TMI Blog1987 (7) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 days. It had worked in double shift for 300 days and in triple shift for 154 days. The extra shift allowance up to a maximum of an amount equal to one-half of the normal allowance is to be allowed where a concern works double shift. Where a concern works triple shift, an extra shift allowance equal to the normal allowance, instead of one-half of the normal allowance, is to be allowed. The assessee had claimed extra shift allowance for triple shift working for 154 days. Again, the assessee claimed extra shift allowance for double shift working for 300 days. The assessee should have confined its claim for extra shift allowance in respect of the double shift working of the concern to 146 days, since extra shift allowance in respect of 154 days had already been allowed on the basis of the triple shift working of the concern. The assessee, however, claimed extra shift allowance on account of the double shift working for 300 days. In this manner, the assessee claimed an extra depreciation of Rs. 2,13,364. The ITO brought this to the notice of the assessee by his letter dated 28-10-1980. The assessee thereupon filed a revised return of income on 14-3-1981. In this return, the assessee m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not become exigible. The CIT (A) found force in both the contentions of the assessee. He hence cancelled the penalty of Rs. 3,50,000 which had been imposed by the ITO. Being aggrieved by this decision of the CIT (A), the Department has come up in appeal before us. It is contended by the Department that the CIT (A) was not justified to cancel the penalty. It is contended by the Department that hence the order of the CIT (A) should be set aside and the order of the ITO levying penalty should be restored. 3. First of all, we will consider whether the CIT (A) was justified to come to the conclusion that the omissions in the original return, as filed by the assessee, were inadvertent and on the basis of such omissions it would not be justified to say that the assessee had concealed the particulars of his income or furnished inaccurate particulars thereof. The items, in respect of which penalty had been levied, are as under : (1) Disallowance of interest under section 40A(8) for Rs. 2,38,415. (2) Disallowance of entertainment expenditure for Rs. 51,372. (3) Disallowance of travelling expenses for Rs. 7,160. (4) Disallowance of extra claim of depreciation for Rs. 2,14,364 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its income or furnished inaccurate particulars of such income. 6. A sum of Rs. 7,160 was disallowed out of travelling expenses, being the amount in excess of the limits prescribed under Rule 6D of the income-tax Rules, 1962. The ITO had considered this to be concealment of income. The CIT (A) felt satisfied with the explanation of the assessee and came to the conclusion that there was no concealment of income on account of this addition. It had been stated by the assessee that the omissions to add back this amount in the original return was inadvertent. It was stated that when a fresh scrutiny revealed that the amount in excess of the prescribed limit had been spent, it was voluntarily offered by the assessee for addition, without any query from the Department on that behalf. The conclusion reached by the CIT (A) is fair. We uphold the finding of the CIT (A) on this behalf. 7. Now, we come to the consideration of the add back of Rs. 2,13,364, which has been made by the ITO out of the claim for depreciation. The facts with regard to this have already been narrated above. To recall, the factory had worked during the year for 301 days. It worked double shift for 300 days and trip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra shift allowance for the year under consideration was only an inadvertent mistake. In our view the chances of making a mistake of the type which has been made by the assessee are practically nil. The triple shift working includes the double shift. Hence when claim for extra shift allowance on account of triple shift working had been made, claim for double shift working was included in it. There was no question of making a separate claim for double shift working. There is practically no scope for making a mistake of the type which has been made by the assessee. We are inclined to take the view that the wrong claim of depreciation cannot be hence attributed to inadvertence, particularly keeping in view the fact that in the past depreciation had been claimed correctly. We hence conclude that by claiming depreciation wrongly the assessee concealed the particulars of its income or furnished inaccurate particulars of such income and thus has made itself liable to the imposition of penalty. 9. Hence our finding is that the assessee by making a wrong claim of depreciation for Rs. 2,13,364 concealed the particulars of its income or furnished inaccurate particulars of such income. As f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come that has been concealed and the total income assessed. If the income that has been sought to be concealed is to be made dependent on the total income assessed, then it will lead to odd results. In the illustration taken above, there will be concealment of income in case there is positive total income assessed and there will be no concealment of income when the computation is a loss. We fail to understand as to how the same fact of the suppression of sales amounting to Rs. 30,000 can be viewed differently, depending on whether there was positive assessed income or not. Even though the suppression of sales was for Rs. 30,000 do we have to say that, when the total income is determined at Rs. 10,000, the concealment is of only Rs. 10,000 and when the total income is determined at Rs. 5,000, the concealment is only of Rs. 5,000 and in case the total income is nil or there is loss, there is no concealment of income. It is self-evident that as to what income has been concealed would not depend on the total income determined on assessment. If the assessee has inflated its expenditure or has suppressed its receipts by a certain sum, then the concealment is of that sum by which the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings had related to the assessment year 1968-69. The assessee firm had filed a return in which it had declared a net loss of Rs. 3,29,304. The assessee firm made a settlement with the Department, pursuant to which, while finalising the assessment for the assessment year 1968-69, an amount of Rs. 2,84,727 was added as concealed income. The net result of this addition and certain disallowances was that in the place of the loss of Rs. 3,29,304 shown in the return, the assessment was finalised on a total income of Rs. 18,460. Penalty proceedings u/s. 271(1)(c) were initiated. The question arose as to what was the amount of the concealed income. The contention of the assessee was that the concealment, if any, could only be to the extent of the assessed income, that is, Rs. 18,460. The Department was, on the other hand, of the view that the concealed income was of Rs. 2,84,727, which was the amount that was added in the assessment of the assessee on account of his concealed income for the year. The Kerala High Court did not accept the view of the assessee that the quantum of concealment can never exceed the amount of taxable income as finally determined in the order of assessment. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or inaccurate particulars have been furnished, exceeds the total income assessed, the amount of tax sought to be evaded means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished, had such income been the total income. From the language of this clause, it is quite apparent that it has been very much envisaged that the concealed income and the total income determined on assessment are two different things. It may be mentioned that this Explanation was not on the statute when penalty was levied in the case of Jaora Oil Mill. Hence the Madhya Pradesh High Court, while deciding that case, had no occasion to look into this Explanation. Hence, if at all there was any doubt with regard to the connotation of the term ' income ' as used in clause (c) as being different from the connotation of the term ' total income assessed ', this is to be considered to be set at rest after the introduction of this Explanation with effect from 1-4-1976. 14. Because of the foregoing discussion, we reject the contention of the assessee that since there was no positive total income assessed in the case under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant for the proceedings under consideration before us is in a vital respect different from the law, which was applicable in the case of Murugan Timber Depot. Explanation 4 to sub-section (1) of section 271 was not then on the statute. This Explanation was brought on the Statute by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. This Explanation is applicable for the proceedings, which are the subject matter of appeal before us. This Explanation gives the meaning of the expression " the amount of tax sought to be evaded " used in clause (iii) of sub-section (1) of section 271. The insertion of this Explanation in the statute has brought about a material change and according to us, the observation of the Madras High Court in the case of Murugan Timber Depot will be no more valid. In the case of Murugan Timber Depot the assessee, which was a registered firm, filed its return for the assessment year 1964-65, disclosing an income of Rs. 16,950. The ITO found that the assessee had not disclosed certain sales in its regular books of account. The ITO made an addition of Rs. 6,400 being the estimated profit on the suppressed turnover and thus, he made the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the language of the provisions relevant to the proceedings under their consideration, would not hold good for the proceedings under our consideration, in view of the altered legal position, since then. Clause (iii) which is relevant for our purpose is worded as under : " In the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice the amount of tax sought to be avoided by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income." As to what is to be understood by the expression " the amount of tax sought to be evaded " has been provided for. Explanation 4 to sub-section (1) of section 271 says as under : " Explanation 4 - For the purposes of clause (iii) of this sub-section, the expression " the amount of tax sought to be evaded ",--- (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in addition to tax. There being tax is not the necessary precondition for the levy of penalty. As a matter of fact, the assessee in the case of Murugan Timber Depot, had raised such an argument and this argument had also found favour with the Tribunal. The Tribunal found it significant that whereas the words " tax, if any, payable by him " had been used in clause (i) and the words " tax, if any, which would have been avoided ", had been used in clause (iii), the words that were used in clause (iii) were " in addition to any tax payable by him ". According to the Tribunal, the omission of the words " if any " in clause (iii) was significant. The High Court, however, did not base its conclusion that if no tax was payable, no penalty could be levied on this ground. The High Court stated as under at page 104 : " In this particular case, as we have pointed out already and as was admitted before the Tribunal itself, no tax was payable by the assessee and, therefore, no penalty is leviable on the assessee. This conclusion of ours is based on the interpretation of all the three clauses namely, clauses. (i), (ii) and (iii) of section 271(1) and for such a conclusion, the presence of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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