TMI Blog1993 (3) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting year. Similar credit balances have to be verified for which purpose, books produced are impounded under s. 131(3). Initial of the ITO dt. 30th Sept., 1987" 3. Subsequently, on 5th Oct., 1987, the ITO requested for the sanction of the learned CIT, Trivandrum, for the continued retention of the books in the following terms: "No. 46-006-FZ-9428/QLN(A) ITO, Quilon . Date : 5th Oct., 1987 To The Commissioner of Income-tax, Aayakkar Bhavan Kowdiar, Trivandrum Sir, Sub: Income-tax assessment of M/s A. Sreenivasa Pai, Quilon—Asst. yr. 1987-88 —Retention of books impounded—Request for The assessee firm follows Malayalam Year as its accounting period. For the year ended 16th Aug., 1986 it had declared a net income of Rs. 2,77,698. From a perusal of the Ledger Folio of the creditors for goods supplied, it is noticed that payment is not seen made in respect of purchases effected even in June, 1986. Since it is very uncommon to the supplier to keep the sale price with the assessee for such a long period, genuineness of the entries in the account of the supplier of the assessee has to be verified. The suppliers are located a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order accepting the additional income of Rs. 3,24,650 as offered by the assessee in the revised return as against the proposed addition of Rs. 4,50,359. In other words, the ITO after verification found that the assessee has correctly computed the peak credit at Rs. 3,24,650 which he had surrendered for assessment. At the same time, he held the view that the revised return filed by the assessee admitting a higher income (which was accepted in the assessment) cannot be treated as a voluntary one as the same was filed by it only after the Department had started enquiries with regard to the credit balances and with regard to the DDs accounts. In this view of the matter, penalty proceedings under s. 271(1)(c) were initiated. The assessee objected to the levy of penalty in its letter dt. 27th Feb., 1988. The learned ITO did not accept the contentions of the assessee. He held the view that the second return filed by the assessee on 16th Oct., 1987 cannot be construed as a revised return under s. 139(5) of the IT Act as the same was filed after the Department has started making enquiries. The mere fact that the additional income offered by the assessee was accepted by the Revenue cannot a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the second return filed on 16th Oct., 1987 admitting higher income is a non est return because it was not in connection with the discovery of any accidental omission or commission in the original return. Even otherwise penalty was lawfully leviable in the ratio laid down in the following cases: (i) K.P. Kandaswami Mudaliar Sons vs. CIT (1984) 39 CTR (Mad) 303 : (1985) 156 ITR 638 (Mad) (ii) CIT vs. Krishna Co. (1979) 13 CTR (Mad) 24 : (1979) 120 ITR 144 (Mad) (iii) Union Engineering Co. vs. CIT (1980) 14 CTR (Ker) 146 : (1980) 122 ITR 719 (Ker) (iv) CIT vs. Haji P. Mohammed (1981) 23 CTR (Ker) 39 : (1981) 132 ITR 623 (Ker) (v) F.C. Agarwal vs. CIT 1976 CTR (Gau) 82 : (1976) 102 ITR 408 (Gau) 8. Thus we heard rival submissions and perused the records furnished before us including the assessee's paper book and that of the Department. The facts of the case have been narrated in paragraphs 2 to 4. Though the ITO seems to have entertained doubts about the credit balances of one Gorantala Yadagiri Co., and wanted to verify similar other credit balances in the books, and though summons and letters were stated to have been issued to different concerns wherefr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposal and accepted the same figure of Rs. 3,24,650 as surrendered by the assessee. Thus, we hold that the disclosure made by the assessee in the second return was full and complete and in the light of the full disclosure of income in the second return voluntarily, prior to the detection by the Department, the charge of concealment cannot be laid against the assessee. 10. Sri Abraham vehemently contended that the second return cannot be construed as a revised return in the light of the decision of the Kerala High Court in Union Engineering Co. vs. CIT. In that case the facts were that for the asst. yr. 1961-62, the assessee filed its return on 30th May, 1962, showing a total income of Rs. 23,947. In November, 1965, the assessee produced the books of account for the year ending 31st May, 1960, in which the ITO found manipulations to a considerable extent by short-crediting the sales. The assessee explained that the products manufactured by it from 1st June, 1959 to 12th May, 1960, were out of stocks taken on loan from two persons. The ITO issued summons to those two persons to appear before him with books of account for the relevant year. On 29th Dec., 1965, the assessee wrote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts from certain bankers. The ITO upon examination found that the discharged hundies produced before him merely represented hawala transactions. Thereupon, the assessee agreed to the addition of peak credit to its income. It was in that context, the High Court observed that in a case where the assessee himself had admitted that the amount represented his own income, no further evidence would be necessary to show that it was the amount which represented his income and it represented his concealed income. Thus, the levy of penalty was justified by the High Court. Turning to the facts of the case before us, we have already held that the ITO was only entertaining certain suspicions in his mind. He had not stumbled upon any evidence to conclusively hold that the assessee had more income than what he had declared in the original return. Thus, the ratio laid down by the Madras High Court on a different set of facts cannot be applied to the case on hand. 13. In the case of F.C. Agarwal vs. CIT the issue was decided on the basis of Expln. to s. 271(1)(c) of the IT Act as it stood then for the asst. yrs. 1963-64 and 1964-65 as the total income returned by the assessee in that case was les ..... X X X X Extracts X X X X X X X X Extracts X X X X
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