NATHU RAM AND CO Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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J. Kathuria, Accountant Member -
(1.) THIS appeal by the assessee pertains to assessment year 1983-84 and challenges the confirmation of penalty levied under Section 271(1)(c) by the Assessing Officer at Rs. 1,22,017.
(2.) Brief facts in this regard are as follows: The assessee is a forest lessee. For assessment year 198384 the assessee firm's accounting year ended on 31-3-1983. The assessee claimed that on the night of 19/20-11-1982, there was an accidental fire at the assessee's premises in which 2508 fir scants were destroyed. The assessee lodged FIR with the police on 24-11-1982. The return of income was filed on 12-8-1983. The enquiries made by the Assessing Officer revealed that the assessee had claimed a sum of Rs. 2,50,800 from the United India Insurance Co. Ltd. As compensation. It was also found that the assessee actually received a sum of Rs. 1,87,178 from the aforesaid Insurance Company on 12-5-1983. Contention of the Revenue was that the insurance amount had been received much before the filing of the return and since the assessee failed to disclose income of Rs. 1,87,178 penalty proceedings were initiated under Section 271 (1)(c) of the Act. The Assessing Officer levied penalty of Rs. 1,22,017 which was confirmed by the learned Commissioner of Income-tax (Appeals).
Shri L.R. Vasudeva, the learned Counsel for the assessee submitted that the first assessment was made by the Assessing Officer on 29-11-1984. It was pointed out that the learned CIT (A) set aside the first assessment and asked the Assessing Officer to make a fresh assessment. The fresh assessment was made by the Assessing Officer on 9-3-1988 in which an addition of Rs. 1,87,178 was made and penalty proceedings under Section 271(1)(c) were initiated. It was submitted that the said addition was sustained by the first appellate authority and the Tribunal without going into the merits of the addition and on a technical ground held that the addition had to be made in the hands of the assessee-firm for assessment year 1983-84. Drawing our attention to the Tribunal's order dated 28-12-1993, in R.A. No. 51/Chandi/1993, it was pointed out that the technical issue on the basis of which the assessee's appeal had been disposed of by the Tribunal was at present the subject-matter of reference before the Hon'ble High Court of Himachal Pradesh at Shimla. It was emphasised that the Tribunal in its order in I.T.A. No. 532/Chandi/1990 had not disposed of the assessee's appeal on merits. It was also submitted that the assessment proceedings and penalty proceedings were independent of each other and that the penalty matter may be decided on merits independent of what happened in the quantum appeal of the assessee where the issue had not been decided on merits but on a technical ground.
(3.) THE learned Counsel for the assessee submitted that the assessee-firm had suo motu disclosed income of Rs. 1,87,178 for assessment year 1984-85 because the insurance claim was settled in the year relevant to assessment year 1984-85. It, was, therefore, submitted that since the assessee was admittedly maintaining the books of account on mercantile system of accounting the loss incurred by way of destruction of 2508 scants had occurred in the year relevant to assessment year 1983-84 and had been claimed in that year by not showing the value of 2508 scants in the closing stock as on 31-3-1983. It was also submitted that the income, if any, was to be shown as and when the assessee's insurance claim was settled. According to the learned Counsel for the assessee, the income was to be disclosed under Section 41(1) of the Act. It was vehemently argued that there was neither any warrant nor any justification nor any obligation for disclosing the factum of having received the insurance amount of Rs. 1,87,178 so far as return for assessment year 1983-84 was concerned. It was submitted that the assessee's bona fides stood established by the disclosure of income of Rs. 1,87,178 for assessment year 1984-85. It was pointed out that though the Revenue authorities had not referred to Explanation 1 to Section 271(1)(c) of the Act, in fact that was the Explanation which was applicable to the facts of the instant case. THE learned Counsel for the assessee pointed out that Explanation 1 postulated that where no explanation for the failure was offered by the assessee or where the explanation offered by the assessee was found to be false or where the assessee was not able to substantiate the explanation offered by him, the law could presume that the amount added or disallowed in computing the total income of the assessee be deemed to represent the income in respect of which the particulars have been concealed. It was, however, pointed out that there was a proviso to the said Explanation according to which nothing contained in Explanation 1 was to apply to a case in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation was bona fide and all the facts relating to the same and material to the computation of its total income had been disclosed by it. In this regard, it was pointed out that the factum of receipt of insurance claim of Rs. 1,87,178 had been duly disclosed by the assessee in its return for assessment year 1984-85. It was also pointed out that all the facts pertaining to the claim filed by the assessee with the Insurance Company etc. had been disclosed by the assessee and nothing had been concealed. It was submitted that the assessee was under a bona fide belief that the income of Rs. 1,87,178 was assessable in the year relevant to assessment year 1984-85 and that no such income was to be shown for assessment year 1983-84. It was therefore, submitted that the assessee had offered an explanation which was bona fide and had disclosed all the facts relating to the same and material to the computation of its total income. It was pleaded that the fact that the explanation offered was not substantiated had to be established by the Revenue which had not been established in this case.;
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