Karnataka High Court
Mahadeswara Movies vs Commissioner Of Income-Tax, Karnataka on 11 April, 1980
Equivalent citations: [1983]144ITR127(KAR), [1983]144ITR127(KARN)
JUDGMENT Srinivasa Iyengar, J.
1. The Income-tax Appellate Tribunal, Bangalore 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 was justified in upholding the levy of penalty of Rs. 14,500 for the assessment year 1969-70, under section 271(1)(c) of the Income-tax Act, 1961?"
2. The assessee is a firm dealing in distribution of films. For the assessment year 1969-70, a return was filed declaring an income of Rs. 24,760. A statement was also filed along with the return disclosing, net profit as per the profit and loss account at Rs. 43,156 and after adding up certain amounts as inadmissible, the profit was shown at Rs. 46,667. Out of this a sum of Rs. 21,907 was deducted as amortisation as per separate statement. The separate statement specified five pictures and mentioned amounts claimable as amortisation on each of the films and the aggregate was Rs. 21,907.
3. However, at the time the assessment was taken up, it transpires that the ITO pointed out that in regard to the two pictures, namely, "Selvam" and Thanga Thambi" the amounts had been already included in the profit and loss account and, therefore, the deduction of these amounts also in the amortisation statement was incorrect. This was readily accepted as an inadvertent mistake. The Two sums claimed in respect of these two pictures were thus added back and the assessment was completed.
4. On the ground that this amounted to concealment or furnishing of inaccurate particulars, proceedings were initiated under s. 271(1)(c) of the I. T. Act, 1961, and on the ground that the minimum penalty imposable would exceed Rs. 1,000, the matter was referred to the IAC. On notice being issued by the IAC, the assessee represented that there was no concealment of income as such and the mistake was an inadvetent one and the imposition of penalty was not justified. On the ground that the assessee himself had pointed out the mistake and only after the ITO had brought the discrepancy to the notice of the representative it had been accepted and, therefore, there was no voluntary pointing out of the mistake by the assessee and the conduct amounted to gross neglect, the IAC levied a penalty of Rs. 14,500.
5. The assessee preferred an appeal in this behalf to the Tribunal. The Tribunal was also of the opinion that there was suo motu disclosure by the assessee auditors of the mistake and the difference in the income was substantial and, therefore, the mistake cannot said to be inadvertent or unintentional. The Tribunal was of the opinion that the plea of the assessee cannot be said to be bona fide and in any event it would amount to gross neglect.
6. It is contended for the petitioner that there was no material on record to justify the conclusion that the mistake was anything but an inadvertent one or to infer any want bona fides and the conclusion reached by the Tribunal was untenable.
7. The submission made on behalf of the petitioner, to our mind, is sound and must be accepted. Along with the return, a profit and loss account had been filed as also a statement of adjustment. In regard to the amortisation, the names of the films were specified and amounts were mentioned in respect of each one of the films. A comparison of the profit and loss account and the amortisation statement would readily point out the discrepancy. No sooner it was pointed out, it was accepted as a mistake. The basic facts had been disclosed and there was no attempt at suppression of any material fact. It had been submitted before the Tribunal that no such mistake had occurred earlier and this was the first time that such a mistake had occurred. The Tribunal in this behalf observed as follows :
"... The assessee's counsel pointed out that this was the first time that mistakes of this type had occurred and the assessee had been careful in the past to make necessary adjustments relating to amortisation. This is no doubt true."
8. But the Tribunal proceeded to state that this did not mean that the mistake was a bona fide one or occurred through oversight. Such a conclusion, in our opinion, is untenable. That in the past no such mistake had occurred was a relevant circumstance to be taken into consideration, and there was nothing improbable in the explanation that the mistake was due to inadvertence. The profit and loss account and the amortisation adjustment statement would have been prepared at different points of time and a slip-up could occur. The circumstances in the case establish that the mistake was accidental and an inadvetent one and there is no material at all to justify any want of bona fides or any gross neglect.
9. In the circumstances, the imposition of penalty was not justified. Accordingly, the question is answered in the negative that the Tribunal was not justified in upholding the levy of penalty.