BHARAT RICE MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In Income tax Reference No. 170 of 1990, the Income tax Appellate Tribunal, Allahabad, hereinafter referred to as "the Tribunal", has referred the following question of law under Section 256(1) of the Income Tax act, 1961, hereinafter referred to as "the Act" for opinion to this Court:

(2.) As both the references relate to the same assessee and pertains to the Assessment Year 1981-82 in proceeding arising out of imposition of penalty under Section 271(1)(c) of the Act, they have been heard together and are being decided by a common order.

(3.) Briefly stated the facts giving rise to the present Reference are as follows:The applicant is a firm. Its accounting period is financial year. It filed its return of income for the Assessment year 1981-82 showing an income of Rs. 6,390/-. CCounsels: <ADV>Vikram Gulati, Shambhu Chopra</ADV> ounsels: <ADV>Vikram Gulati, Shambhu Chopra</ADV> Th e ssessment was originally completed on 5th April, 1982 on a total income of Rs. 12,390/-. Subsequently while completing the assessment proceedings for assessment year 1982-83, the Income-tax Officer noticed that the applicant had sold 209 quintals of Ghuta rice in the first week of April, 1981 whereas till the date of sale, there had been no hulling of paddy, nor was there any opening stock of Gutha rice. On being asked to explain this discrepancy, the applicant submitted that it had 309 quintals of Ghuta rice as its closing stock of the previous year relevant to the assessment Year 1981-82 and that it was this stock which was sold in April, 1981. The Income-tax Officer further noticed that the applicant had undertaken hulling of Government paddy during the previous year relevant to the Assessment Year 1981-82 and had received 433.04 quintals of Kinki rice, as its own share out of the Government rice hulling. This share of the applicant was shown in the levy Register of relevant previous year, but was not included in the closing stock on the last date of the previous year relevant to the Assessment Year 1981-82. When the applicant was confronted with the aforesaid facts, the applicant filed a revised return of income for the Assessment Year 1981-82, including the value of undisclosed Ghuta rice and the applicant's share of Kinki rice received on account of Government hulling. Re-assessment was completed including the value of the afore said stock at Rs. 37,548/-. The additions made were as follows: (1) Value of 209 quintals of Ghuta rice Rs. 16,093 (2) Value of losing stock of Kinki rice Rs. 71,455 ---------Rs. 87,548 --------- While completing the re-assessment as above, the Income-tax Officer issued penalty notice to the applicant in terms of Section 271(1)(c). It was explained on behalf of the applicant before the Income-tax Officer that "non disclosure of closing stock of Ghuta (rice) was not intentional and it was only a mistake by the Accountant not to have included it in the closing stock" similarly, regarding non-disclosure of applicant's share of rice in custom hulling, it was stated that the applicant was under impression that it can include its share only when it is sold and therefore 433 quintals of Kinki rice was not shown by it as its closing stock.