TMI Blog1993 (6) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,700 relates to asst. yr. 1975-76. A notice was issued under s. 148 to the assessee, and in pursuance thereof, assessee filed a return on 5th Feb., 1985, offering an income of Rs. 40,420, the same figure with which it was originally assessed. During the course of reassessment proceedings, it was contended that during asst. yrs. 1968-69 to 1975-76, total intangible additions to the extent of Rs. 89,135 were made, and since the aggregate of these intangible additions exceeded the difference in the trade creditors balances, there is nothing to make further addition in asst. yr. 1974-75. This contention of the assessee was negatived by the ITO held that the case of the assessee was not that the intangible additions were relatable to incorrect deduction of trade creditors' balances. He clearly found that the difference between the balances in the trade creditor's accounts as on 30th June, 1973 as per the list furnished by the assessee and on the basis of information gathered from trade creditors amounted to Rs. 11,000. Therefore, telescoping of intangible additions into this Rs. 11,000 was rejected and the total income of the assessee was determined at Rs. 51,429, before the firm's t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 75,700 relatable to the asst. yr. 1975-76 has to be added under s. 68 of the IT Act. Thus, he determined the total income of the assessee at Rs. 1,33,920 and completed the reassessment on 22nd Feb., 1985. Inter alia, the ITO started penalty proceedings under s. 271(1)(c) for concealment of income and for furnishing false particulars of income. 4. Notices under s. 271(1)(c) were issued for asst. yrs. 1974-75 and 1975-76. Assessee filed explanations dt. 25th March, 1987 and 3rd Aug., 1987, copies of which are furnished at pages 28, 29 and 30 to 32 of the first paper book filed on behalf of the assessee. In its reply dt. 25th March, 1987, assessee contended that against the additions made in the reassessment proceedings, appeals were preferred before the CIT(A)-II, Hyderabad. It was also contended that the difference in the accounts of the trade creditors, after a sum of Rs. 40,000 was considered for asst. yr. 1976-77, remained at Rs. 86,418. Assessee contends that intangible additions made in the asst. yrs. 1968-69 to 1975-76 cover an amount of Rs. 89,135. If one is telescoped into the other, there would not be any case for further addition to be made either in asst. yr. 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n addition of Rs. 40,000 for that year towards difference in the accounts of the trade creditors. He wanted to consider the difference of Rs. 86,418 for asst. yr. 1974-75 and 1975-76. He wanted to consider a sum of Rs. 11,000 for asst. yr. 1974-75 and Rs. 75,700 for asst. yr. 1975- 76. Already, while making assessments for 1968-69 to 1975-76, intangible additions to the extent of Rs. 89,135 were made, and if those intangible additions were telescoped into the intended additions representing difference in the accounts of the trade creditors, there would not be any scope to make any further additions in the reassessment for asst. yrs. 1974-75 and 1975-76. The learned CIT(A) in the appeal filed against the reassessment for the asst. yr. 1975-76, gave a relief of Rs. 12,000 and confirmed the balance of Rs. 63,700. In the survey operations conducted under s. 133A in the year 1976, no unexplained cash was found, and there was also no suppression of sales, and except the mistake committed in the preparation of balance sheet, by the accountant, there was neither concealment nor furnishing of inaccurate particulars of such income. Hence, the assessee is not liable to penalty under s. 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty of Rs. 1,00,000. Against the levied penalties, assessee went in appeal for asst. yrs. 1974-75 and 1975-76. 7. The AAC, B-Range, Hyderabad, while disposing of the appeal for asst. yr. 1974-75, by his order dt. 14th March, 1988, having held that the extent of inflation in the accounts of the trade creditors is accepted by the assessee also, and having found that the plea of the assessee that the inflation is covered by the intangible additions made in earlier years is not acceptable, since the said additions were made in earlier years on different grounds, he held that the inflation in the accounts of the trade creditors made by the assessee is a clear-cut case of furnishing inaccurate particulars, which amount to concealment, and therefore, he confirmed the penalty imposed by the ITO. 8. The learned CIT(A)-II, Hyderabad, by her impugned order dt. 23rd Feb., 1988 reduced the penalty from Rs. 1,00,000 to Rs. 63,700 for the asst. yr. 1975-76, and thus granted partial relief to the assessee. 9. Having been aggrieved by the sustained penalties for the asst. yrs. 1974-75 and 1975-76, assessee came up in further appeals before this Tribunal, and thus, these matters stand for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 299 (Cal). It is also contended that no statements were recorded from the creditors or from any of the partners of the assessee-firm. The Department had not found out any omission of purchase or sale from the books of account maintained by the assessee either in the raid or in search proceedings. In these circumstances of the case, there is no material to justify penalty under s. 271(1)(c) and in support of this proposition, he relied upon the decision in CIT vs. Sardar Iqbal Singh (1990) 84 CTR (Cal) 270 : (1991) 190 ITR 51 (Cal). 11. As against these arguments, learned Departmental Representative argued and very much relied upon para 6 of the Tribunal's order in quantum appeals, which is already extracted hereinabove, and which is found at page 35 of the paper book filed by the assessee. So also, the attention of this Tribunal is pointedly invited to page 2899 of Chaturvedi Pithisaria's Income-tax Law (Vol.5). The learned Departmental Representative also cited and relied upon the following decisions (a) CIT vs. Nathulal Agarwal Sons (1985) 47 CTR (Pat)(FB) 258 : (1985) 153 ITR 292 (Pat) (FB); (b) Viswakarma Industries vs. CIT (1982) 29 CTR (P H) 243 (FB) : (1982) 135 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all of them are still in the custody of the Department. On 22nd Dec., 1977, a search was also conducted. Even in the original assessment framed for asst. yr. 1976-77 on 9th June, 1979, it was found that a sum of Rs. 1,26,418 was the excess balance shown in the trade creditors' accounts, and it was found that the assessee was in the habit of showing larger balances in the accounts of the trade creditors, than what were actually due to them. This addition was made on the basis of information gathered by the Department from the various trade creditors. Against the original assessment for asst. yr. 1976-77, assessee went in appeal before the CIT(A). The learned CIT(A) had accepted the contention of the assessee that a part of the difference of Rs. 1,26,418 related to earlier years. Assessee also filed a letter dt. 8th Feb., 1982, wherein it was pointed out that the difference between the balances as per the assessee's ledgers and the real balances as per the account copies received from the trade creditors related to assessment years earlier to 1976-77 also. This is found stated at page 20 of paper-book, which is part of fresh assessment order dt. 25th March, 1982 passed for asst. yr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors, and the said intangible additions were made on altogether different grounds, and therefore, telescoping cannot be permitted. Thus, though the assessee knew that Rs. 11,000 was to be added to the returned income for asst. yr. 1974-75, and Rs. 75,700 was to be added to the returned income for asst. yr. 1975- 76, still it did not show any of these figures as part of the returned income for these years, and they were added under s. 68 of the IT Act. The question is whether the amounts added under s. 68 of the IT Act can be considered to be concealed income automatically, or whether the concealment has to be independently found out apart from the additions made under s. 68. 14. At page 5959 of Sampath Iyengar's Law of Income Tax (8th Edition) revised by Justice S. Ranganathan, the learned author on the basis of the Madras High Court's decision in R. Srinivasan Co. vs. CIT (1974) 97 ITR 431 (Mad) and Kedar Nath Sanwal Dass vs. CIT (1978) 111 ITR 440 (P H) discussed the law relating to penalty as follows: "....It cannot be contended that in all cases there should be fresh material in the penalty proceedings and that the Tribunal cannot act on the material produced at the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made for the asst. yrs. 1968-69 to 1975-76. This cannot be done in view of the fact that the intangible additions were made in earlier years on altogether different grounds, and the same was never made after taking into consideration the inflated trade creditors' balances in the books of account of the assessee. Thus, the explanation is found to be false as well as untenable. Further, what is the consequence of the admission made by the assessee with regard to the addition. It is stated again by the learned author in Sampath Iyengar's Law of Income-tax (8th Edition) at page 5967 that 'it is for the assessee to explain as to why the unequivocal admission was made by him that the disputed amount was his income'. No doubt, it is open for him to show that the admission was untrue or that it was made in such circumstances that it could not be acted upon, but this must be done in such a manner as to rebut the weight and effect of the admission. In this connection, the learned author cited the decision of the Madhya Pradesh High Court in Addl. CIT vs. Bharathiya Bhandar (1979) 13 CTR (MP) 159 : (1980) 122 ITR 622 (MP). That was also a case of penalty for concealment of income. At the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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