9911796707
TMI Blog1988 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... 69.76 Closing 220,150.00 Gross Profit : 210,614.17 Stock ----------------------- ------------------------ 866,387.30 866,387.30 ----------------------- ------------------------ After deducting various trading expenses and adding profit on sales of property, the net income as declared by the assessee-firm for the aforesaid accounting period was Rs. 88,242 which was equally divided by the assessee-firm amongst four partners. 3. On30-12-1975, the assessee firm and its partners made voluntary disclosure under the Voluntary Disclosure of Income and Wealth Ordinance, 1975. The following narrations were made against item 5 of the form of declaration prescribed u/s 3(1) of the Voluntary Disclosure Scheme, 1975 : --- ------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Name of the Amount of Assessment If the income Remark assessee income years) to is represented declared which the by cash (including income bank relates deposits), bullion, investment in share, debts due from other persons, commodities or any other assets -------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled revised trading account, profit and loss account and balance sheet. In the revised trading account, two figures were changed namely purchases and closing stock. The figures of opening stock, gross profit and sales remained the same as in the accounts filed along with the original return. Purchases were, however, reduced from Rs. 5,84,070 declared in the original trading account, to Rs. 4,10,670. Closing stock figures were also correspondingly reduced from Rs. 2,20,150 to Rs. 46,750. There was thus reduction of Rs. 1,73,400 in the figures of purchases and closing stock. That left the gross profit unaltered. Corresponding to the aforesaid changes, changes were also effected in the figures of sundry creditors, which were declared earlier at Rs. 3,65,290 and which were brought down to Rs. 2,90,704 in the revised balance sheet. Figure of sundry debtors was also changed. Besides, there were numerous other changes in various accounts. They were, however minor in quantum. The ITO required the assessee to explain the aforesaid variations and to file a copy of the closing stock inventory which was now being shown by the assessee at Rs. 46,750 and to explain as to how the earlier value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls), however, sustained the addition to the extent of Rs. 54,050 because in his opinion, the assessee's explanation was not convincing. The observations of the learned CIT (Appeals) with regard to this item as contained in paragraph 9 of his order placed at pages 22 to 25 of the assessee's paper book were as below : " 9. As far as the addition of Rs. 54,049.85 is concerned, the appellant has not been able to discharge its onus to prove the authenticity of the stock ownership vesting with some consignee. He has not been able to furnish any evidence or any details whatsoever regarding the alleged consignees. In the absence of any evidence, the ITO as well as the IAC was fully justified in making addition of the alleged consignment stocks. The addition stands confirmed." 5. Against the aforesaid order of the learned CIT (A) both the assessee and the revenue appealed to the Tribunal. Whereas the grievance of the assessee was that the addition of Rs. 54,049 should have been deleted by the learned CIT (A), the grievance of revenue was that the deletion of the addition to the extent of Rs. 1,19,850 was not justified. 6. The Tribunal, after hearing both the sides, confirmed the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the revised trading account and the balance sheet. In fact, the assessee himself does not accept that the closing stock on31-3-1975was merely Rs. 46,750. In the next year while working out the trading account the opening stock was shown at above amount of Rs. 46,750 as well as the value of the stocks which were covered by the voluntary disclosure of the firm and its partners. In order to enable the assessee to change the figures of the closing stock, the assessee reduced the figures of purchases and changed the figure of sundry creditors and sundry debtors. The assessee has not come forward before us to explain the basis of the changes made by him in these accounts. Thus, it is clear that the assessee has not been able to show that the revised trading account represented the correct position of the stocks, purchases etc. 17. The assessee had explained that the closing stock shown at the time of the original return included the amounts voluntarily disclosed by the assessee. This explanation has to be rejected as the return was filed by the assessee on31-10-1975along with trading account and the balance sheet, whereas the disclosure by the firm and its partners were made only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had also concealed the particulars of his income. In view of the concealment of particulars and furnishing of inaccurate particulars on the part of the assessee, the provisions of section 271(1)(c) are clearly attracted and I, therefore, impose a penalty of Rs. 1,24,050 which is equal to the income concealed by the assessee firm." 8. On appeal, the learned CIT (Appeals) has confirmed the above order. 9. The appellant challenges the correctness of the above order on numerous grounds ; viz. the following : --- (1) That penalty proceedings in the present case had not been validly initiated by the ITO and, therefore, the penalty order was void ab initio. (2) That penalty was being imposed by the ITO for two offences namely the concealment of income and the furnishing of inaccurate particulars of its income and such order was vitiated on account of vagueness and so the order in question should be quashed. (3) That penalty, if it was to be imposed at all should have been tax based because the final assessment order in the present case has been passed in 1982 and the law which prevailed at that time should be made applicable to the assessee's case and inasmuch as the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of penalty on the assessee on the basis of income evaded was in accordance with the ratio of the judgment of the Hon'ble Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1 and that the aforesaid decision has not since been superseded by the Hon'ble Supreme Court as alleged by the assessee's learned counsel. While deciding the judgment in the case of Maya Rani Punj their Lordships were dealing with the question of penalty for not filing of the return of income and that the question as to whether such default was a continuing default or was one time default. The observations made in that context could not be construed as overruling the ratio of the judgment of the Hon'ble Supreme Court in the case of Brij Mohan. In fact their Lordships did not refer to their judgment in Brij Mohan's case while deciding the issue raised in the case of Maya Rani Punj. 13. The learned D. R. also disputed the assessee's submission that there was no valid penalty proceeding pending at the time when the penalty order was passed by the ITO. According to him, the penalty notice issued by the ITO at the time of passing the original assessment order on26-9-1978initiated the penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea that the earlier accountant had caused confusion and had prepared a wrong trading account and profit and loss account and balance sheet. In this connection, he invited our attention to the statement of the earlier Accountant Sh. R.L. Arora recorded by the ITO on 25-3-1978 in which the said Accountant had categorically stated that he had kept the books of accounts in the normal course and that it was on the basis of such books that he had prepared the profit and loss account, trading account and balance sheet, that the said accounts had been shown both to the Chartered Accountant of the assessee and the partners of the assessee and that it was after clearance from them that the return of income was originally filed by the assessee along with the trading account, profit and loss account and balance sheet. According to the learned D.R. it was in the face of the said statement wrong to allege on the part of the assessee that wrong trading accounts etc. had been prepared by the earlier Accountant. He also pointed out that the assessee's case was not that the closing stock of Rs. 2,20,150 did not exist as shown in the original trading account, for in the revised trading account for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned penalty order on the ground that they were passed without there being a valid initiation of penalty proceedings. The order passed on27-3-1982was not a fresh assessment order as presumed by the learned counsel for the assessee. Against the original assessment order passed on26-9-1978, appeal was filed on various grounds by the assessee before the CIT (Appeals) who disposed off the said appeal vide his order dated17th September, 1979whereby he gave considerable relief to the assessee to the extent of Rs. 1,19,850. Addition of Rs. 54,050 was confirmed by him and with regard to the addition of Rs. 15,000, the matter was set aside by him and the issue was restored to the ITO. Against the aforesaid order of the CIT (Appeals), both the revenue and the assessee appealed to the Tribunal and in the assessee's appeal the question of setting aside of the order to the ITO for re-determining the issue of the addition of Rs. 15,000 was also one of the grounds of appeal along with other issue of Rs. 54,050 which was, confirmed by the learned CIT (Appeals). In the departmental appeal, the question raised was with regard to the deletion of the addition of Rs. 1,19,850. The aforesaid cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding before him, the assessee discovered that the Accountant of the assessee had debited the opening stock value amounting to Rs. 25,770 to the profit and loss account twice and thereby there had been an understatement of the profits. He, therefore, surrendered Rs. 25,770 before the AAC for purposes of taxation. The said amount was, therefore, added by the learned AAC to the assessee's total income on the above basis. He, however, issued no penalty notice on this account. The learned AAC imposed penalty on the assessee with reference to the said sum of Rs. 25,770 (even though penalty had been issued with reference to the addition of Rs. 26,691) and it was with reference to it that he observed that "the assessee had concealed its income or that it had furnished inaccurate particulars of such income". It was with reference to this order of the IAC that their Lordships of the Hon'ble Gujarat High Court held that the IAC's order could not be sustained because there was change in the whole basis of assessment and that the IAC treated the non-disclosure of the double debiting of Rs. 25,770 in the profit and loss account for the asstt. year as concealment of income and also as furnishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is any inflation of expenses nor that there is any suppression of sales. The dispute centres round two figures : (1) valuation of closing stock, and (2) figure of purchases. As regards purchases also, there is no real dispute because the assessee's case is that the real purchases were Rs. 4,10,617 and not Rs. 5,84,070, as originally declared, and that the books of the assessee evidence the said purchases of Rs. 4,10,617. The Department has no quarrel with this submission. In fact this position was impliedly accepted by the Department when it made the addition of Rs. 1,73,400 (i.e. the difference between the aforesaid two figures). The real dispute between the two sides is as regards the valuation of the closing stock figure. 18. That the closing stock valuation was done on the basis of an inventory prepared on physical verification of the stock is the stand of one of the partners of the assessee-firm. This position is in accord with the normal practice of stock-taking. There is, therefore, no reason to disbelieve the partner's version on this account. As per this stock inventory, the value of the closing stock was declared originally at Rs. 2,20,150 in the accounts filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on its correctness. The real figure, it appears to us, was Rs. 2,20,150. 19. The assessee was weighed down with this knowledge all along and that is why it came forward with the theory in March 1978 that to the extent of Rs. 1,19,850, the stock stood covered by the voluntary declaration and that the remaining stock of Rs. 54,050 represented the value of the goods received on consignment. If the stock were in fact only of the value of Rs. 46,150 as declared in the revised trading account, where was the justification for the above explanation ? Consistent with this explanation, the assessee revised the opening stock value in the following year when it declared opening stock of Rs. 1,66,000 consisting of (i) the figure of Rs. 46,150, and (ii) Rs. 1,19,850 as above. If the actual stock were no move than Rs. 46,150 why this change in the figure if the opening stock of the following year ? This conduct goes clearly to demonstrate that the real stock was not Rs. 46,150 but much more. All the facts being in the assessee's possession, it should have come out with them. It has somehow chosen not to make a clean breast of itself. For this reason adverse inference has to be drawn against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in the original trading account was partly acquired by the assessee with the help of the investment outside the books of account. 23. The plea of the assessee that goods to the extent of Rs. 54,050 did not belong to it and that they had been acquired on consignment basis from some consignee has to be rejected on the same ground as has been indicated in the orders of the CIT (Appeals) in paragraph 9 of his order and the Tribunal in the quantum appeals. We are also not impressed by the assessee's contention that the entry with regard to Rs. 54,050 was wrongly made by the earlier Accountant of the firm in the books of the assessee-firm. No evidence in support of it has been adduced by the assessee and a mere allegation cannot take the place of evidence, more particularly when the old accountant denied such situation. 24. Onus in the present case to show that the difference between the assessed income and the returned income did not arise out of the assessee's fraud or gross or wilful neglect lay entirely on the assessee in terms of the explanation to section 271(1)(c), as it stood at the relevant time when the original return of income was filed by the assessee before the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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