The Hindu Business Line : `Completion of sales key to decision on income concealment'

"There was no valid justifiable reason for imposing penalty since the sale was completed only in June 1998, when the purchaser received the goods based on which the assessee paid income-tax for the assessment year 1999-2000."

Chennai , April 3

The Madras High Court has held that levy of penalty on an income-tax assessee for showing lesser sales turnover was not justified under Section 271(1)(c) of the Income-tax Act as the assessee was not guilty of deliberate misstatement and concealment of facts.

Allowing an appeal by the assessee challenging an order dated November 8, 2002, by the Income-tax Appellate Tribunal, C Bench, Chennai, imposing a penalty of Rs 6.67 lakh a Division Bench comprising Mr Justice P.D. Dinakaran and Mr Justice P.P.S. Janarthana Raja said that the act of the assessee that it had paid sales tax for the assessment year 1998-99 with regard to sale of goods under invoice dated March 31, 1998, and also paid Central Excise Duty for the goods would not by itself be a justification to find the assessee at fault that he had concealed income or furnished inaccurate particulars to levy penalty.

The assessee, Rajarajan Electrical Equipment P Ltd, Chennai, admitted a total income of Rs 26.52 lakh for assessment year 1998-99. In the assessment completed, under Section 143(3), total income was determined at Rs 46.23 lakh on the ground that sales turnover to that extent was not brought to the account of the assessee and sales turnover was kept outside the purview of the assessment.

The assessee submitted that though the sale was effected on March 31, 1998, and certain deductions were claimed under the General Sales Tax Act, the sale was completed only in June 1998, when the purchaser received the goods sold. The issue of invoice and delivery challan on March 31, 1998, could not be construed as the confirmation of sale.

Rejecting the contention of the assessee, the Commissioner of Income-tax (Appeals) confirmed the order of the assessing officer, which was later confirmed by the Appellate Tribunal. Hence, the present appeal.

Counsel for the assessee Mr M. Aravind Subramaniam, contended that there was no valid justifiable reason for imposing penalty since the sale was completed only in June 1998, when the purchaser received the goods based on which the assessee paid income-tax for the assessment year 1999-2000.

The Bench held that to decide the question whether assessee had concealed income or not, the fact that the sale was completed in June 1998 had to be taken into consideration. The Tribunal had erred in not holding that Section 273(A) was attracted in the instant case, and, thereby, exempted the appellant from paying the impugned penalty assessment. The appeal stood allowed.

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