TMI Blog1997 (1) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... income was Rs. 29,550 and the original assessment under section 143(3) was made on a total income of Rs. 31,590. On October 5, 1992, the Department conducted search proceedings under section 132 of the Act in the premises of the assessee. In the course of the proceedings, incriminating documents including the order books and collection chittai were seized and they revealed large scale suppression of tailoring receipts. Reassessment proceedings were taken for the assessment years 1980-81 and 1981-82 under section 147(a) of the Act by issuing notice under section 148 to bring to tax the escaped income in respect of suppression of receipts from tailoring business and other investments. In response to the notices, the assessee filed returns of income showing a total income of Rs. 48,810 including a sum of Rs. 27,644 admitted as income from other sources for the assessment year 1980-81 and a total income of Rs. 60,570 including Rs. 27,676 admitted as "income from other sources" for the assessment year 1981-82. The assessments were completed for the assessment years 1980-81 and 1981-82 on a total income of Rs. 1,84,960 and Rs. 2,34,140, respectively. In the reassessments, additions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the order of the Commissioner of Income-tax in levying penalty and allowed the appeals filed by the assessee and dismissed the appeals filed by the Department. Learned standing counsel appearing for the Department submitted that the question raised for reference is a pure question of law and, therefore, a statement should be called for from the Tribunal. There was concealment of income with regard to the stitching charges as can be seen from the differences between the original return filed and the revised return filed by the assessee, The Tribunal overlooked the fact that but for the search proceedings conducted by the Department, the suppression of tailoring receipts would not have come to light. The assessee had systematically and deliberately understated his income from tailoring business by not recording the same in the account books. The fact that the Commissioner of Income-tax in the appeal sustained the penalty, would go to show that there is clear concealment of income by the assessee in the present case. In the remand report submitted by the Assistant Commissioner, the assessee was not exonerated from the charge of suppression of the tailoring receipts. There is vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1995, sent by the assessee. The reasons that are made good for making an addition would not be good for levying penalty. For levying penalty under section 271(1)(c) of the Act, the Department must prove that the assessee had deliberately concealed the income. The explanation offered by the assessee would go to show that there was no mens rea in the matter of non-disclosure of the stitching charges, which could not be recovered in the nature of business done by the assessee. Under such circumstances, only after considering all these facts, the Tribunal came to the conclusion that no penalty is leviable under section 271(1)(c) of the Act. In order to support his contentions, learned counsel appearing for the assessee relied upon the following decisions : (1) CIT v. V. Ponnuswamy Naidu [1995] 214 ITR 185 (Mad) ; (2) CIT v. S. P. Jain [1973] 87 ITR 370 (SC) ; (3) CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC) ; (4) CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC) ; (5) H. V. Venugopal Chettiar v. CIT [1985] 153 ITR 376 (Mad) ; (6) CIT v. Adamkhan [1997] 223 ITR 264 (Mad) ; (7) Newton Chikli Collieries Ltd. v. CIT [1962] 44 ITR 495 (SC) ; (8) CIT v. Daulatram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal. The assessee sent a letter dated April 26, 1995, giving an explanation in detail as to how there was no suppression in his case. Since the assessee made a complaint before the Tribunal that the assessee was not given an opportunity to explain his case before the authorities below, due to the fact that books were impounded and pending in criminal proceedings, the Tribunal called for a remand report. The Assistant Commissioner in his remand report points out that in the absence of other books, the missing number of orders received and the period during which such orders received were adopted hypothetically at the time of assessment proceedings to estimate the assessee's income from tailoring receipts. Account books relating to the accounting year 1979-80, for the assessment year 1980-81 were in the custody of the criminal court. No opportunity was given to the assessee to reconcile the omission of receipts pointed out. The Tribunal pointed out that in the list of omissions supplied, the assessee was able to find out mistakes as many as 39 for the assessment year 1980-81 ; 72 for the assessment year 1981-82 and 217 for the assessment year 1982-83, and on examination, they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) and the Tribunal. That was also the position with regard to the assessment years 1981-82 and 1982-83. It was pointed out that the Tribunal held that the investments standing in the names of relatives of the assessee should not be included in the hands of the assessee. Even according to the Commissioner of Income-tax (Appeals), he is restricting the quantum of penalty with reference to the suppressed income from tailoring charges worked out by the assessee without adequate materials and documents. Thus the suppression was with regard to tailoring charges on which penalty was said to be levied. The reason for not stating the estimated income in tailoring business was explained by the assessee convincingly as stated above. It was also recognised that the kind of business in which the assessee is engaged would incur losses of that nature as stated in his explanation. Therefore, the Tribunal on considering the facts, came to the conclusion that there is no warrant to hold that the assessee suppressed the tailoring charges so as to warrant initiation of proceedings under section 271(1)(c) of the Act. It was pointed out that there was no mens rea in not disclosing the alleged tailorin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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