TMI Blog2006 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... er found that GP rate for the year under consideration was at 8.45 per cent as against 11.16 per cent of immediate preceding year. The assessee was asked to explain the steep fall in GP rate along with other information of monthwise purchase and sales. Certain other details were also called for and the case was adjourned to 27-12-1993 on which date the assessee did not furnish the information as called for. Accordingly, the adjournment was granted on 6-1-1994. Thereafter chronology of fixed dates as described at page 2 of the assessment order is as under:- ------------------------------------------------ On 6-1-1994 Monthwise purchase and sales with the date of delivering challans, date of receipt of goods and closing stock inventory with valuations. On 12-1-1994 Complete details of purchases of January, 1992 to March, 1992, bill-wise with date of delivery challan. On 19-1-1994 Details of purchases furnished, 20-1-1994 asked to attend on 25-1-1994 either Shri S.D. Shah or any other working partner. 25-1-1994 No pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs. 8,70,941 were not recorded in the regular books of account. For the sake of convenience relevant observations of Assessing Officer in this regard as appearing at pages 3 and 4 of the assessment order are reproduced below:- "Apparently, the purchase of copper scrap was not the raw materials used by the assessee nor the assessee was dealing in scrap of copper. Further it was noticed that the assessee could not show any consumption of the copper scrap purchased by him nor it showed any sales thereof nor scrap of copper form part of the closing stock shown by the assessee. The assessee was therefore, repeatedly asked about these purchases and consumption etc. of copper scrap. Instead of explaining the nature of purchases and purpose of use of scrap, the assessee filed a revised return of income in which the sales of copper scrap was disclosed and appended a note stating that the sale proceeds amounting to Rs. 8,70,941 were not recorded in the p regular books of account. All these facts prove that the assessee has not filed the revised return of income voluntarily and on its own voliation but the same has been filed because the department persistently asked the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing decisions:- 1. J.P. Sharma Sons v. CIT [1985] 151 ITR 333 (Raj.) 2. CIT v. Sri Rajaram Cloth Stores [1995] 214 ITR 262 (Mad.). Considering these submissions, ld. CIT(A) has deleted the penalty as per paragraph 11 of the impugned order which is reproduced below for the sake of convenience:- "11. I have carefully considered the submissions made before me. As regards addition of Rs. 8,70,941 the same was disclosed by the appellant by way of revised return filed during the course of assessment proceedings. It is also seen from the assessment order that the Assessing Officer had asked for details of purchase which were furnished on 19-1-1994/20-1-1994. There is nothing on record to show that the detection of concealment had already been made by the Assessing Officer before the filing of the revised return. No show-cause notice was issued in respect of this amount by the Assessing Officer and merely because details of purchases and sales were held up for sometime does not necessarily mean that the detection has been made. The details of purchase and sales are clearly made in a routine manner and since the revised return has been filed by the appellant well before the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there cannot be estoppel against a statute and there is no principle of universal application that whenever an assessment has been completed by accepting the offer of an assessee, no penalty can be imposed. D. G.C. Agarwal v. CIT [1990] 186 ITR 571 (SC) to contend that there being no satisfactory explanation for filing false original return and conditions necessary for application of Explanation to section 271(1)(c) existing qua original return explanation rightly invoked notwithstanding filing of revised return. E. Henry Isidore v. CIT [1996] 222 ITR 496 (Mad.) to contend that items of income definitely omitted from the original return constituted concealment and the contention of the assessee that the books were seized by the department and income was returned on estimate basis as the assessee could have sought time for final return and asked for inspection and taken extracts of the books which was not done. In this case Hon'ble Madras High Court has relied on its earlier decision namely CIT v. S.K.G. Arthanariswamy Chettiar [1982] 136 ITR 145 in which it was held that offence of concealment is complete at the time of filing of the original return. 6. As against thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars of his income or misguiding the Assessing Officer was acceptable and for that penalty was held rightly not leviable. K.C. Builders v. Asstt. CIT [2004] 265 ITR 562 (SC) to contend that mere omission of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. E. Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT [2005] 149 Taxman 456 (Guj.) in the said case referring to the decision in the aforecited case of K.C. Builders their Lordships of Hon'ble Jurisdictional High Court have observed that where there is no mala fide intention or mens rea found by any of the authorities, mere omission from the return of income of an item of receipt neither amounts to concealment nor deliberate furnishing of inaccurate particulars of income. Referring to these decisions it was pleaded that it was the bona fide mistake of the assessee and the said mistake has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be incorporated in the books of account and once the mistake was discovered by the assessee it filed revised return and disclosed sales of copper scraps and since the disclosure is voluntary and before detection made by the Assessing Officer the penalty has wrongly been imposed. 9. Before proceeding further it will be relevant to examine Explanation 1 to section 271(1)(c). Explanation 1 to section 271(1)(c) reads as under:- "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 Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, 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 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sold in the market by way of cash sales. No evidence has been filed to support such contention also and no evidence has been furnished to show that when these cash sales were made. It is also not explained that there was need of funds and how the said need of funds was met with particularly when the sale price of copper scrap was available with the assessee as cash amount. The amount of Rs. 8,70,941 is a substantial sum. If the amount was required for business needs of the assessee then it is unlikely that assessee would not enter the realized amount in its books of account. Moreover assessee concern is a partnership concern, the amount of Rs. 8,70,941 being a substantial sum cannot escape the attention of all the partners to be entered in the books of account. Rather it suggests that copper scrap was purchased by the assessee with a view to claim more expenses to reduce incidence of taxation and the same was sold outside the books of account and the intention of the assessee right from the beginning was not to show or disclose the sale price of copper scrap in the books of account. Thus the explanation given has not been substantiated at all by the assessee and the assessee fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty should be levied, we may observe that when an assessee files a revised return in fact it is admitted that original return was not correct and complete and it is intended to be substituted by a revised return which according to the assessee, is correct and complete. It is quite possible and natural that in submitting a return and disclosing full particulars of income in the return some bona fide omission or some wrong statement may have occurred. In order to obviate this possibility. Legislature enacted section 139(5) enabling the assessee to furnish a revised return. But to come under the said provision, the omission or wrong statement that might have occurred or crept in (i) must be bona fide and (ii) must have been discovered by the assessee himself. If, however, omission or wrong statement is discovered by the Department as a result of enquiry thereafter a revised return is furnished making amendments that will not amount to a revised return as contemplated under section 139(5). Section 139(5) is nothing more than to permit an assessee when a genuine omission or wrong statement is detected, to file a revised return in time before assessment is made. This could only mean t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be brought on record by assessee. In the instant case, few relevant dates are necessary to be noted. Original return was filed at an income of Rs. 4,94,458 on 23-10-1992. Notice under section 143(2) was issued for the first time on 12-11-1992 for 25-11-1992 (sic). The assessee was required to submit details with respect to sales and purchases along with all relevant details. Thus an enquiry was started by Assessing Officer with regard to the sale and purchase of the assessee when he found that the GP for the year under consideration was very much low as compared to immediate-preceding year. Thus the Assessing Officer started probe to verify the sale and purchases recorded by the assessee. Prior to the year under consideration, assessee had never dealt in copper scraps. The assessee purchased copper scraps only during the month of January i.e., at the fag end of the relevant accounting year. The purchases were also substantial i.e., above Rs. 8 lakhs. According to the note furnished with the revised return the assessee was in need of funds, therefore, it sold copper scraps purchased by it by way of cash sales. If so was the position then it was very much required that assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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