TMI Blog1992 (3) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to which it had agreed to an addition of Rs. 21,701 to be made to the income returned by it for assessment year 1979-80, by deleting the same from the returned income for assessment year 1980-81. It was also stated that the accounts were not settled with the dealer during the year under consideration and it was a bona fide mistake. This explanation of the assessee was found to be unconvincing and the Income-tax Officer in the penalty proceedings under section 271(1)(c) held that when it was a bona fide mistake there was no necessity for the assessee to change the normal nature of accounts from Credit Note Account to Texmo Industries account in the statement filed before the ITO. If the accounts were not settled during the year of account, the assessee could have filed copies of the credit notes on the basis of which it had made entries in its books to show that the credit was contingent or subject to confirmation. In the absence of any evidence in this regard, the only conclusion which can be drawn is that the assessee wanted to postpone this receipt of income as a trading liability. In view of assessee's admission by its letter dated 25-2-1982, the amount of Rs. 21,701 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the credit notes are the following :--- Date Particulars Amount Rs. 31-3-1978 After sale service allowance allowed 21,043.16 on Rs. 5,26,079 at 4 per cent for the year 1977-78 31-3-1978 Bonus discount allowed @ 6 per cent on Rs. 10,967.80 on the sales of 13 658.07 Nos. Motors and 4 Nos. pumps, for the period 1-4-1977 to 31-3-1978 ---------------- Total 21,701.23 ---------------- It is explained by the assessee that the Accountant entered the credit note amounts in the Credit Notes account. Subsequently it was realised to be an error and to rectify that error, the Sales account was credited with the credit note amount on 19-10-1979. This explanation of the assessee was found to be not acceptable by the AAC. He held that the quantum of the credit notes and the date on which the entries were made indicate that this was not merely an accounting error. The amount of credit notes indicates that the partners must have been aware of them. The credit note amount was reflected in the balance-sheet and also shown as profit for the next year only with a view to reducing the tax liability for, if it was shown and included in the income for assessment year 1979-80, the taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee were intended to be withdrawn or were actually withdrawn. A fair reading of the letter would show that it was only a threat administered by the manufacturer so that the dealer would supply spares and free replacements throughout the guarantee period of one year to the customers of Texmo products. When once a credit note is given and when it is unconditional and absolute in terms, to our understanding the person who sends the credit note cannot withdraw the same subsequently. If so, there is no reason why the amounts covered by the credit notes should be deleted from the income of the assessee-firm and should be shown as sales in the subsequent assessment year, viz., 1980-81. 5. During the course of the proceedings before this Tribunal, our attention was drawn to the order sheet entries of the ITO dated 9-2-1982 and 11-2-1982 as well as 25-2-1982 which are as follows :--- Order sheet dated 9-2-1982 : " An amount of Rs. 21,043.16 is credited to Credit Notes account and debited to Texmo Industries. Similarly Rs. 658.07 is credited to Credit Notes account and debited to Aqua Pump Industries. Assessee to prove liability. Adjourn to 11-2-1982. " Order sheet dated 11-2- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries did not withdraw the whole or any of the amounts covered by the credit notes. Hence, it is not reasonable for the assessee to think that the amounts covered by the credit notes does not represent income and on the other hand it represents income coupled with a contingent liability. 6. The learned counsel for the assessee contended that the present case before us is not a fit case where penalty under section 271(1)(c) can be justified, and he relied upon the following decisions :--- (1) CIT v. Dajibhai Kanjibhai [1991] 189 ITR 41 (Bom.), (2) CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC), (3) CIT v. Gurudayalram Mukhlal [1991] 190 ITR 39 (Gauhati). The learned counsel contended that when an addition was made on an agreed basis, no penalty under section 271(1)(c) can be imposed. On the other hand, the learned departmental representative contended that even on an agreed addition penalty can be imposed or sustained. In support of this proposition, he relied upon the following case law :--- (1) Rathnam Co. v. IAC [1980] 124 ITR 376 (Mad.) : (2) Addl. CIT v. E. Bhoopathy [1978] 113 ITR 188 (Mad.). The learned departmental representative contended that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 of the Act. The fact that under section 23(5) of the Act in the case of a registered firm tax is not payable by the firm itself does not prevent a penalty being imposed on the firm. This decision is neither here nor there for purposes of the appeal before us. We do not know in what way it will help the appellant or support any of its contentions put forward before us. We hold that this decision carmot be of any help to the assessee. 9. The decision in Gurudayalram Mukhlal's case, also does not help the asscssee. It deals with the erstwhile Explanation under section 271(1)(c) when the returned income is less than 80% of the assessed income. In that case, certain cash credit was disbelieved by the Revenue and the amount was added as undisclosed income of the assessee. Evidence regarding cash credit was produced before the Tribunal in quantum proceedings but not admitted by the Tribunal. The Revenue did not adduce any evidence in penalty proceedings to prove that the amount represented assessee's income. Under the circumstances of the case, the High Court held that there was no justification for imposing penalty under section 271(1)(c). It can be seen that in that case there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order dated 27-2-1982 was filed before us. It contained the following finding of the ITO : " If the accounts were not settled during the year under account, the assessee could have filed the copies of the credit notes on the basis of which he made entries in the books to show that the credit was contingent or subject to confirmation. In the absence of any evidence and having regard to the usual commercial practice, the only conclusion that can be drawn is that the assessee wanted to postpone this receipt of income nature as a trading liability. In view of the assessee's admission by letter dated 25-2-1982, an amount of Rs. 21,701 is brought to charge under the head Business. " Thus, the ITO gave a finding that the assessee tried to furnish inaccurate particulars of its income and by acting upon the admission contained in the letter dated 25-2-1982, the ITO also appears to have recorded that the assessee had also tried to conceal its income previous to the filing of the letter. Thus, the ratio of the Bombay High Court decision in 95 CTR 262 is fully complied with and the penalty order does not suffer farom any infirmity in that regard. 11. Now, the question that remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consent or otherwise of the assessee. 13. In E. Bhoopathy's case for assessment years 1963-64 to 1965-66, the assessee estimated his income at 15% of the turnover which was not accepted by the ITO who had assessed 20% of the estimated turnover as representing the income of the assessee. The assessee accepted the addition made by the ITO. Penalties were levied by the IAC which were cancelled by the Tribunal. On a reference to the Madras High Court at the instance of the Department, the Honourable High Court held the following as per head note obtaining at page 189 :--- " Held, that the Tribunal had not applied its mind properly to the facts of these three assessment years. The Income-tax Officer had only made an estimate on the basis of the turnover of each of the years. He had to make the estimate as the assessee did not produce any accounts for these years. The assessee himself having accepted the estimate of 20 per cent made by the officer and not having been able to show that the estimate made by him was bona fide or proper, there is clear scope for the finding that the assessee has concealed the particulars of his income or filed inaccurate particulars thereof in these th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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