TMI Blog1983 (1) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... had repaid them while no money passed as loans, nor were any money returned as repayments. Before, however, investigations could be concluded as to the genuineness and the nature and source of those credits, the assessee filed a petition before the Commissioner of Income-tax purporting to be made under section 271(4A) of the Income-tax Act, 1961. In that petition, it referred to the credits appearing in their books in the names of multani financiers, the bulk of which arose in the account years relevant to 1956-57 to 1958-59. The peak credit in the multani bankers' accounts amounted to Rs. 6,00,000. The assessee submitted that the peak credit may be regarded as the firm's income. But since the entire income could not have accrued in a single year, it was suggested that the amount may be spread over six years of assessment from 1958-59 attributing Rs. 50,000 (sic) in each of the assessment years as the income over and above what was returned by the assessee-firm from out of its books of account. Having offered for assessment the peak credit as spread over in this manner in a number of assessments, the assessee pleaded that in view of the voluntary disclosure made by them of the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer on the basis of the assessee's offer Assessment year Amount to be added Rs. 1953-54 1,05,000 1954-55 83,000 1955-56 83,000 1956-57 76,564 1957-58 85,939 1958-59 1,12,318 1959-60 61,191 1960-61 1,00,571 1961-62 75,967 1962-63 80,763 1963-64 1,08,936 1964-65 1,05,827 1965-66 86,779 It will be seen from the above table that the Income-tax Officer accepted the last five offers made by way of voluntary disclosure of income which are not earlier disclosed by them in their original returns and which were not disclosed as income receipts in the books of account. While the Income-tax Officer made the assessments in this manner following the voluntary disclosure, he nevertheless initiated penalty proceedings against the assessee under section 27 l(1)(c) of the Income-tax Act, 1961. These proceedings subsequently stood transferred to the Inspecting Assistant Commissioner. When the assessee was asked to show cause against the levy of penalty, the assessee represented that these were not cases in which action under section 271(1)(c) could be launched. The assessee submitted that the assessment was made on the basis of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned by the assessee in the original assessment proceedings. As for the next assessment year 1962-63, the Tribunal sustained the penalty on the score that there was a prolonged inquiry into the cash credits in this year which made the assessee come out with voluntary disclosure. This feature, according to the Tribunal, showed that the assessee had concealed its income for this year. For the last three years, namely, 1963-64 to 1965-66, the Tribunal accepted the fact that the assessee had filed revised returns even before the Income-tax Officer set on foot any inquiries or investigations. However, the revised returns even for those years, according to the Tribunal, came about only because of the inquiries being conducted by the Income-tax Officer in the course of the assessment for 1962-63. The Tribunal pointed out that in the voluntary disclosure petition, it was admitted that the crediting of interest on hundi credits was also fictitious and since the interest figured in the last three years of assessment, 1963-64 to 1965-66, the assessee must be treated as having concealed their income. The Tribunal then proceeded to hold generally that the assessee cannot escape from the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these references as falling under well-defined groups. The penalties falling under the first group relate to nine assessment years from 1953-54 to 1961-62. The levy for this group of assessment years was made in the course of the reassessment proceedings. The record shows that on the very day the assessee filed the returns in the course of reassessment proceedings the assessments were completed, adopting, without any material change, the figures offered for assessment by the assessee. The pattern of these reassessments shows that in the course of reassessment proceedings, at any rate, there was no concealment by the assessee. However, both the Inspecting Assistant Commissioner and the Tribunal only laid stress on the undeniable fact that there was a blatant concealment of income on the part of the assessee in the original assessments for the years 1953-54 to 1961-62. The question is whether for such concealment, penalties can be levied on the assessee in the reassessment proceeding. According to the legal position laid down by the Supreme Court in a recent decision, a reassessment under the taxing enactments completely obliterates without trace the original assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of the original proceedings would survive when the original assessment itself is supplanted by the reassessment. It, however, seems to us that even on the basis of the position that reassessment proceedings arose out of existence of the original assessment proceedings, the assessee can by no means be regarded as not having concealed his income, merely because in the reassessment proceedings he has made a clean breast of the whole income and expenditure position. The very reason for reassessment proceedings especially under section 147(a) of the Income-tax Act is that income has escaped assessment by reason of the failure or omission on the part of the assessee to fully and truly disclose all material facts necessary for his assessment. When such is the basis for reassessment, it would be quite odd to hold that the assessee is not guilty of concealment of income, merely because in the reassessment proceedings he unconceals what he has concealed in the original assessment. We are, therefore, satisfied that the assessee in the present case was properly charged with penalty in the reassessments for 1953-54 to 1961-62 notwithstanding the fact that it was the assessee's own volu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. By analogy of deduction from Malbary Bros. v. CIT [1964] 51 ITR 295 (SC), we must hold that the assessee cannot be absolved from having concealed his income in the course of the original assessment proceedings, merely because the original assessments were set aside on appeal by the Appellate Assistant Commissioner. The penalties for the two years 1962-63 and 1963-64 must also be upheld. This leaves us only with the last two assessment years under reference, namely, 1964-65 and 1965-66. The assessee filed original returns for these two years, but subsequently, even before the officer took up the returns for inquiry, the assessee filed revised returns reporting higher figures of income, adopting the voluntary disclosure settlement between him and the, Department. In other words, even before the Income-tax Officer set on foot any investigation and even before he detected any concealment of income in these two years, the assessee came out with revised returns on the basis of his voluntary disclosure. What is more, the assessments which were completed by the Income-tax Officer were based out and out on the figures offered by the assessee on the basis of the voluntary disclosure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 144 (Mad), which was also a case of penalty under section 271(1)(c) of the Act. It was somewhat broadly stated in that case that where the assessee himself made an admission about having earned income which was not shown by him in the original return, that by itself would be sufficient to justify penalty for concealment. It must, however, be pointed out that in that case, the admission or confession by the assessee as to his having earned a larger income than he reported originally came about only after an inquiry was set on foot by the Income-tax Officer and after the Income-tax Officer was about to detect the concealment. In the present case, however, the fact is quite different. As we pointed out earlier, even before the Income-tax Officer took up for Scrutiny the assessee's returns for these two years, the assessee had filed a voluntary disclosure and on that basis had offered income over and above that which he furnished in the original return. We do not, therefore, see any parallel between the present case and the case in CIT v. Krishna Co. [1979] 120 ITR 144 (Mad). The first question of law propounded for our consideration in this group is as follows: " Whether, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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