TMI Blog1998 (4) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the ADI, Chandigarh. On an enquiry, it appears that one of the partners of the firm admitted that these drafts were purchased by the firm and due to a mistake of the accountant, these were not entered in the books on the dates when these were purchased but were entered in the books of account on subsequent dates. On receiving this information from the Investigating Unit, Chandigarh, the Assessing Officer issued a notice under section 148 of the Act to the assessee on May 3, 1989. However, much prior to the issue of notice by the Assessing Officer, the assessee filed a revised return on March 9, 1989, accompanied by a letter wherein the assessee surrendered a sum of Rs.2,50,000 representing the total of the five drafts. The covering letter reads as under : It is submitted that during the course of verification of certain entries in the books of account pertaining to the assessment year 1988-89 certain discrepancies have been detected by us. In order to buy peace the return of income is re-submitted wherein discrepancies have been sorted out and income has been declared in the return. It is submitted that the return of income of the firm and partners may kindly be accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment and not only this it also paid the tax due on this surrendered amount. This fact alone will go a long way in substantiating the appellant s claim that the revised return was filed voluntarily. It is also evident that the voluntary return along with voluntary payment of additional tax was made wholly because the appellant wanted to buy peace and expected a lenient treatment from the Department in view of the voluntary nature of its admission of mistake in the accounts and prompt payment of additional tax. It is pertinent to note that notice under section 148 was issued long after the appellant had filed his revised return surrendering the amount of Rs. 2,50,000. Another important factor is that even while finalising reassessment on the second return, the Assessing Officer had accepted the account books in toto after thorough scrutiny. The purchases and sales have been accepted as shown without any interference. The gross profit shown and the expenses claimed have been accepted as declared. No other defects were found anywhere. Only five drafts were not accounted for on the dates of purchase but had only been entered subsequently. The appellant had surrendered for addition th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of the report of the ADI on the basis of which the proceedings were claimed to have been initiated against the assessee under section 148. The learned Departmental Representative, however, submitted that the factual background discussed by the Assessing Officer in the penalty order clearly showed that the so-called surrender was not voluntary and was made only after detection by the Departmental authorities and as such the learned Commissioner of Income-tax (Appeals) was not justified in cancelling the penalty. Learned counsel for the assessee strongly relied on the order of the learned Commissioner of Income-tax (Appeals) and further submitted that notice under section 148 reopening the assessment was issued by the Assessing Officer on May 3, 1989, whereas the revised return surrendering the amount of Rs. 2,50,000 was filed by the assessee much earlier, i.e., on March 9, 1989, and the assessee had deposited the tax due on the basis of the return in the case of the firm as well as the partners. It was submitted that the impugned drafts were all entered in the books of account though not on the dates when these were actually purchased and the mistake occurred because of old age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal offence. Keeping in view the totality of the facts and circumstances of the case, we are of the opinion that if the assessee has, in its endeavour to buy peace, offered for taxation a sum of Rs. 2,50,000 representing the total of five drafts as suggested by the ADI, even prior to the issue of notice under section 148, it has suffered taxation for the negligence of the act of omission/commission of its accountant and the firm should not be further penalised by holding it to be guilty of conscious and deliberate concealment particularly when the revised return offering the amount of Rs.2,50,000 was filed prior to the issue of notice under section 148. In this view of the matter, we uphold the order of the learned Commissioner of Income-tax (Appeals) in this regard and dismiss the appeal filed by the Revenue. U. B. S. Bedi (Judicial Member).-Despite great persuasion to myself, Ihave not been able to concur with the conclusions and findings given by my learned Brother, the Accountant Member, in the proposed order and for such dissent, I base my reasons and conclusions as hereinafter given after having considered the facts, arguments of both the parties and the case law cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the fact that the assessee had filed a revised return before the issue of notice under section 148 is correct or the view of the Judicial Member that the order of the Commissioner of Income-tax (Appeals) deleting the penalty was required to be reversed as the assessee has not come forward voluntarily to agree for the addition but only when allegedly detected by the ADI that it included the amounts of drafts, which were not properly accounted for in the books and filed revised return, is justified ? ORDER OF THIRD MEMBER R. M. Mehta (Vice-President).-On a difference of opinion between the Members constituting the Division Bench, the following point of difference was referred to me as a Third Member by the hon ble President acting under section 255(4) of the Income-tax Act, 1961 : Whether, on the facts and in the circumstances of the case, the view of the Accountant Member that penalty of Rs. 1,60,000 levied by the Assessing Officer was rightly deleted by the Commissioner of Income-tax (Appeals) particularly in view of the fact that the assessee had filed a revised return before the issue of notice under section 148 is correct or the view of the Judicial Member that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) in respect of the amount of Rs. 2,50,000 and by means of a subsequent order levied penalty in a sum of Rs. 1,60,000. Being aggrieved, the assessee filed an appeal to the Commissioner of Income-tax (Appeals) who vide detailed reasons stated in the appellate order proceeded to cancel the penalty on the following main grounds : (1) On the case being taken for examination by the ADI, the partner of the firm admitted that the impugned drafts were not entered in the books on the due dates on which these were purchased but when called for examination on the second occasion he stated that all the drafts had been recorded in the books on dates subsequent to the dates on which these had been purchased and he in fact correlated these five drafts as entered in the books. It was admitted that this was due to a mistake on the part of the accountant. (2) That the return had already been revised declaring an additional income of Rs. 2,50,000 on account of the impugned drafts and additional tax amounting to Rs. 1,29,175 due on the amount surrendered had been duly paid. (3) The ADI submitted a report to the D.D.I. on April 4, 1989, holding that the firm had concealed income to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s counsel strongly supported the order of the Commissioner of Income-tax (Appeals) and submitted that whereas notice under section 148 was issued on May 3, 1989, the assessee had already filed a revised return surrendering an amount of Rs. 2,50,000 on March 9, 1989, and had also deposited the tax due on the basis of the additional amount so surrendered in the case of the firm as also the partners. It was submitted that the impugned drafts were duly entered in the books of account though not on the dates when these were actually purchased and such a mistake had occurred because of the accountant who was aged and not in a position to write the books on daily basis. It was canvassed that the surrender of Rs. 2,50,000 was made to avoid litigation and to buy peace of mind and on the oral assurance of the Department that no penalty would be levied. The bona fides of the assessee were adverted to contending that these were clear and which was further proved by the fact that the assessee had not worked out the peak of the drafts for purposes of surrendering the same as income. The learned Accountant Member who wrote the initial order accepted the view point canvassed on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter, the act of filing a revised return could not be treated as a voluntary one. In the final analysis, he confirmed the levy of penalty and reversed the order of the Commissioner of Income-tax (Appeals). I have heard both the parties at length-the learned Departmental Representative supporting the view taken by the learned Judicial Member and learned counsel for the respondent doing the same with respect to the order of the learned Accountant Member. The learned Departmental Representative reiterated that the revised return was not a voluntary one and the same had been filed only after the department had come into possession of information that the assessee had purchased certain drafts which had not been accounted for in its books of account. It was, therefore, urged that the view taken by the learned Judicial Member be confirmed. Learned counsel for the respondent, on the other hand, placed reliance on the following decisions contending in the process that the view taken by the learned Accountant Member was the correct view : (i) Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC). (ii) CIT v. Raja Corporation [1994] 205 ITR 533 (Mad). (iii) CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt agreed upon was the assessee s concealed income. The learned Accountant Member has rightly taken the view that the Revenue is not absolved from proving the mens rea of a quasi-criminal offence and in the present case, endeavour of the assessee was to purchase peace and it offered for taxation the sum of Rs. 2,50,000 representing the total of five drafts. The learned Accountant Member has also rightly opined that it was enough for the assessee to suffer taxation on the impugned amount on account of the negligence of its accountant and there was no basis to penalise it further by levying penalty under section 271(1)(c). The learned Judicial Member has clearly overlooked the aforesaid facts which were so clearly noted by the learned accountant Member and has proceeded to confirm the penalty merely on the basis of general observations and without reference to the decisions cited. The other decisions relied upon by learned counsel during the course of hearing of the present reference are also apt on the point and these do advance the view point canvassed by him in support of the order of the learned Accountant Member. In the case of CIT v. J. V. Appadurai Chettiar Co. [1996] 221 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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