B.M. Kothari, Accountant Member - (1.)THE assessee has preferred these two appeals against the orders passed by the CIT(A) - one against his order confirming the penalty of Rs. 34,774 imposed by the ITO Under Section 273(1)(a) and the other against confirming the order passed by the ITO Under Section 271(1)(c) imposing penalty amounting to Rs. 2,30,278. Since both these appeals relate to same year, they are being disposed of by this common order.
(2.)The brief facts relating to the aforesaid appeals are as under :
The aforesaid association runs a spinning mill. During the year under consideration a return of income showing its gross total income at Rs. 26,54,423 and after deductions available under Chapter VI-A its net income was shown at Rs. 20,02,235. One of the deductions claimed by the assessee was in respect of carry forward of deduction Under Section 80J which was determined as eligible for being carried forward at Rs. 6,13,836 in the assessment order for A.Y. 1974-75. The carry forward in respect of aforesaid amount of unabsorbed deduction Under Section 80J of A.Y. 1974-75 was disallowed in view of the provisions contained in proviso (i) to Section 80J(3) which provides that in no case deficiency Under Section 80J is allowed to be carried forward beyond the seventh assessment years as reckoned from the end of initial assessment year. In the instant case the initial assessment year was 1970-71 and as such the aforesaid deficiency of deduction Under Section 80J pertaining to A.Y. 1974-75 could not have been carried forward in the year under consideration, viz., A.Y. 1981-82. Accordingly the aforesaid deduction of Rs. 6,30,836 claimed by the assessee was disallowed. Consequently the income of the assessee was assessed at Rs. 25,25,600 by the ITO vide assessment order Under Section 143(3) and penalty proceedings for furnishing untrue estimate of advance tax and for concealing particulars of income were also issued. Thereafter penalties Under Section 273(1)(a) amounting to Rs. 34,774 and Rs. 2,30,278 Under Section 271(1)(c) were imposed by the ITO. The CIT(A) confirmed both the aforesaid penalties. The present appeals are directed against these two orders passed by the CIT(A).

2A. The learned counsel for the assessee contended that the persons who were looking after the taxation work of the aforesaid society were not aware about the correct interpretation relating to carry forward of unabsorbed amount of deduction deficiency of past years allowable Under Section80J. He submitted that usually the provisions relating to carry forward of unabsorbed losses and other unabsorbed deduction commences from the year in which such loss occurres and the provisions contained in Section 80J(3) is a provision of unusual nature which provides that in no case such deficiency or any part thereof be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. He submitted that a provision like this would be that deficiency of the seventh assessment year from the end of initial year is thus not even eligible to be carried forward to the next year. Such an interpretation was commonly unknown to the persons dealing with taxation work. Mr. J.P. Shah, the learned counsel for the assessee told that he himself knew about such a provision only recently when an occasion came to conduct such a case. He further submitted that the assessee under such bona fide belief that it was entitled to carry forward the deficiency of deduction Under Section 80J pertaining to past years claimed such deduction in ignorance of aforesaid proviso (i) to 80J(3), which is evident from the return of income furnished for A.Y. 1980-81. He invited our attention to page 3 of the paper book in which the statement of income for A.Y. 1980-81 shows nil income and the assessee has thereafter claimed carry forward in respect of unabsorbed amount of depreciation, development rebate, deduction Under Section 80J, investment allowance eic. pertaining to A.Ys. 1972-73 to 1979-80. This statement giving details of assessee's claim for such unabsorbed losses and other deductions also include the aforesaid amount of Rs. 6,13,836 being unabsorbed deduction Under Section 80J of A.Y. 1974-75. It was further contended that the ITO while passing the assessment order has not made any observations about such incorrect claim made in respect of deficiency Under Section 80J pertaining to A.Y. 1974-75. He further submitted that at the time of filing the return of income for A.Y. 1981-82, the year under appeal, the assessee has disclosed gross total income of Rs. 26,54,423 out of which deduction in respect of 80J deficiency allowed in A.Y. 1974-75 amounting to Rs. 6,13,836 has been separately and distinctly claimed as a deduction. The learned counsel contended that such bona fide claim made under a honest and mistaken belief cannot be considered as concealment or furnising of inaccurate particulars of income and also cannot attract penal provisions relating to short payment of advance tax etc. He further submitted that the assessee had also made bona fide mistakes to their own detriment. He invited our attention towards assessment order for A.Y. 1970-71 in which the unabsorbed depreciation eligible to be carried forward in subsequent years was determined by the ITO at Rs. 8,37,978. In A.Y. 1979-80 the ITO has mentioned that claim of unabsorbed depreciation pertaining to A.Y. 1970-71 is barred by limitation of time as eight years has expired. Such observations made by the ITO in the assessment order for A.Y. 1979-80 is apparently contradictory to the provisions of law, as there is no limitation of time to carry forward of unabsorbed depreciation of past years and thus income pertaining to the year under appeal has been over-assessed by amount of Rs. 8,37,978 being the unabsorbed depreciation of A.Y. 1970-71 which could have been claimed as deduction on account of unabsorbed depreciation in the year under consideration.

The learned counsel therefore contended that in case the aforesaid submissions are taken into consideration neither penalty Under Section 273 nor Under Section 271(1)(c) could be validly imposed upon the assessee. He therefore submitted that both the penalties imposed upon the assessee deserve to be cancelled.

The learned DR supported the order passed by the learned authorities below and submitted that the penalties imposed Under Section 271(1)(c) and 273 have rightly been confirmed by the CIT(A). He submitted that there was no basis whatsoever for claiming deduction in respect of unabsorbed deduction Under Section 80J pertaining to A.Y. 1974-75 in view of the provisions contained in proviso (i) to Section 80J(3). He relied upon the judgment of Hon 'ble Gujarat High Court in the case of CIT v. Drapco Electric Corporation [1980] 122 ITR 341 and contended that gross neglect or reckless disregard of the provisions of law amounts to conscious concealment and penalties are leviable in case of such gross neglect on the part of the assessee. He also relied upon the judgment of Hon'ble Madras High Court in the case of Rathnam & Co. v. IAC [1980] 124 ITR 376 in which penalty was sustained by the Hon'ble Madras High Court on the ground that the assessee had agreed to the additions in the declared income. In the instant case also the assessee has accepted the order passed by the IAC Under Section 144B in respect of aforesaid disallowance. He further submitted that penal provisions are both preventive and punitive and the CIT(A) was fully justified in sustaining both the aforesaid penalties. It was also contended that ignorance of law is no excuse. The assessee is an old assessee and is assisted by qualified CAs and therefore such an apparent incorrect claim of unabsorbed deduction Under Section 80J clearly amounts furnishing of inaccurate particulars of income. He submitted that the penalties imposed upon the assessee should be confirmed.

(3.)IN the rejoinder the learned counsel for the assessee invited our attention to the judgment of the Hon' ble Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705. At page 713 the Hon'ble Supreme Court has held that from agreeing to certain additions, it does not follow that the amount agreed to be added was concealed income. There may be a hundred and one reasons for such admission that is when the assessee realises the true position, it does not dispute certain disallowances but that does not absolve the revenue from proving metisrea of a quasi-criminal offence. He submitted that as soon as the assessee became aware about the correct position of law in this regard, the assessee agreea to the aforesaid addition before the IAC in proceedings Under Section 144B. Prior to that stage the assessee remained under the bonafide belief that the unabsorbed amount of deduction allowable Under Section 80J pertaining to A.Y. 1974-75 which was determined by the ITO as eligible for being carried forward in the assessment order for A.Y. 1974-75, is deductible against the income of the year under appeal. He once again submitted that penalties imposed by the ITO should be deleted.