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M/S Cheep Cycle Stores v. Cit - INCOME TAX REFERENCE No. 253 of 1991 [2005] RD-AH 744 (15 March 2005)


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Court No. 37

I.T. R. No. 253 of 1991

M/s. Cheap Cycle  Stores, Azamgarh    Vs.    The Commissioner of Income-tax, Allahabad.

Hon'ble R.K.Agrawal, J.

Hon'ble Prakash Krishna, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256 (2) of the Income Tax Act, 1961, hereinafter referred to as the Act for opinion to this Court, relating to the assessment years 1981-82 and 1982-83:-

"Whether on a true and correct interpretation of the provision of law as contained in Section 139 (4) read with Section 217 (1) (C) of the Income-tax Act, 1961 and Explanation thereto and application of such provisions to the facts of the case, the penalty for concealment and/or gross or wilful neglect was leviable in the instant case?"

Briefly stated the facts giving rise to the present reference are as follows:-

The reference relates to the assessment year 1978-79 in proceedings arisen out  of imposition of penalty under section 271 (1) ( c )  of the Act. The applicant has been assessed to the income tax in the status of a firm. Its accounting period for the assessment year in question ended on 31st of March, 1978. Return for the aforesaid previous year was filed by the applicant originally declaring an income of Rs.38590/- which was accepted under section 143 (1) of the Act. Subsequently, the matter was taken up for scrutiny and notice was issued to the applicant. Vide order sheet entry  dated 27th September, 1978 the applicant was asked by the Assessing Officer to furnish the details of the purchase and sale of cycles. The applicant thereafter filed a revised return showing an income of Rs.57,069/- alongwith which it had filed a chart in which closing stock of cycles purchased within U.P. was shown  at Rs.19,941/- as against Rs.15,287/- shown in the original return. With regard to the Ex-U.P. Cycle Account the closing stock was not declared  to be Rs.52,899/- as against Rs.45,486/- declared earlier. The applicant stated that the revised return has been filed on detecting mistake in the closing stock valuation and it was not its intention to conceal its income  when it originally filed its return of income declaring lesser closing stock. The Income-tax Officer  did not accept the above submission of the assessee and held that there was a definite device adopted by the assessee for understating the closing stock.  He, therefore, made an addition of Rs.11,562/-to the applicant's income. Penalty proceedings under section 271 (1) (c) of the Act was also initiated and after considering the explanation the Income-tax Officer had imposed a sum of Rs.15,000/- as penalty. Feeling aggrieved against the imposition of the penalty the applicant preferred an appeal before the Appellate Assistant Commissioner who had held that the applicant had detected mistake itself and which was bonafide and therefore penalty was not imposable and set aside the penalty order. The Revenue feeling aggrieved preferred an appeal before the Tribunal. The Tribunal has restored the penalty order.

We have heard Shri Rakesh Kumar, the learned counsel for the applicant and Shri A.N. Mahajan, learned counsel for the Revenue.

The learned counsel for the applicant submitted that it is incorrect and not born out from the record that the Income-tax Officer had detected the concealment and only thereafter the applicant had filed revised return. He invited attention of the Court to the entry dated 27th September, 1978 in this behalf and submitted that having been detected the concealment, the factum of concealment does not find mention at all.

According to him as the applicant has filed revised return bonafidely, no penalty was called for. The learned standing counsel, however, submitted that only after the concealment had been detected the applicant was forced to file revised return and therefore penalty had rightly been imposed.

Having heard the learned counsel for the parties we find that the order sheet entry dated 27th September, 1978 does not mention any thing about concealment in the closing stock having been detected by the Assessing Officer. Entry dated 27th September, 1978 is reproduced below:-

"27.9.78 Nirdhariti ke bhagidar Shri Imran Ahmed upasthit hua.  Anshik sunvayee ki gaee. Cycle kharid aur pharokht ka vivaran dene ko samay chaha. Dinank 4-10-78 ko 2:30 baje pesh ho."  

Prior to 27th September,1978 the order sheet entry shows that on 7th September,1978 notice fixing 27th September, 1978 had been issued. Thereafter the matter was got adjourned on two dates and revised return was filed on 26th October, 1978. It may be mentioned here that the applicant having filed original return within the statutory period as provided under section 139 (1) of the Act, it was entitled to file a revised return under the provisions of Section 139 (5) of the Act. Thus the revised return filed under section 139 (5) of the Act was a valid return and was to be taken into consideration. No concealment having been found in the revised return, the penalty in respect of the income declared in the return originally filed could not have been taken as the concealment had not yet been detected by the Assessing Officer up till the time revised return was filed. The Appellate Assistant Commissioner had rightly considered the order sheet entry dated 27th September, 1978 while recording  finding that till then no concealment had been detected.

In view of the foregoing discussion, we are of the considered opinion that the Tribunal was not justified in upholding that the applicant had concealed the particulars of the turnover and revised return was only a cover-up.

We accordingly answer the  question  referred to us in negative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.

Dt. 15.3.2005



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