Income Tax Appellate Tribunal - Chandigarh
Commissioner Of Income Tax vs Atlas Marketing & Mfg. Co. Pvt. Ltd. on 13 May, 1996
ORDER
J. Kathuria, A.M.
1. The Revenue by means of this application has required the Tribunal to refer the following question, said to be of law and arising from its order dt. 15th Dec., 1995, in aforementioned appeal, relating to asst. yr. 1979-80 to the Hon'ble High Court of Punjab & Haryana at Chandigarh for its esteemed opinion :
"Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the penalty of Rs. 1,57,972 levied under s. 271(1)(c) for concealment of income when the assessee has failed to substantiate discrepancies in accounts even before Tribunal ?"
2. Since, in our opinion, no referable question of law arises, we decline to make a reference.
3. The assessee-company derived income from the manufacture and sale of agricultural implements. Assessment was made under s. 143(3) of the Act on 4th Sept., 1982, on a total income of Rs. 1,91,982. The AO noticed that the assessee had made fictitious purchases and sales and had also shown lower GP rate in this year as compared to the earlier years. Certain commission paid to agents was found to be fictitious. The AO after noticing various discrepancies, proceeded to determine the profit adopting the rate of 43% on total sales of Rs. 11,50,000. This is how an addition of Rs. 2,10,628 was made. The amount of commission paid to certain persons was also disallowed separately at Rs. 36,249.
4. The assessee went in appeal before the CIT(A) but did not succeed.
5. The assessee's quantum appeal before the Tribunal also failed.
6. The AO proceeded to levy penalty for concealment of income under s. 271(1)(c) at Rs. 1,57,192. The assessee preferred an appeal but failed before the first appellate authority. When the matter came before the Tribunal, it was of the view that whatever discrepancies were noticed by the Revenue authorities as well as Tribunal, these would not make out a case of concealment against the assessee unless any fresh enquiry was made to show that these discrepancies were the result of a design adopted by the assessee to conceal the particulars of income. The Tribunal observed that certain sales and purchases were held to be not correctly shown in the books because parties were not available at the given addresses. The Tribunal also noted the fact that notices had not been sent at the correct addresses and it was no fault of the assessee that the notices had been received unserved. The Tribunal agreed with the learned counsel for the assessee that simply because certain parties were not traceable, that would not make out a case that the assessee had shown fictitious purchases and sales. According to the Tribunal, the Revenue authorities had also not held that purchases and sales shown at Rs. 1,22,450 and Rs. 2,52,799 respectively were entirely fictitious. According to the Tribunal, there was only a suspicion that purchases had been inflated and sales understated. The Tribunal further observed that it was for that reason of suspicion that the additions were not made on the basis of those figures but, instead, the method of determining profit was adopted by applying a higher GP rate. As regards the difference in the account of PTL, the Tribunal accepted the contention of the learned counsel for the assessee that it had occurred on account of method of accounting. The assessee had recorded the supplies in stock register as and when stock was received. The suppliers had, however, issued debit notes as and when it found it appropriate. According to the Tribunal, this is how a difference of Rs. 59,101 had been noticed. Though the assessee had failed to reconcile the difference that would not again establish the charge of concealment. The existence of discrepancies which the assessee failed to reconcile at the time of assessment proceedings also did not, according to the Tribunal, establish the charge of concealment. The Tribunal further observed that the discrepancies may be treated to be sufficient for making certain additions by following a specific method but that would not establish the charge of concealment. The Tribunal also observed that non-maintenance of day-to-day production record may amount to a serious discrepancy in the maintenances of books of account but that would not tantamount to concealment of income. Since the addition was finally made by estimating higher sales and by adopting higher GP rate, the Tribunal held that this did not establish a charge of concealment. The sales shown by the assessee, according to the Tribunal, were not found to be acceptable because grave discrepancies were noticed in the maintenance of books of accounts. According to the Tribunal, confirmation of addition was, in itself not sufficient to warrant levy of penalty without establishing that the nature of addition did establish concealment of income. According to the Tribunal, the assessee did put forward a plausible explanation in respect of purchases and sales as well as low GP rate. This explanation was, however, treated as insufficient by the Revenue authorities. According to the Tribunal, once the assessee had given a bona fide and plausible explanation, it was for the Revenue to establish that the assessee was guilty of concealment of particulars of income.
7. On the basis of the above facts and discussion, the Tribunal held that the charge of concealment had not been made out and, therefore, the levy of penalty could not be sustained. Penalty was accordingly deleted.
8. At the time of hearing of the reference application, the learned Departmental Representative submitted that the Revenue authorities had pointed out serious discrepancies in the maintenance of books of accounts and the Tribunal had also taken cognizance of the same but it still held that penalty under s. 271(1)(c) was not exigible. It was submitted that a question of law did arise which may be referred to the High Court for opinion.
9. Shri Sudhir Sehgal, the learned counsel for the assessee, submitted that the Tribunal had held that the entire case of the Revenue was built on suspicion which, howsoever strong it may appear, could not take the place of evidence. It was also submitted that the Tribunal had recorded a categorical finding of fact that the assessee had furnished a bona fide and plausible explanation which was, however, not found to be sufficient by the Revenue authorities. It was submitted that the Tribunal had gone by the factual aspects though certain judgment had also been considered and since the matter had been decided on the appreciation of evidence and on the basis of findings of fact recorded, no question of law arose.
10. Relying on the decision of the Punjab & Haryana High Court in CIT vs. Chandan Lal Nirmat Singh (1985) 153 ITR 343 (P&H) the learned counsel submitted that where penalty under s. 271(1)(c) was held to be not leviable on the basis of findings by the Tribunal which were based on material on record, no question of law arose. Reliance was also placed on the Delhi High Court decision in the case of CIT vs. Chetan Dass Lachhman Dass (1995) 214 ITR 726 (Del) for the proposition that where the Tribunal considered material in penalty proceedings and recorded a finding that there was no concealment of income, such a finding being a finding of fact did not give rise to a question of law. Reliance was also placed on Madras High Court decision in CIT vs. V. Ponnuswammy Naidu (1995) 214 ITR 185 (Mad) for the proposition that where the finding of the Tribunal cancelling the penalty for concealment of income was based on facts on record, such a finding did not give rise to a question of law. For a similar proposition, reliance was also placed on the Calcutta High Court decision in CIT vs. Shankar Ghosh (1995) 214 ITR 349 (Cal) wherein it was held that the question whether there was any concealment of income was purely a question of fact. The learned counsel for the assessee also relied on the Allahabad High Court decision in Addl. CIT vs. Jai Jawan Radios (1984) 146 ITR 504 (All) for the proposition that where Tribunal drew inference on the basis of circumstantial evidence and cancelled the penalty, such a finding was not vitiated in law and no question of law arose from such a finding.
11. After carefully considering the submissions of both the sides, we are of the opinion that no question of law arises in the present case because the Tribunal has recorded a finding of fact that no concealment had taken place in the present case. The finding recorded by the Tribunal is based on cogent and convincing material. Various High Courts in their judgments referred to supra pointed out that where the Tribunal's finding is based on appreciation of materials that are already on record and the penalty under s. 271(1)(c) has been cancelled or deleted on the basis of that finding, such a finding cannot give rise to a question of law. Taking a total view of the matter, we hold that no question of law as such arises in the present case and the reference application by the Revenue accordingly stands dismissed.