COMMISSIONER OF INCOME TAX Vs. BEST SUPPLY AGENCY

JUDGEMENT

(1.) IN these three tax case petitions, the Department requests this court to direct the Tribunal to refer the following two questions for the assessment years 1986-87 and 1988-89 for the opinion of this court under section 256(2) of the INcome-tax Act, 1961 Assessment year 1986-87 :

(2.) THE assessee is a registered firm carrying on business as a wholesale dealer in engineering cutting tools. For the assessment year 1986-87, originally the return was filed on March 24, 1987, showing an income of Rs. 2,21,575. THE assessment was completed on November 26, 1987, on a total income of Rs. 12,41,700. Subsequently when the assessment for the assessment year 1987-88 was taken up, the Income-tax Officer called for certain details including transactions of the assessee with Addison and Co. THE assessee wrote a letter dated February 16, 1989, stating that they have noticed certain discrepancies in the accounts and they will be filing a revised return and requesting the Income-tax Officer not to initiate penalty proceedings. On March 29, 1989, the assessee again wrote to the Income-tax Officer stating that the discrepancy has been located and stated that there was a difference of Rs. 17,26,577 to be credited to Addison and Company, which had to be spread over the assessment years 1986-87 and 1987-88. Consequently, a revised return was filed for the assessment year 1986-87 showing an additional income of Rs. 8,96,992. In the meanwhile, the Income-tax Officer had recorded his reasons on March 31, 19891 for reopening the assessment and issued a notice under section 147 on the same date. THE revised return was filed on April 28, 1989, and the reassessment was made on that basis on October 18, 1989. THE Income-tax Officer also initiated penalty proceedings under section 271(1)(c) THE assessee filed an explanation dated November 20, 1989, stating that the discrepancy arose only out of some mistakes in the accounts and since the accountant, who was responsible had also died, the penalty proposed should be dropped. THE Income-tax Officer, however, took the view that there was a concealment of income and imposed penalty of Rs. 4,40,185. On appeal, the Commissioner of Income-tax (Appeals) confirmed the imposition of penalty.