TaxTMI 
TaxTMI 
1984 (2) TMI 89
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....ous year, the assessee executed certain contracts as a sub-contractor of M/s. Raipur Provincial Engineering Company (hereafter referred to as the "principal contractors"). Some persons who were partners in the firm, M/s. Raipur Provincial Engineering Company, were also partners of the assessee-firm. The principal contractors had secured contracts from the Madhya Pradesh Electricity Board and these contracts were entrusted for execution to the assessee-firm under an agreement, dated October 25, 1963. Clause (3) of the said agreement recited that the principal contractors had started the work on August 28, 1963, and had incurred expenditure and the total expenditure incurred by them up to October 18, 1963, had been to the tune of Rs. 1,57,675.21 and that the assessee had agreed to accept the said expenditure and had also accepted the work-in-progress till the date of the agreement. Clause (6) of the agreement provided that the principal contractors would retain 5% of the net payment received from the Madhya Pradesh Electricity Board for execution of the contract and pass on the balance to the assessee. The receipts relating to the work executed up to October 18, 1963, were referab....
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....s amount to the net profit, the profit as per books worked out to Rs. 4,66,734 This was the profit declared by the assessee in the revised return. Whereas earlier while estimating the profits in the original return, the assessee had disclosed receipts of Rs. 19,16,602, in the revised return which was compiled on the basis of the books of account, the receipts were of the order of Rs. 24,50,131. The difference was attributable to the omission of two items : one was a sum of Rs. 3,83,529 relating to the receipts for the work executed prior to October 18, 1963 (reference to cl. (3) of the agreement between the assessee and the principal contractors). The other omission was of a sum of Rs. 1,50,000 referable to the security advance. The ITO framed a fresh assessment under s. 143(3) of the Act, by order dated March 7, 1970. The income was determined at Rs. 5,53,546. The ITO recorded that action for imposing penalty was being initiated (order dated March 7, 1970, is annex. A). As the minimum penalty imposable exceeded Rs. 1,000, the ITO referred the case to the AAC. The assessment was reduced in appeal by Rs. 5,000 but the inclusion of receipts of Rs. 3,83,529 and Rs. 1,50,000 i....
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....the Tribunal considered and rejected the argument advanced by the assessee's counsel that adjustment entries in respect of the aforesaid sums had been passed only at the stage of the filing of the revised return, which was about six years later. The Tribunal found that it was difficult to believe that the assessee, a firm constituted of 13 partners and having common partners in the principal firm, also did not care to pass adjustment entries for the very first year of the business for period which was longer than five years. Again, in paras. 21 and 22 of the appellate order, the Tribunal took into consideration the facts and circumstances obtaining in the case of the assessee and observed as follows : " Having regard to the above facts and all the circumstances and further remembering that the receipts and profits determined in the assessment are on the basis of books of account of the assessee itself, we find that it has been established that in omitting to declare the profits in relation to the full amount of receipt in its original return the assessee bad concealed income or furnished inaccurate particulars of income. Therefore, we bold that a penalty is exigible. " The Hi....
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....00 were not received by the firm in the relevant accounting year, but had been received prior to that. It was also submitted that there was no actual receipt but only a transfer by book entries. Therefore, according to him, there was no concealment in the relevant accounting year. The contention was raised before the Tribunal also and rightly rejected. The agreement between the assessee and the principal contractors, dated October 25, 1963, itself shows that some work had been executed by the principal contractors prior to the agreement in question and the assessee was entitled to the receipts which the principal contractors had obtained for the work executed by them up to October 18, 1963. Moreover, the assessee itself admitted these receipts while filing the revised return and, therefore, this glaring inconsistency in the explanation and the conduct could not be solved. The assessee maintained accounts on mercantile system, and profit and loss and taxable income had to be calculated on the basis of accrual. This was not disputed at any stage. The assessment order (annex. A) itself shows that the method of accounting was mercantile and there was never any dispute about it. Therefo....