Commissioner of Income Tax vs Bhoj Raj and Co.

G.S. Singhvi, J.—This is an appeal against the order dated September 16, 1999, passed by the Income Tax Appellate Tribunal, Amritsar Bench, confirming the order dated January 19, 1993, passed by the Commissioner of Income Tax (Appeals), Bhatinda, vide which he quashed the penalty imposed on the assessee u/s 271(1)(c) of the Income Tax Act, 1961 (for short "the Act").

The facts relevant to the decision of the appeal are that on the basis of a search conducted at the premises of the assessee u/s 132 of the Act, the assessing authority made an addition of Rs. 1,45,659 for the assessment year 1984-85 and then imposed penalty of Rs. 95,000 u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income. The Commissioner of Income Tax (Appeals) deleted the penalty by making the following observations :

"I have given careful consideration to the entire matter and I am of the considered view that even if the method of accounting being followed by the assessee is not accepted and additions are made and confirmed holding that the assessee was following the mercantile system of accounting, there is no justification for imposition of penalty especially when income on account of credit notes as well as expenses on account of debit notes was duly disclosed in the year of receipt/intimation in this regard. This view has been held by the Income Tax Appellate Tribunal, Amritsar Bench in the case of Shyama Textiles for the assessment years 1982-83 to 1985-86 quoted supra. It has been held by the Income Tax Appellate Tribunal in that case in similar circumstances that method of accounting of showing commission/expenses on receipt basis is a recognised method since there could always be some dispute or difference regarding the actual amount receivable as commission. That this might arise subsequently because of sales returned, quality difference, complaint from customers and expenditure incurred by the mills on behalf of the assessee. That when the credit note is sent, only then it could be said that there was no further dispute on account of commission receivable. That if the books of account are maintained on the basis of credit notes received it was certainly an accepted method of accounting and that can never be a basis for holding that concealment of income was involved. The Income Tax Appellate Tribunal deleted the penalties for all the four years relying on the following decisions :

(i) Commissioner of Income Tax, Poona Vs. Devandas Perumal and Co., .

(ii) Commissioner of Income Tax, Poona Vs. Mohammed Yakub Mohd. Ibrahim and Co., .

It was held by the Income Tax Appellate Tribunal that where addition was made by rejecting the method of accounting being followed (as in the case of Shyama Textile Agency), there was no basis for arriving at a finding of concealment. Reference application filed against the combined penalty order for the four years has since been rejected by the Income Tax Appellate Tribunal. The facts of the appellant''s case being the same as in the case of Shyama Textile Agency, respectfully following the decision of the Income Tax Appellate Tribunal, it is held that there was no inaccurate furnishing of particulars of income since income on account of credit notes was duly disclosed in the assessment year 1985-86 as per method of accounting being followed by the appellant. Penalty is, therefore, not exigible and penalty imposed is, accordingly, deleted."

The Income Tax Appellate Tribunal upheld the order passed by the Commissioner by observing that it is in consonance with the similar decision rendered in other cases.

After hearing Shri R. P. Sawhney, senior advocate for the appellant, we are convinced that no, substantial question of law arises for consideration by the court which may justify entertaining this appeal. The Commissioner (Appeals) has given cogent reasons for holding that the non-acceptance of the method of accounting adopted by the assessee cannot lead to a conclusion that it had deliberately suppressed the income from the Department and we do not find any reason to take a different view.

Hence, the appeal is dismissed.