CHEAP CYCLE STORES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Tribunal, Allahabad, has referred the following question of law under Section 256(2) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court, relating to the asst. yrs. 1981-82 and 1982-83 :

(2.) Briefly stated, the facts giving rise to the present reference are as follows : The reference relates to the asst. yr. 1978-79 in proceedings arisen out of imposition of penalty under Section 271(1)(c) of the Act. The applicant has been assessed to the income-tax in the status of a firm. Its accounting period for the assessment year in question ended on 31st of March, 1978. Return for the aforesaid previous year was filed by the applicant originally declaring an income of Rs. 3.8,590 which was accepted under Section 143(1) of the Act. Subsequently, the matter was taken up for scrutiny and notice was issued to the applicant. Vide order-sheet entry dt. 27th Sept., 1978, the applicant was asked by the AO to furnish the details of the purchase and sale of cycles, The applicant thereafter filed a revised return showing an income of Rs. 57,069 along with which it had filed a chart in which closing stock of cycles purchased within UP was shown at Rs. 19,941 as against Rs. 15,287 shown in the original return. With regard to the Ex-UP Cycle Account, the closing stock was now declared to be Rs. 52,899 as against Rs. 45,486 declared earlier. The applicant stated that the revised return has been filed on detecting mistake in the closing stock valuation and it was not its intention to conceal its income when it originally filed its return of income declaring lesser closing stock. The ITO did not accept the above submission of the assessee and held that there was a definite device adopted by the assessee for understating the closing stock. He, therefore, made an addition of Rs. 11,562 to the applicant's income. Penalty proceedings under Section 271(1)(c) of the Act were also initiated, and after considering the explanation, the ITO had imposed a sum of Rs. 15,000 as penalty. Feeling aggrieved against the imposition of the penalty, the applicant preferred an appeal before the AAC who had held that the applicant had detected mistake itself and which was bona fide and, therefore, penalty was not imposable and set aside the penalty order. The Revenue feeling aggrieved, preferred an appeal before the Tribunal. The Tribunal has restored the penalty order.

(3.) We have heard Shri Rakesh Kumar, the learned counsel for the applicant and Shri A.N. Mahajan, learned counsel for the Revenue.