TMI Blog1997 (2) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on 28-12-1990. During the survey, it was noticed by the Departmental officers that there were certain discrepancies between the stock as returned by the assessee towards closing stock as on 31-3-1990 (the last date of the accounting year for assessment year 1990-91) and the inventory as per the stock register maintained by the assessee as on the same date. The assessee was asked to produce its books of account including the stock register before the Assessing Officer. The books were thereafter impounded under section 131(3) and details were collected. The quantity-wise details of differences between the stock position as per the day-to-day stock register as mentioned above and the closing stock inventory as enclosed along with the return as on 31-3-1990 was worked out. The amount of difference in terms of value in the two stock positions as mentioned above was Rs. 8,85,598. The stock as per the regular stock register maintained by the assessee in the form of excise registers required to be kept up in accordance with the Excise Rules was found to be more than what had been returned as closing stock by the abovementioned amount of Rs. 8,85,598. The partner of the assessee-firm G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was required to maintain his stock register in accordance with the strict Excise Rules and that the day-to-day stock register was actually being maintained by the assessee in such a manner that the position of each item of liquor at any particular day was available. The Assessing Officer thus discussed that therefore it could not be said that this was a case where the correct stock particulars as on 31-3-1990 were not available. On the other hand, the Assessing Officer pointed out that what was required for the assessee to show the correct position of closing stock at the stage of filing the return of income was just to copy the closing stock entry as on 31-3-1990 from the stock register being maintained by it. The Assessing Officer also pointed out that out of 71 items of liquor in which the assessee was dealing, in the inventory of closing stock filed along with the return, the assessee had given figures in respect of 40 items only. The Assessing Officer thus came to the conclusion that this clearly showed that the assessee had deliberately furnished false stock particulars in respect of 40 items (brands of liquor). The Assessing Officer thus held the assessee to be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been received by it from the Department. He relied on various decisions of different courts to come to the conclusion that in the circumstances, penalty under section 271(1)(c) was not leviable on the assessee. As such, he cancelled the penalty. 5. Before we proceed to deal with the matter, we must take notice of two very serious factual mistakes committed by the CIT(A) in his order. Firstly, the CIT(A) has remarked that there was no discrepancy between the physical stock and the assessee's stock register. However, the answer to question No. 3 put to Shri T. Giriyappa, Managing Partner of the assessee, on 7-1-1991 in connection with the survey under section 133A conducted on 28-12-1990 would clearly show that the assertion of the CIT(A) in this regard is not at all correct. The said question and answer are being extracted below : " Question 3. There are certain stock difference as per your stock register and as per the stock on physical verification as on 28-12-1990. The main difference arises on Hayward's whisky, Gateway whisky, Khoday XXX Rum and White Lable Zin. In all these cases the shortfall in stock is 53 bottles, 48 bottles, 443 bottles and 48 bottles respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken up a plea which was not adopted before the lower authorities. He has relied on the decision of the Supreme Court in the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 in support of his contention that the ITAT can allow a new question of law to be raised before it for the first time. It has been argued by him that inasmuch as there is a prohibition contained in sub-section (4) of section 133A against removing or causing to be removed the account books during the course of a survey under section 133A and inasmuch as in the instant case, such books were removed and later on impounded by the departmental authorities, the so-called survey is actually required to be treated as a search and seizure operation under section 132 of the Income-tax Act, 1961. It is contended by him that a sworn statement was given by Shri Giriyappa, Managing Partner of the assessee-firm, on 7-1-1990 within a period of about 10 days from the survey and that the said statement should be considered as a deposition taken under section 132(4) of the Income-tax Act. In the said statement, Shri Giriyappa admitted the difference in stock to the extent of Rs. 8,85,598, agreed for addition of this amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble articles during the course of a search and seizure proceeding as concealed income even though such items may later on be shown as part of the income of the assessee in the returns filed. Before introduction of this Explanation, an assessee could have got away with concealment penalty on income of this type simply by showing the value of the unexplained assets found during the search, as his income in the return filed by him subsequent to the search. Explanation 5 puts certain bars thereon and in that way the Explanation was introduced to safeguard the interests of the Department and not those of the assessee. The question of considering imposition of penalty for concealment of income vis-a-vis the original return would still be open even if the assessee declares the value of the unexplained assets found during the search in a revised return filed by him later on and all the conditions as laid down in Explanation 5 to section 271(1)(c) be fulfilled. In the instant case, no valuable asset was found during the survey operation and even if some discrepancy in the physical stock might have been found out, no addition was made in the assessment on that account. The entire matter cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Department had not established that the assessee had not manufactured tincture and had sold only alcohol. It is required to be noted that up to assessment year 1963-64, for levy of penalty under section 18(1)(c) of the Income-tax Act, or section 271(1)(c) of the new Act, it was necessary that the assessee had " deliberately " concealed the particulars of its income. The Supreme Court merely held in this particular case that the element of deliberate commission of guilt of concealment was absent in that particular case. In the case of D. Halappa Sons v. CIT [1974] 95 ITR 542, as decided by the Mysore High Court, it was held by the High Court that the case of concealment of part of income of the assessee relating to jaggery business had no foundation since the assessee had succeeded on this issue on merits. The High Court also noted that there was no finding by the lower authorities that income returned was less than 80 per cent of the income assessed and hence, the Explanation to section 271(1)(c) would apply. The case of CIT v. Bengal Iron Galvanising Works [1987] 165 ITR 249 as decided by the Calcutta High Court also pertained to assessment year 1963-64. The High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining a regular stock-book from which the computation of actual stock position was not at all difficult in this case, the assessee did not simply agree to addition of certain amounts by way of cash-credit or otherwise but the managing partner of the assessee admitted that the closing stock had been shown at a much lower figure and that the correct position of closing stock should be as per the stock register maintained. 11. Now comes the question as to whether this concealment with regard to the original return of income can be considered to have been taken care of by the assessee by admitting the extra income in the revised return filed by it even before issue of a notice by the Department. In the case of G.C Agarwal, Supreme Court held that as a proposition of law, it might be correct that where a revised return as contemplated under section 139(5) is submitted, a penalty proceeding under section 271(1)(c) might not be attracted. But for that purpose, the revised return itself must be within the correct ambit and scope of section 139(5). The omission or wrong statement in the original return must be due to bona fide inadvertence or mistake on the part of the assessee. The ult ..... X X X X Extracts X X X X X X X X Extracts X X X X
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