed that since there was no concealment of income or enhancement of income-tax in the assessment, the provisions of s. 271(1)(c) were not attracted. For that, the learned Counsel for the assessee has relied on the decisions of the Amritsar Bench of the Tribunal in the case of Victory P.H.M. Transport Conten. (P) Ltd. vs. ITO (1986) 17 ITD 857 (Asr) and of the Bombay Bench of the Tribunal in ITA No. 2965/Bom/85 a copy of which has been filed in the compilation at page 71. He has also relied on the decisions of Hon'ble Bombay High Court reported as CIT vs. Haji Gaffar Haji Dada Chini (1987) 63 CTR (Bom) 130 : (1988) 169 r 33 (Bom) and of the Hon'ble Supreme Court reported as Sir Shadilal Sugar & General Mills Ltd. & Anr. vs. CIT (1987) 64 CTR (SC) 199 : (1987) 168 ITR 705 (SC).
4. On the other hand, the learned Departmental Representative has relied on the order of the learned CIT(A) and also relied on the decisions of the Hon'ble Kerala High Court reported as CIT vs. Rowther Brothers (9179) 8 CTR (Ker) 68 : (1970) 119 ITR 353 (Ker) and CIT vs. Varkey Chacko (1980) 16 CTR (Ker) 97 : (1980) 126 ITR 469 (Ker).
5. We have heard the parties at length and also perused the entire facts on record. The Amristsar Bench of the try in the case of Victory P.H.M. Transport Co. (P) Ltd. had held that where the assessee filed returns declaring loss and after making additions towards unexplained cash credits, the finally assessed figure was against a loss, then the provisions of s. 271(1)(c) cannot attracted and no penalty can be imposed. While deciding that case, it had relied on the decision of the Madhya Pradesh High Court in the case of CIT vs. Jaora Oil Mills (1981) 129 ITR 423 (MP). In the same way, the Bombay Bench of the Tribunal, while deciding ITA No. 2965/Bom/85 had held that the word 'income used in Explanation to s. 271(1)(c) cannot be held to included loss. In view of the fact that the assessee has suffered heavy losses not only in the year under appeal but also in the subsequent years the Bench was satisfied that the assessee had no guilty intention in understanding the value of closing stock, and, consequently, the penalty imposed under s. 271(1)(c) was cancelled. The basic reasoning adopted by the Bench in that case was that where the assessment, even after taking the concealed income into consideration is of a loss, then no penalty under s. 271(1)(c) can be imposed as no income has been concealed. In such cases, at the most, what can be said is that the losses are reduced by addition the concealed income while computing the total income of the assessee. The Hon'ble Bombay High Court in the case of CIT vs. Hazi Gaffar Hazi dada Chini had held that a mere surrender of certain cash credits to buy peace did not amount to an admission of concealment of income, and in such cases, the levy of penalty was liable to be quashed. In the same way, the Hon'ble Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. & Anr. vs. CIT had held that where the assessee had agreed to certain additions to maintain good relations it does not amount to an admission of concealment, and in such cases the provisions of s. 271(1)(c) are not attracted. In the present case, the ITO, while scrutinising the accounts, came to the conclusion that certain closing stock had been suppressed and made addition of Rs. 2,70,000 in the profits. The assessee, as alleged by him, had not filed any appeal just to buy peace and his petition for revision under s. 264 was rejected by the learned CIT. These facts, themselves did not amount to an admission of concealment of income. When there was no concealment of income, as held by the Hon'ble Supreme Court and also by the Hon'ble Bombay High Court in the cases mentioned above, the provisions of s. 271(1)(c) are not attracted. Even if the facts are taken as interpreted by the Revenue, still in this particular case the levy of penalty was not justified. The Amristsar Bench of the Tribunal in the case Victory P.H.M. Transport Co. (P) Ltd. had very clearly held that in cases of loss assessment even after the addition of concealed income, no penalty can be levied. Virtually, the said proposition has been accepted buy the Bombay Bench of the Tribunal while deciding ITA No. 2965/Bom/85. We patently do not find any reasons to differ from the findings of the Tribunal. Hence, respectfully following the said order of the Tribunal we hold that, even in the alternative, in cases of loss assessment the penalty imposed was not justified. In this case, the assessee was assessed asset a lost and even in the subsequent asst. yr. 1984-85 was also assessed at a loss which fact had been given by him in his application to the CIT under s. 264 of the IT Act a copy of which has been filed at pages 55 to 59 of the compilation and the details of such loss are at page 57 of the compilation. Taking all the facts into consideration we hold that the levy of penalty in cases was not justified. The order of the learned CIT(A) is accordingly reversed.
6. The result, the appeals is allowed.
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