Income Tax Appellate Tribunal - Indore
Assistant Commissioner Of Income Tax vs Premier Soya Oil Ltd. on 28 July, 1998
Equivalent citations: (1998)62TTJ(INDORE)523
ORDER
Satish Chandra, AM The appeal by the revenue is directed against the order dated 11-4-1994 of the Commissioner (Appeals)-I, Indore, whereby he cancelled the penalty of Rs. 4,95,537 imposed by the assessing officer under section 271(1)(c) of the Act for concealment of income and/or furnishing of inaccurate particulars thereof for the assessment year 1988-89.
2. The assessee is a limited company engaged in Soya oil business. It filed return on 29-7-1988, declaring estimated loss of Rs. 10,50,000 which was subsequently revised to loss of Rs. 18,58,073. The assessing officer completed the assessment determining net loss at Rs. 10,00,000 vide order, dated 31-1-1992 under section 143(3) of the Act. He initiated penalty proceedings under section 271(1)(c).
3. In response to show-cause notice, written reply, dated 20-7-1992 was filed stating therein, inter alia, that the assessee has not concealed any particulars of income, only some minor disallowances have been made to the returned loss, in loss case no concealment initiated. The explanation was not acceptable to the assessing officer, who, for the reasons given in the assessment order, observed that loss amounting to Rs. 8,58,072 was disallowed for want of details/evidence filed by the assessee. Invoking the provisions contained in Explanation 4 below section 271(1)(c), he imposed the impugned penalty. Aggrieved thereby, the assessee carried the matter in appeal before the Commissioner (Appeals).
4. It was contended before the Commissioner (Appeals) that in the absence of any positive income even after making disallowance of Rs. 8,58,073, the c6ncealment penalty is not exigible, as the income remained to be negative income. In support of this proposition, reference was made to the following decisions:
Sardarilal Bhasin v. ITO (1987) 22 ITD 132 (Jab-Trib);
Dy. CIT (Asst.) v. Steel Tubes of India (ITA No. 269/Ind/1993, dt. 11-10-1993-Indore-Bench); CIT v. Jaora Oil Mills (1981) 129 ITR 423 (MP);
CIT v. Prithipal Singh & Co. (1990) 183 ITR 69 (P&H);
Zaveri Paper & Board Mill v. ITO (1993) 47 ITJ (Ahd-Trib) 170; H.T Power Structures (P) Ltd. v. Asstt. CIT (1993) 47 TTJ (Ahd-Trib) 146; and Pancharatna Hotels (P) Ltd. v. Dy. CIT (1993) 47 TTJ (Ahd-Trib) 282.
5. It was further contended that the findings recorded in the assessment proceedings are not sufficient to levy concealment penalty, as in the assessee's case there was not enough material on which charge of concealment could be substantiated. Reliance was placed on the decision of Hyderabad Bench of the Tribunal reported in (1992) 42 TTJ (Hyd-Trib) 208 (sic).
6. It was also contended that simply because the assessee did not prefer an appeal against the disallowances to buy peace with the department it would not amount to concealment. Reference was made to the decision in Galvenisers v. Asstt. CIT (1990) 38 TTJ (Bom-Trib) 12.
7. It was further contended that in the absence of invoking Explanation to section 271(1)(c), burden would remain on the revenue to bring the case within mischief of main provisions of section 271(1)(c) as held in CIT v. Dharamchand L. Shah (1993) 204 ITR 462 (Bom). It was submitted that the assessee tried to give all the possible information as called for but despite best efforts some of the information could not be filed, as the factory was practically closed and there was none to look after the taxation matters. In support of the above, copies of correspondence with Rajasthan State Electricity Board were filed to emphasise that at the relevant time, there was none to attend even such important matters, as the installation of electric facility which proved beyond any doubt that the affairs of the assessee were in a mesh. It was argued that under such circumstances, it could not be held that the required information was withheld by the assessee with any mala fide intentions. The submissions of the assessee found favour with the Commissioner (Appeals), who after considering the factual and legal position held that levy of impugned penalty was not justified, as there was no positive income which was concealed or inaccurate particulars thereof were filed. The revenue is dissatisfied on the ground that the levy of penalty was justified in view of Explanation 4 below section 271(1)(c).
8. We have heard the arguments advanced by the learned representatives of the parties. We have also perused the orders of the authorities below as also the documents contained in the paper book filed on behalf of the assessee. It is an admitted position that the impugned penalty has been levied on the basis of findings recorded in the assessment order to the effect that the other liabilities had registered increase of about Rs. 3.22 lakh, loans from other had increased by Rs. 2.37 lakh and certain settlement claims were not allowable. Besides, details of expenses, purchase sales, etc. had not been made available. It was on account of the above reasons that the assessing officer determined the net loss at an estimated figure of Rs. 10 lakh as against originally returned loss of Rs. 10,50,000 and later revised to Rs. 10,58,073. There is, however, no inkling in the assessment order that reasons for increase under the head 'other liabilities' and 'loan from others' were asked from the assessee, as such increase was noted by the assessing officer from balance sheet available on the records, which settlement claims were not allowable in nature have not been specified in the assessment order. It would further be seen from the assessment order that the assessee had explained that details could be prepared partly only because the company is closed for more than a year and no proper person is there to look after the affairs of the company. Nonetheless books of account in whatever form they were had been produced before the assessing officer. During the course of penalty proceedings, the assessee explained the reasons for loss incurred by the assessee which were these. The sales registered abnormal decrease (l/3rd only) as compared to the preceding year but the overhead expenses did not reduce in the same proportion, as against other income of Rs. 13,49,832 in the preceding year, it was only Rs. 97,863 in the year of account. It was also pointed out that the full installed capacity was utilised for 18 days only in the entire year. The production was not even upto break-even point. It was further explained that the main reason for increase in other liabilities was that in the preceding year these liabilities on account of purchase of coal and chemical on credit were accounted for under the head 'sundry creditors'. The increase in loan from others was attributable to the interest having been credited in the accounts at the end of the year. From the above, it is obvious that determination of the total loss at a reduced figure in the assessment was not attributable to concealment of particulars of any income or furnishing of inaccurate particulars thereof. In other words, on the basis of material on record, the assessee cannot be charged with under the main provision under which the assessing officer had initiated penalty proceedings in the assessment order. Of course, in the penalty order, the assessing officer had invoked Explanation 4, which defines the expression amount of tax sought to be evaded'. We have looked into the said Explanation 4. The expression 'amount of tax sought to be evaded' is defined in three situations, (a) where the concealed income is more than the assessed income, it means the tax on the amount of concealed income, (b) where the case falls under Explanation 3, it means the tax on the assessed income, and (c) in other cases, it means the difference between the tax on the total income assessed and the tax on the total income minus concealed income. It would be apparent from the above that the basis of calculation is the tax on the amount of concealed income and/or tax on the total income assessed. In the instant case, there is neither total positive income nor there is tax on the amount of any concealed income. Moreover, in CIT v. Ganesh Prasad Badri Prasad & Co.(1998) 231 ITR 951 (MP), their Lordships of Madhya Pradesh High Court have observed in the context of applicability of Explanation 1 as under:
"The initial burden is on the department to prima facie record that there is concealment and thereafter the Explanation is to be sought".
In the case of H. T Power Structures (P) Ltd. (supra), Ahmedabad Bench of the Tribunal took the view relying on the decision in Prithipal Singh & Co. (supra) of Punjab & Haryana High Court that when assessment has resulted in a loss, penalty under section 271(1)(c) would not be leviable even on the basis of Explanation 4 below section 271(1)(c) as inserted with effect from 1-4-1976. We find ourselves in agreement with the above view. For the reasons stated above and agreeing with the views expressed by the Commissioner (Appeals), we hold that the impugned penalty is not exigible at all. The Commissioner (Appeals) was perfectly justified in cancelling the impugned penalty.
3. In the result, the revenue fails and the appeal stands dismissed.