COMMISSIONER OF INCOME-TAX VS SERVICE IRON & STEEL ROLLING MILLS
1991 P T D 92
[Punjab and Haryana High Court (India)]
Before Gokal Chand Mital and S.S. Sodhi, JJ
COMMISSIONER OF INCOME-TAX
versus
SERVICE IRON & STEEL ROLLING MILLS
Income-tax Reference No. 114 of 1980, decided on 15/11/1988.
Income-tax---
----Penalty---Concealment of income---Income returned less than 80% of income assessed---Evidence produced during penalty proceedings to show that there had been no concealment---Cancellation of penalty, held, was justified.
The assessee filed a return showing an income of Rs. 15,000 for the assessment year 1972-73. The Income-tax Officer held that the assessee had undervalued its closing stock. He held that the stock had been valued at Rs. 575 per metric ton whereas it was worth Rs. 900 per metric ton. A sum of Rs. 34,158 was added by the Income-tax Officer which was reduced to Rs. 20,034 on appeal. Penalty proceedings were also commenced. The assessee produced material before the Inspecting Assistant Commissioner to show that the closing stock was sold in the next year at prices ranging from Rs. 480 to Rs. 595 per metric ton. The Inspecting Assistant Commissioner imposed penalty. The Tribunal, however, cancelled the penalty. On a reference:
Held, that the Explanation to section 271 (1)(c) of the Indian Income-tax Act, 1961, applied to the facts of the case and hence there was a presumption that the assessee had concealed its income. However, by producing documentary evidence that the closing stock in hand was sold by the assessee at rates varying between Rs. 480 to Rs. 595 per metric ton, the presumption stood rebutted by the evidence led during the penalty proceedings. The cancellation of penalty was, therefore, justified.
Vishwakarma Industries v. C.I.T. (1982) 135 ITR 652 (P & H) and C.I.T. v. Shri Rajeshwar Singh (1986) 162 ITR 173 (P & H) applied.
Ashok Bhan and Ajay Mittal for the Commissioner.
JUDGMENT
GOKAL CHAND MITAL, J.--The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question for the opinion of this Court:
"Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the Inspecting Assistant Commissioner of Income-tax was not justified in levying penalty under the Explanation to section 271(1)(c) of the Income-tax Act, 1961?"
For the assessment year 1972-73, the assessee filed a return on July 31, 1972, declaring an income of Rs. 15,000. During the course of proceedings, the Income-tax Officer found that the assessee had assessed the value of the closing stock at the rate of Rs. 575 per metric ton whereas it should have been valued at Rs.900 per metric ton. In this manner, the Income-tax Officer was of the opinion that the closing stock was undervalued and added Rs. 34,158 to the total income of the assessee. However, on appeal, the addition on account of closing stock was reduced to Rs.20,034.
When the matter came up for consideration before the Inspecting Assistant Commissioner for imposition of penalty, the assessee produced material before him to show that the closing stock was sold in the next year at rates ranging from Rs.480 to Rs.595 per metric ton and, on this basis, claimed that no penalty should be levied. However, the Inspecting Assistant Commissioner rejected the argument after observing that the same plea had been taken before the Tribunal and had been rejected and imposed penalty of Rs. 22,100. On appeal, the Tribunal cancelled the penalty on the reasoning that although in the quantum appeal he was not able to satisfy the Tribunal, he had produced material now to show that the same stock was sold in the next financial year at rates varying between Rs. 480 to Rs. 595 per metric ton and the Inspecting Assistant Commissioner should have independently considered this material. Accepting the material, the Tribunal cancelled the penalty.
So far as the interpretation of the provisions of section 271(1)(c) of the Act and the Explanation is concerned, the matter is covered by the Full Bench decision of this Court in Vishwakarma Industries v. CIT (1982) 135 ITR 652 and a Division Bench judgment in CIT v. Shri Rajeshwar Singh (1986) 162 ITR 173, The Inspecting Assistant Commissioner could invoke the Explanation to the facts of the case and even though the initial presumption would be on the assessee which is rebuttable, we are of the opinion that by producing documentary evidence that the closing stock was sold by the assessee at rates varying between Rs. 480 to Rs. 595 per metric ton, the presumption stood rebutted by the evidence led during the penalty proceedings. It is true that certain observations of the Tribunal in regard to the interpretation of section 271(1)(c) of the Act and the Explanation are not happily worded, yet, on the fact, there can be no escape from the conclusion arrived at by the Tribunal. Accordingly, we answer the question in the negative, that is, against the Revenue and in favour of the assessee, that the Tribunal did not err in holding that the Inspecting Assistant Commissioner was not justified in levying the penalty. However, there will be no order as to costs.
Z.S./779/TQuestion answered in the negative.