R.N. Singhal, Accountant Member -
(1.) ASSESSEE's this appeal is directed against the levy of penalty under Section 271(1)(c) for concealment of income. The Assessing Officer had quantified it with reference to the concealed income of Rs. 14,03,311 and levied the minimum penalty leviable under the Act amounting to Rs. 8,33,566. The CIT (Appeals) directed that the penalty should be quantified with reference to a smaller figure of concealed income. He noted that Rs. 14,03,311 was the gross income but the penalty should be quantified with reference to the net income. He had noted that expenses of Rs. 7,00,110 related to the said gross income of Rs. 14,03,311 and consequently he noted that the penalty was leviable with reference to the net income of Rs. 7,03,201 (Rs. 14,03,311 minus Rs. 7,00,110). The assessee is aggrieved even by this order. It is pointed out that as a result of the order of the CIT (A) the penalty amount is reduced to Rs. 5,54,570 but according to the assessee it was not a fit case for levy of penalty under Section 271(1)(c) at all.
(2.) Basic facts may be noted first. The assessee-company is engaged in the business of transportation of very heavy machinery, equipment and material and it undertakes jobs of eminent companies and undertakings like BHEL, GEB and NTPC, etc. The previous year relevant to this appeal is financial year 1989-90. Return of income was filed on 1 -2-1991 showing income of Rs. 12,67,206. The Assessing Officer took up the processing of the assessment and noted that "the assessee had not shown anything in its profit and loss account by way of work-in-progress or work uncertified". He called upon the assessee to explain why the same should not be treated as income. The assessee thereupon "gave the details of work in progress and filed revised return on 20-11-1991" offering "for taxation a sum of Rs. 13,60,883 being income receivable". In the revised return filed on 20-11-1991 the income shown was Rs. 13,30,110 and by way of reconciliation the assessee claimed two deductions against the said sum of income receivable Rs. 13,60,883. One was of expenses amounting to Rs. 7,00,110 which were not provided but were actually incurred and another was of Rs. 5,60,000 which was shown as income in original return but it was simply an advance received from NTPC. Ultimately assessment was made on a total income of Rs. 13,44,439; obviously with minor adjustments (against income shown in the revised return at Rs. 13,30,110). The Assessing Officer initiated penalty proceedings under Section 271(1)(c) and ultimately levied penalty with reference to the income receivable (Rs. 14,03,311) as indicated above. The CIT (A) in appeal had held that expenses relatable to the income receivable should be deducted for arriving at the concealed income and penalty should be quantified accordingly.
Before proceeding to narrate and consider the submissions, it would be beneficial to take note of variations in the figures of different items, as follows :
(i) For gross income receivable; as already noted assessment order (vide para 4) dated 29-4-1992 mentioned the figure of Rs. 13,60,883. The penalty order dated 28-9-1992 took the corresponding figure at Rs. 14,03,311 and we were told that this was the correct figure.
(ii) For expenses relatable to that income the assessment order mentioned the figure of Rs. 7,00,110 (vide para 4) but we are now told that that figure really is Rs. 4,88,174. It is pointed out that the latter figure is adopted by the Assessing Officer in his order dated 31-5-1993 giving effect to the order of the CIT(A) for reduction of amount of penalty under Section 271(1)(c).
(3.) THE learned advocate for the assessee started by giving the background of the case and submitted that this was the fourth year of assessee's business and in all the preceding three years this very system of accounting had been adopted by the assessee and accepted by the Department. Drawing our specific attention to ground No. 4 taken before the Tribunal he submitted that five factors enumerated therein had not been properly appreciated by the CIT (A). THEn drawing our attention to the statement of facts furnished before the CIT(A) he submitted that the income in respect of works done but not certified by the concerned parties was actually not even income accrued and at any rate this was the practice followed all along in the past and it was accepted by the department. THEn he drew our specific attention to the grounds of appeal taken before the CIT(A) and highlighted the aspect that apart from the other factors mentioned above it was also pointed out to the CIT(A) that a refund of Rs. 2,04,090 of retention money was credited as income. THEn he proceeded to say that revised return was filed by the assessee by accepting the hint of the Assessing Officer because overall tax effect to the assessee was negligible. He reiterated that now in penalty proceedings he was entitled to claim that the value of the work which remained uncertified by the same authorities cannot be regarded as income accrued even on mercantile system of accounting. He submitted that the assessee had cooperated with the department by not only filing the revised return but by accepting the assessment. He emphasised that department had not proved that there was any concealment or furnishing of inaccurate particulars. According to him, it was only a bona fide difference of opinion and at any rate there were many other items which had been wrongly included in the total income. He submitted that in the account books for the subsequent year, the entries to the corresponding sum of Rs. 14,03,311 had been reversed because originally adjustments for deduction of income-tax, etc., credit for Rs. 13,60,884 had been taken.;