Commissioner of Income Tax vs M.M. Rice Mills

G.S. Singhvi, J.—In this appeal filed u/s 260A of the Income Tax Act, 1961 (for short "the Act"), the Revenue has prayed for determination of the following question of law :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in deleting the penalty of Rs. 72,370 imposed u/s 271(1)(c) of the Income Tax Act, 1961, by holding that where the addition has been made by applying the proviso to Section 145(1) of the Income Tax Act, the same cannot be made a basis for imposition of penalty u/s 271(1)(c) ?"

The facts necessary for deciding the appeal are that the assessee had filed a return for the assessment year 1989-90 showing an income of Rs. 63,310. The Assessing Officer made additions to the tune of Rs. 1,45,200 on account of Khudi Phak and Rs. 4,094 on account of chhilka. The order of the Assessing Officer was confirmed by the Commissioner of Income Tax (Appeals) qua the addition of Rs. 1,45,200. Thereafter, the Assessing Officer imposed a penalty of Rs. 72,370 u/s 271(1)(c) of the Act. The Commissioner of Income Tax (Appeals) allowed the appeal preferred by the assessee against the order of penalty and the appellate order was upheld by the Income Tax Appellate Tribunal (for short, "the Tribunal"), while dismissing the appeal of the Revenue.

We have heard Shri R.P. Sawhney, senior advocate appearing for the appellant, and have gone through the record.

In our opinion, no question of law, much less a substantial question of law arises for determination in this appeal. A perusal of the order passed by the Commissioner of Income Tax (Appeals) shows that he had accepted the assessee''s plea that there was no concealment of income by making the following observations :

"As regards the plea that no concealment was established and addition was made on estimate basis, after applying the proviso to Section 145(1), the plea is correct, and the Assessing Officer has not brought on record any document or material to show that assessee was guilty of concealing the particulars of income. No sale/excess stock of khudi phak was detected outside the books of account. As such the addition made by applying the proviso to Section 145(1) cannot be made the basis for imposition of penalty u/s 271(1)(c). This view has been upheld by the Punjab High Court in the case of Commissioner of Income Tax Vs. Metal Products of India, . The High Court has observed as under (headnote) :

''Held, that merely because the addition had been made on estimate under the proviso to Section 145(1) by adopting the view that the gross profit shown in the books of account was too low as there were defects in the method of accounting employed, did not automatically lead to the conclusion that there was failure to return the correct income by means of fraud or gross or wilful neglect. Though the onus to prove that there was no fraud or gross or wilful neglect was on the assessee, yet the quantum of proof to discharge it was that as required in a civil case, i.e., by preponderance of probabilities. This had been discharged by the assessee''s producing regular books of account and that was "enough evidence" before the Tribunal to come to the view that the onus had been discharged. This also applied to the discrepancy in the stock statements . . .''

In view of the foregoing discussion it is held that penalty is not exigible on the facts of this case and penalty imposed is deleted."

The Tribunal expressed its agreement with the view taken by the Commissioner of Income Tax (Appeals) and dismissed the appeal filed by the Revenue by applying the ratio of the decision of this court in the case of Commissioner of Income Tax Vs. Metal Products of India, .

In our opinion, the concurrent view expressed by the Commissioner of Income Tax (Appeals) and the Tribunal represents the correct position of law and there is no valid ground to entertain the appeal which we hereby dismiss.