UNION ENGINEERING CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions of law have been directed to be referred by the Tribunal under Section 256(2) of the I.T. Act, 1961 :

(2.) THE assessee is a manufacturer of tea chest fittings front tin plates imported under licence issued under the Kerala Small Scale Industries Scheme. THE assessment year, with which we are concerned, is 1961-62, and for the accounting year ended on May 31, 1960, the assessee filed a return of income on May 30, 1962, showing the total income as Rs. 23,947. This worked out to a gross profit of 31.7% on a turnover of Rs. 1,04,604. Out of the tin plates purchases of the year ended May 31, 1960, relevant to the assessment year 1961-62, the assessee had deposited 38 tons of tin sheets on November 3, 1959, with the State Bank of India as security for key loan facilities. THE stocks were released by the bank between March 12, 1960, and May 14, 1960, in three instalments, the last being 24'5 tons released on May 14, 1960. On November 26, 1965, the assessee produced the books of account for the year ended May 31, 1960, and these were examined by the ITO. THE officer found that there were manipulations in the accounts to a considerable extent by short-crediting sales. THE day book and the ledger were impounded and also the file containing the sale bills. By letter dated December 9, 1965, the ITO wrote to the assessee about the serious irregularities disclosed, and gave an opportunity to the assessee to explain the shortage, and hearing was fixed for December 20, 1965. On that day, the assessee replied to the officer that the fittings manufactured prior to May 13, 1960, which was for the period from June 1, 1959 to May 13, 1960, were out of tin sheet cuttings taken on loan from Janab V. Ibrahim Kutty and Janab Abdul Azeez of Quilon. THE ITO issued summons to these two persons to appear before him with books of account for the relevant year. On December 29, 1965, the assessee wrote to the officer not to examine the two witnesses and admitting that the stocks declared for the assessment purposes as on May 31, 1960, were at variance with the actual stock. THE assessee also furnished details of the stock not accounted for in the books of account amounting to Rs. 24,760. Along with his letter dated December 29, 1965, the assessee also enclosed a revised return showing a total income of Rs. 47,406 inclusive of the unaccounted stock. THE assessment was completed by the officer on December 31, 1965, on a total income of Rs. 56,006. THE total income was reduced as a result of the appeals preferred eventually to Rs. 50,206.

(3.) THE ground of action in this case is that the assessee had concealed the particulars of his income. Counsel for the assessee raised two contentions : that in order to attract a penalty under the terms of this section, mere concealment of income would not suffice, and that there must be a finding that there was a conscious concealment of income. Secondly, that in imposing a penalty and fixing a quantum thereof, the fact that a revised return had in fact been filed by the assessee was at least a relevant factor to be taken into account by the assessing authority, which has not been done in the instant case.