TMI Blog1990 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessment order would give a picture as noticed by the assessing officer and the suspicion which promoted him to levy penalty: "While going through the books of accounts maintained by the assessee it was found that the assessee has kept miscellaneous account for recording credits and debits of the various customers to whom the goods were supplied either on credit or where the customers had deposited the advance for getting particular type of cloth purchased from the assessee. Such account was also maintained in earlier years. However on the close scrutiny of the credits and debits accounted for in this account, it has been seen that the credits and debits on the following dates in this account do not-contain the names: Credits Debits 43012-7-78 200019-8-78 3731-8-78 1258-9-78 912.6021-10-78 1826-10-78 23927-10-78200023-8-78 6321-11-783729-8-78 8136-11-7842019-9-78 152.649-11-786292-10-78 1915.8215-11-786001-11-78 3831.6417-11-789184-11-78 111220-11-784756-11-78 9029-11-78907-11-78 408-12-7854013-11-78 29213-12-7836315-11-78 5516-12-781915.8216-11-78 50018-12-781112.4020-11-78 150019-12-781915.8221-11-78 100019-12-78769.8327-11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the order-sheet. This action of the assessing officer in itself shows that assessment on the point resulted from the assessee's attitude of self-restraint from litigation. 8. Exonerating the assessee from the charge of concealment we allow the appeal by cancelling the penalty. Per Narayanan, A.M. ---The question for decision here is small in terms of revenue. The principle involved, however, is of some importance. Hence this order of dissent. 2. A penalty of Rs. 3,498 was levied under section 271(1)(c) of the Act with regard to a sum of Rs., 4,861 included by the ITO in the assessment for this year as income from undisclosed sources. The assessment order dated31-10-1981gives the factual background to this addition. It is also reproduced in the order of my learned brother. Briefly, the addition came to be made because the assessee, a registered firm, was unable to furnish full details of the small amounts credited/debited in the 'Miscellaneous Account' in its books this year. Its explanation before the ITO was that these entries related to various customers. Either goods had been supplied to them or they had deposited moneys as advances with the assessee against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts that led to the levy of penalty were mentioned in sufficient detail in the order passed by the learned Judicial Member, which were not in dispute. I shall therefore refer to them in brief The assessee is a registered firm dealing in the purchase and sale of cloth manufactured by, Binny Cloth Mills. For the assessment year 1980-81 it filed its return disclosing an income of Rs. 97,300. The Income-tax Officer made an assessment determining the income at Rs. 1,10,310 by his order dated31-10-1981. The amounts that were added by the Income-tax Officer were Rs. 5,000 in cloth account on ad hoc basis and another sum of Rs. 4,861 as income from undisclosed sources. This latter addition of Rs. 4,861 was regarded as concealment of income and a penalty was imposed, which is the subject matter of appeal. The Income-tax Officer while going through the accounts of the firm noticed that the assessee had maintained an account called 'miscellaneous account' in which certain credits and debits were found of varying amounts almost daily. In response to the enquiry as to the nature of these credits and debits, the assessee explained that whenever customers come to its shop, they take the goods on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax sought to be evaded on this sum. 3. Aggrieved by this penalty, an appeal was filed before the Commissioner (A), who confirmed the penalty relying upon two factors, namely, the absence of names for the credits and debits and the agreement of the assessee for the addition of Rs. 4,861. He also invoked the Explanation added by Taxation Laws Amendment Act, 1975 with effect from 1-4-1976 whereby if a person fails to offer an explanation or the explanation offered was found to be false or not substantiated, concealment of income was to be presumed unless the explanation offered was shown to be bona fide and all the facts relating to the same and material to the computation of total income were disclosed. According to him the explanation offered by the assessee was not substantiated by any evidence and that the explanation offered was not bona fide because of the agreement. 4. In a further appeal before the Tribunal the same contentions were reiterated. The learned Judicial Member took the view that the explanation offered by the assessee and the method of accounting employed by the assessee all along proved the innocence of the assessee and that this was not a case where a cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of addition did constitute the concealed income of the assessee. I have therefore to see in this case whether the assessee agreed for the addition as its concealed income or the agreement was only with a view to help the assessment and avoid litigation. The learned Accountant Member had rightly referred to the legal maxim of de minimis non curat lex because small addition of a sum of Rs. 4,861 should not have been made the cause for concealment of income when the turnover of the assessee was as high as Rs. 13 lacs. The order sheet entry, where the consent of the assessee for the addition was recorded, does not show that the assessee was agreeing that that sum represented the concealed income of the assessee. When the Income-tax Officer insisted that he would not accept the assessee's explanation for the debits and credits in the miscellaneous account, the assessee had no option except to agree for the addition because he was not able to give the names of the customers in respect of whom the entries were made. The probabilities of the case should have been taken into consideration by the department. Such entries were made not only in this year but also in the earlier years. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal, in the case referred to above, the nature of the agreement given by the assessee was not such as to infer that it represented the concealed income of the assessee. Unless there is an agreement that the addition agreed to was the concealed income of the assessee, the ruling laid down by the Delhi High Court could not come into play. In that case the agreement was that the amount added was the concealed income of the assessee. The Delhi High Court therefore held that in such an event the levy of penalty for concealment of income was automatic. 6. Justice M. S. Kania, as he then was (currently Supreme Court Judge), speaking for the Bombay High Court in the case of CIT v. Bhimji Khanjee Co. [1984] 146 ITR 145, had held that even if in assessment proceedings, the assessee admitted the existence of the credits and accepted for their addition on the ground that it was not in a position to call the parties and when the Income-tax Officer worked out the peak credit, as in this case and brought that sum as income from undisclosed sources, it could not be held that the amount was the concealed income of the assessee attracting the levy of penalty u/s. 271(1)(c) of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income and when the Tribunal cancelled the penalty holding that the agreement given by the assessee did not ipso facto indicate any intention on its part to conceal any portion of the income and when the High Court reversed the view taken by the Tribunal, by pointing out that the Tribunal had failed to consider the effect of the acceptance by the assessee company of the inclusion of the above sums in its income and held that there was concealment of income, the Supreme Court on appeal by the assessee reversed the judgment of the High Court and held that the Tribunal had considered, all the facts and admissions made by the assessee as well as the time of the admission, the admission given by the assessee did not amount to accepting that it deliberately furnished inaccurate particulars or concealed any income and therefore the High Court was wrong in reversing the judgment of the Tribunal and in doing so, the High Court transgressed the limits of its jurisdiction. In this case the Supreme Court pointed out, quoting from the head-notes : "From the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. There m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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