TaxTMI 
TaxTMI 
1991 (4) TMI 77
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...."the Act"). The question arises out of the facts set out in paragraphs Nos. 2 and 3 below. The assessee is hereinafter referred to as the respondent. In a search of the respondent's premises made on January 12, 1977, the books of account including the stock register and inventories were seized by the petitioner. The respondent filed his income-tax return for the assessment year 1977-78 (accounting year ending on December 31, 1976) declaring an income of Rs. 85,200. An examination of the books of account of the respondent revealed that the value of the closing stock for the assessment year in question was Rs. 12,17,726. The respondent had declared the value of such stock to be Rs. 10,36,385. The respondent's explanation of this discrepanc....
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....pondent. He held that the respondent had not concealed the particulars of his income. His reasons were : (a) Since the details of the respondent's stock were known to the petitioner who possessed all the account books for the 11 months preceding the filing of the income-tax return, the element of secrecy which is the essence of concealment was absent from the transaction, and (b) Since the petitioner knew the position of the stock and its value from the account books in his possession, the respondent cannot be said to have concealed the particulars of his income. The Income-tax Appellate Tribunal, Cochin Bench, by its order dated December 22, 1983, in I. T. A. No. 321 / (Coch.) of 1982, confirmed the decision of the Commissioner of....
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....rise. We thought it necessary to distinguish between the existence of a question and the existence of an answer because the respondent, relying upon the proviso to Explanation 1 to sub-section (1) of section 271 of the Act, urged that his explanation being bona fide, his failure to substantiate his explanation about the discrepancy in the value of the stocks does not attract penalty. If the respondent, by reason of the bona fides of his conduct, has, as he claims, a complete answer to the charge of concealment of income, the question may be answered in his favour. But the question does not cease to exist ; indeed, the existence of an answer accentuates the presence of the question. The Income-tax Appellate Tribunal made its order under s....
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.... Mills Ltd. v. CIT [1954] 26 ITR 775 (SC), or a finding of fact arrived at by misconstruction of a document as in CIT v. Sivakasi Match Exporting Co. [1964] 53 ITR 204 (SC), or a finding which depends upon the interpretation of statutory provisions as in Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265 (SC), illustrate how the apparently factual character of a question may, in reality, be a question of law. Where, as in this case, the ultimate finding that the respondent has concealed particulars of his income is an inference to be drawn from the admitted discrepancy in the value of the closing stock, the explanation offered by the respondent and consideration of the true meaning of "concealment" the essence of which is secrecy and decept....