Allahabad High Court
Commissioner Of Income-Tax vs Devi Dayal Aluminium Industries (Pvt.) ... on 26 October, 1987
Equivalent citations: (1988)72CTR(ALL)7, [1988]171ITR683(ALL), [1987]35TAXMAN484(ALL)
Author: R.M. Sahai
Bench: R.M. Sahai
JUDGMENT R.M. Sahai, J.
1. The Commissioner of Income-tax has filed this application under Section 256(2) of the Income-tax Act for calling the following questions of law said to arise out of the order passed by the Income-tax Appellate Tribunal, Delhi Bench B, New Delhi :
"(1) Whether the Tribunal was justified in cancelling the penalty imposed by the Income-tax Officer in the facts and circumstances of the case ?
(2) Whether the order of the Tribunal is wrong and perverse inasmuch as it ignored the Tribunal's finding in the quantum matter and unreasonably gave a higher appreciation to the order of the Commissioner of Income-tax (Appeals) which order had already been criticised by the previous Bench of the Tribunal, inter alia, in these words :
' Actually, the Commissioner of Income-tax (Appeals) has given no reason worth the name to delete the addition of Rs. 32,000 ?' "
(3) Whether the order of the Tribunal is wrong and perverse inasmuch as it gives no reason for its finding that the Department had failed to prove actual concealment, all its findings having been restricted to consider the alternative plea of the departmental representative that there was also deemed concealment in, accordance with Explanation 1 to Section 271(1)(c) ?
(4) Whether the order of the Tribunal has not gone perverse when the Tribunal has taken support from the difference in stock from the observation of the Commissioner of Income-tax (Appeals) in quantum appeal and in not appreciating the observation of the Tribunal in para (8) which is as under :
' Had the goods been received as alleged, the same would have been shown as part of the closing stock of the assessee, that is not so ?' "
(5) Whether the Tribunal is legally correct in holding that the concealment of income cannot be deemed in view of Explanation 1 to Section 271(1)(c)?"
2. The assessee was engaged in the manufacture and sale of pressure cookers and aluminium circles. In the return filed for the assessment year 1978-79, a net loss was declared at Rs. 25,970. The Income-tax Officer, however, made several additions. The two additions, one of Rs. 60,000 and the other of Rs. 45,835, were made on account of suppressed profit and undervaluation of stock respectively.
3. The claim of the assessee about melting loss was not accepted. It was further held that stainless steel weighing 538 kgs. was not reflected in the stock. On appeal, the Commissioner of Income-tax accepted melting loss in the manufacture of "stainless" steel at 23% to 25%. Consequently, the addition on this account was knocked off. In respect of stock discrepancy, the appellate authority accepted the explanation of the assessee that the stock was of the goods received back out of earlier sales made to Agarwal Metal Corporation, Bombay. But since they were not settling the accounts, the goods could not be sold and were held as security. The Tribunal restored the order of the Income-tax Officer in respect of melting loss as the assessee had been taking different stands. It did not record any finding that melting loss determined at 23% to 26% was not correct. As regards stock discrepancy, the Tribunal held that there were no entries in the account books to support the assessee's claim as if the goods had been received as not sold and it should have been shown as part of the closing stock of the assessee. The order of the Tribunal in the assessment proceedings became final. On these facts, the Income-tax Officer levied penalty under Section 271(i)(c). The order was set aside by the Tribunal in view of the proviso to the Explanation to the aforesaid section. It was held that although the explanation given by the assessee was not accepted, there was no material on which it could be held that it was not bona fide.
4. It has been vehemently urged that the order of the Tribunal is illegal. Learned counsel submitted that the Tribunal was not justified in cancelling the penalty in the circumstances of the case. The argument appears to be devoid of any substance. Rejection of the explanation does not render it false so as to attract Section 271(1)(c). The assessee failed to substantiate melting loss or wastage but so long as the claim was bona fide, it could not be held to be false. Moreover, the Tribunal has not given any reason as to how the finding of the Commissioner in appeal about melting loss was erroneous. The assessee may not be permitted to derive any advantage as it was not consistent in its stand, but that could not render the claim false. Same applies to stock discrepancy. In any case, if the assessee had furnished all details and had not concealed anything, then it cannot be said that he was not acting bona fide only because its explanation was not accepted. The proviso to the Explanation to Section 271(1)(c), was, therefore, squarely applicable and the Tribunal was justified in the circumstances in cancelling the penalty. Question No. (1), as such, raised by the Department does not arise.
5. As regards questions Nos. (2) to (4), it again does not raise any question of law as the order cannot be said to be perverse only because the Tribunal did not levy penalty on the finding recorded in the assessment proceedings.
6. Question No. (5), no doubt, is worded as a question of law. But it cannot be taken in isolation. Since, on facts, penalty was not leviable, the question does not arise.
7. In the result, the application fails and is rejected. But there shall be no order as to costs.