TMI Blog1973 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. We, therefore, requested the counsel for the department to plead for the assessee as well. Mr. D. N. Awasthy has fairly and frankly argued the case on behalf of the assessee as well as on behalf of the department. The assessment year in question is 1968-69. The assessee-firm has two partners and they are Shri Amrit Lal and Shri Raj Kumar. The share of Shri Amrit Lal is two-thirds and that of Shri Raj Kumar is one-third. The income of the partnership is from the small cutting tools, tape, dies and number sets. The firm filed its return on 22nd July, 1968, declaring income of Rs. 26,813. This income was assessed at Rs. 28,044 by the Income-tax Officer, vide order dated 31st October, 1968. The assessee had imported die-steel dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year 1965-66. Goods were detained by the Pakistan Government during the Indo-Pak. hostilities. Subsequently, the assessee received claim of Rs. 28,680.05 in Indian currency from the insurance company. The sum of Rs. 9,423.33 forms a part of the taxable income of the firm and the balance sum of Rs. 19,256.76 represents equal amount of compensation and due to devaluation as casual income exempt from tax." The Income-tax Officer then fixed the case for hearing under section 143(3) of the Act. In the course of this hearing, the assessee agreed to the inclusion of Rs. 19,257. However, the Income-tax Officer brought the entire amount of Rs. 28,680 to tax and, therefore, this amount was added to the amount already assessed. This led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to withhold it for purposes of assessment. Otherwise, if he intended that this receipt should be taken note of by the income-tax authorities, he would have shown it in the account books. The taxability or otherwise of the sum would have depended on the facts. Even thereafter when the Income-tax Officer came to know of this receipt, the assessee chose to contest the nature of the receipt as far as the sum of Rs. 19,256 was concerned (total receipts Rs. 28,680 minus Rs. 9,423 being the value of the goods). He did not stop at that. He urged that it was a casual receipt. When he was cornered by the authorities, he surrendered the amount for assessment together with the penalty of 20%. Thereafter, he made his efforts for the waiver of the penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort which is well planned to conceal the income or to furnish the inaccurate particulars thereof. Coming to the quantum, the assessee has concealed the particulars of his income to the extent of the value of the goods received, i.e., Rs. 9,423, and another sum of Rs. 9,423 being the sum equal to the value as compensation. As regards the gain on account of devaluation, the assessee could be under a bona fide belief that perhaps the gain on account of devaluation was not taxable. It could be taken to be a debatable point and when an issue is debatable the assessment of the amount in dispute may be proper but not the penalty. We are, therefore, of the view that the penalty equal to the aggregate of the two items, i.e., (i) Rs. 9,423 being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruing because of the deeming provisions of the Income-tax Act as would be apparent from the provisions of sections 5(a), 7 and 8, etc., of the Income-tax Act, 1961." While considering the import of the deeming provisions the following observations of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council may be appropriately referred to: " If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961 (give details).' Thus this column of the return pointedly drew the attention of the assessee towards the provisions of section 41 of the Income-tax Act, 1961, which section deemed the deduction of the purchase tax claimed by the assessee during the assessment years 1959-60 and 1960-61 to be his income for the year 1962-63. It is apparent that the authorities below did not consider this case keeping in view the relevant provisions of the Act and on the other hand without examining the facts and finding out whether there was any conscious concealment or deliberate furnishing of inaccurate particulars of the income decided the case." So far as the first contention is concerned the question whether the amount w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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