1997 (2) TMI 157 - AT - Income Tax

Account Books, Account Books, Assessing Officer, Assessing Officer, Assessment Year, Assessment Year, Bona Fide, Bona Fide, Inaccurate Particulars, Inaccurate Particulars, Penalty For Concealment, Revised Returns, Revised Returns, Search And Seizure, Search And Seizure

Summary

Issues Involved:
1. Legitimacy of the penalty under section 271(1)(c) for concealment of income.
2. Validity of the revised return filed by the assessee.
3. Applicability of Explanation 5 to section 271(1)(c) in the context of the case.

Detailed Analysis:

1. Legitimacy of the Penalty under Section 271(1)(c) for Concealment of Income:
The primary issue in the case was whether the penalty of Rs. 2,29,392 levied under section 271(1)(c) was justified. The assessee, a firm engaged in the wholesale business of Indian made foreign liquors and beer, had discrepancies in its stock records. During a survey under section 133A, it was found that the closing stock as per the stock register was higher by Rs. 8,85,598 compared to what was declared in the return. The Assessing Officer (AO) concluded that the assessee had deliberately furnished false stock particulars, leading to the imposition of the penalty.

2. Validity of the Revised Return Filed by the Assessee:
The assessee argued that the discrepancies were due to clerical errors and the managing partner's health issues. They filed a revised return voluntarily, including the additional stock value of Rs. 8,85,000, and paid the due taxes. The CIT(A) accepted the assessee's explanation and cancelled the penalty, noting that the revised return was filed before any notice was received from the Department. However, the Tribunal found that the revised return was not filed voluntarily but was prompted by the discovery of discrepancies during the survey. The Tribunal emphasized that the original return contained inaccurate stock details, which constituted concealment of income.

3. Applicability of Explanation 5 to Section 271(1)(c):
The assessee contended that the operation should be treated as a search and seizure under section 132, and the revised return should be considered under Explanation 5 to section 271(1)(c), which provides immunity from penalty if certain conditions are met. The Tribunal rejected this argument, stating that the operation was a survey under section 133A, not a search and seizure. Even if it were considered a search, Explanation 5 would not apply as it is meant to safeguard the Department's interests, not the assessee's. The Tribunal concluded that the concealment of income in the original return was deliberate, and the revised return did not absolve the assessee of the concealment.

Conclusion:
The Tribunal reversed the CIT(A)'s decision, reinstating the penalty. It held that the assessee had deliberately concealed income by showing a lower stock value in the original return. The revised return, prompted by the survey, did not mitigate the concealment. Therefore, the penalty under section 271(1)(c) was justified, and the departmental appeal was allowed.