9911796707
TMI Blog1974 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... In the course of examination of the accounts for the accounting year, viz., S. Y. 2004, relevant to the assessment year 1949-50, the Income-tax Officer noticed that the assessee-firm had an overdraft of Rs. 3,05,396-3-10 from the Mercantile Bank of India, Bombay, on 31st October, 1948. To a query made by him the Income-tax Officer was informed that the overdraft was a clean overdraft sanctioned by the bank purely on the personal security of the partners. The Income-tax Officer, however, made enquiries with the bank and he learnt that the overdraft had been sanctioned on the hypothecation of stocks worth Rs. 7,68,325. When this information was put before the assessee-firm, the assessee-firm's explanation was that not all the stocks belonged to it and further that the stock might have also, been over-valued by one of the partners of the firm who was no more but who alone was in the know of things. This explanation was not accepted by the Income-tax Officer. Since, accoding to the books of accounts, the assessee-firm had, on the relevant date, viz., 31st October, 1948, stock worth Rs. 3,05,396-3-10 only, the Income-tax Officer considered that the assessee had suppressed stocks to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-operative attitude and agreeing to the addition of Rs. 47,940 in the assessment, no penalty should be levied. This plea was contained in the assessee's letter dated 21st of May, 1957. The Income-tax Officer did not accept the plea and on the facts already found in the assessment proceedings held that the assessee-firm had deliberately concealed the particulars of its income in respect of the said sum of Rs. 47,940. He, accordingly levied a penalty of Rs. 40,000, i.e., equal to about 100% of the tax sought to be avoided by the assessee. On appeal, the Appellate Assistant Commissioner confirmed the penalty imposed by the Income-tax Officer. When the matter was finally taken to the Tribunal, the Tribunal took the view that the department had failed to establish mens rea and bring the guilt home and lay it at the assessee's door. It further took the view that the basis of the penalty proceedings was a statement made by the assessee-firm to the bank, declaring certain stocks and that the bulk of the surplus stock had been satisfactorily explained except the two items in question, viz., stock of 175 bags of cotton and 28 bags of groundnuts, but there was no conclusive evidence that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if, even after the assessee had admitted that the two amounts could be treated as its concealed income, the department had still to prove by independent evidence that the assessee had concealed its income. The court, therefore, upheld the penalty that was imposed upon the assessee. In our view, the decision of the Delhi High Court on which reliance has been placed by Mr. Joshi is clearly distinguishable on facts. In that case there was a clear-cut admission made by the assessee that the two amounts in question were concealed income and the assessee agreed that the same should be added to its income for the relevant year and it was on the basis of such clear-cut admission that the penalty proceedings were initiated and ultimately the penalty that was imposed upon the assessee was upheld by the Delhi High Court. In the instant case, the explanation which was offered by the assessee, which was initially disbelieved by the Income-tax Officer, has been found to be partially satisfactory and correct. The explanation given by the assessee-firm, when it was confronted with the information which the Income-tax Officer had initially obtained independently from the Mercantile Bank of India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-firm was not able to identify only those two items of stock worth Rs. 47,940, this figure was agreed to be added to the assessment. It may be stated that before the Tribunal a certificate from the Mercantile Bank dated 22nd of January, 1962, was also produced and the certificate issued by the bank stated that M/s. M. Bhuta & Co. " had overdraft facilities with us in the year 1948, for an amount of Rs. 1,50,000, for advance against hypothecation over stocks of seeds and/or cotton stored in up-country godowns at Bhavnagar, not under the bank's control with a margin of at least 50% to be maintained on current market value ". This certificate also clearly indicated that even the bank had permitted margin of 50% to be kept while it advanced moneys under the overdraft facilities granted to the assessee-firm. In view of these facts, which are very clear on record, it is difficult to accept Mr. Joshi's contention that there was an admission of concealment of income as such on the part of the assessee-firm either during the assessment proceedings or during the penalty proceedings and, therefore, the decision of the Delhi High Court on which reliance was placed by him would not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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