TMI Blog1996 (9) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... section 132(1) of the Act and it is seen from the factual matrix that in the course of this search, stock inventories prepared by the assessee on December 30, 1976 (a few days before), were seized. As per the return filed the assessee's trading account disclosed total sales of Rs. 1,05,32,644.81. The closing stock credited to the trading account is seen as Rs. 10,36,384.75, and a percentage of 5.85 gross profit is disclosed at Rs. 5,67,261. As per the picture found from the inventories that came to be seized in the search, the following particulars seem to have been noted: "Stock as per book No. 1 9,09,791.13 Stock as per book No. 2 1,76,749.60 Other items 1,45,682.80 Total 12,32,223.53 Less : Sales on 31-12-1976 14,497.81 Balance 12,17,725.72" The assessee was expected to account for this amount of Rs. 12,17,725. The factual matrix further shows undisputedly that the assessee accounted for Rs. 10,36,384 and his explanation in regard thereto was accepted as the value of the closing stock. The difference related to an amount of Rs. 1,81,341. With regard to the above difference of Rs. 1,81,341, the assessee explained that there was duplication in the closing stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quite possible." It would be seen that the assessee had placed his difficulties and circumstances at the outset. Reading the order of the Income-tax Officer in the penalty proceedings it appears that the officer has given the solitary emphasis to the reasoning of the Tribunal and its observations in the quantum proceedings---order dated April 10, 1981, in fact the said observations are quoted verbatim and they are reproduced hereinafter: "We have carefully considered these arguments. The learned representative of the assessee has pointed out in the course of the hearing the different instances where there were, according to him, duplications. We have gone through the two note books which were produced by the Departmental representative. We are unable to agree with the assessee that there has been duplication of the stock in the stock-taking on December 30, 1976. As has been pointed out by the Income-tax Officer in the assessment order and by the Commissioner of Income-tax in his appellate order the stock has been taken in a meticulous and systematic manner and it is for the assessee to show beyond doubt that some stock has been taken into account twice in his stock inventory. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the judgment of the appellate authority we find that the first appellate authority considered the question that furnishing inaccurate particulars and failure of the assessee to disclose the value of the closing stock, would not tantamount to concealment or deliberate furnishing of inaccurate particulars. The first appellate authority also considered the situation that if there is no evidence on the record except the explanation given by the assessee which explanation has been found to be false, the situation would not necessarily follow that the receipt (sic) that any kind of concealment could have any relationship with the process of dealing with the situation. The first appellate authority also adverted to the position that it is necessary to consider as to whether the assessee has consciously and deliberately concealed the particulars of his income and was deliberate in furnishing inaccurate particulars of the income. This reasoning is adopted by the first appellate authority on the strength of, firstly, the decision of the Patna High Court in Shanker Lal Kejriwal v. CIT [1964] 54 ITR 541, then on the decision of this court in R. Madhavan Nair v. CIT [1973] 87 ITR 362, and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department with regard to the amount of Rs. 12,17,725 as far as the amount of Rs. 10,36,384, as regards quite a sizeable proportion in regard thereto, leaving the difference only of Rs. 1,81,341. The third aspect that is seen floating on the surface of the record is that the assessee offered explanations with two alternatives. One was the possibility of duplicate entries and the other was damage to the goods. In regard to the damage to the goods it has to be emphasised that it was not rejected by the Department even in the quantum proceedings and on that count reduction though of a token character has been granted at Rs. 10,000 in regard thereto leaving the difference ultimately at Rs. 1,71,341. Fourthly, it would be seen that the first appellate authority has also recorded that there is no concealment of income although reasons in regard thereto may be somewhat different and debatable. Fifthly, the Tribunal on taking into consideration the circumstances has observed that it cannot be said that the assessee has concealed any income or intended to furnish inaccurate particulars thereof. In the light of the above factual situation learned senior standing counsel for taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : "Explanation 1.---Where in respect of any facts material to the computation of the total income of any person under this Act,-- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed: Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him." Referring to the contents of the above Explanation it would be obvious that the situation would be governed by clause (B) thereof. The next consequence that would legally flow from the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars. This court also had an occasion to consider the position in the light of the above decision of the apex court. This was in I. T. R. No. 69 of 1992, Anand Liquors v. CIT [1998] 232 ITR 35 (Ker), by the judgment (to which one of us-myself-was a party delivering the judgment). This court has been conscious that the Explanation creates what is known as a deeming situation. The position has to be considered with reference to its application to the above undisputed factual matrix. We have already spread over the factual matrix in necessary details. The situation shows that the inaccurate particulars are found from the disclosures of the return from which an inference of concealment is sought to be drawn. We also find that the assessee had disclosed the total sales of Rs.1,05,32,644.81. He had also shown the closing stock credited to trading account at Rs. 10,36,384.75. On the basis thereof he had also disclosed gross profit of Rs. 5,60,261 approximately at 5.85 per cent. The Income-tax Officer on the basis of material seized on January 12, 1977, relating to stock inventories prepared by the assessee on December 30, 1976, found the closing stock amounting to Rs. 12,17,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal. Learned senior standing counsel for taxes to buttress the submission placed reliance on an old decision of the apex court in Hoshiarpur Electric Supply Co. v. CIT [1961] 41 ITR 608 especially with regard to the observations at page 611 thereof to the effect that it is not open for this court to enter upon the factual question in the absence of there being a finding in regard thereto by the Tribunal. With anxiety, carefully and cautiously we have considered the matter from all the possible angles to find out if there is any lack of bona fides or failure to disclose the necessary material. We have also given our thought even to a remotest possibility on the facts and circumstances before us in regard to which there cannot be any dispute, as to whether on any count it could be said that there is lack of bona fides or failure to disclose. We have emphasised these aspects earlier. We find that once the provisions of the proviso are considered in its application to the factual matrix no other conclusion would follow and the situation would be inescapable. The law and decisions in regard thereto have an element of dynamism to suit the changing conditions and requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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