TMI Blog1997 (2) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... all margin of profit. For the assessment years 1986-87, 1987-88 and 1988-89, the assessee filed original returns of income disclosing a total income of Rs. 23,730, Rs. 34,370 and Rs. 50,060 respectively, which were accepted under section 143(1) of the I.T. Act. Subsequent to the completion of assessment, a search under section 132 was conducted on 3rd August, 1989 in the assessee's residential premises and also in the business premises of the firms in which the assessee was a partner. The assessee was a partner in (i) M/s. S.M. Bangarimath, Trichy, (ii) M/s. Bangarimath Bros., Madurai and (iii) M/s. Mamaseth Co., Karur. Incriminating books/documents evidencing evasion of income were found and documents were seized by the Department. Subsequent to the search operations, the assessee filed revised returns of income on 26th March, 1993. The position regarding the income declared in the original returns as well as in the revised returns and the income assessed after the search operations as furnished by the CIT(Appeals) is as under: ------------------------------------------------------------------------------------------------------------------------------------------------- "As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the assessee has not admitted any undisclosed income in the statement recorded under section 132(4) of the Income-tax Act. It was also explained before the Assessing Officer that the assessee purchased coconuts from agriculturists and supplying them to M/s. Mamaseth Co., after charging a small margin of profit. The assessee in the revised returns of income filed after the search, disclosed the income (refer to in the preceding paragraph) under the head 'Other sources'. But the assessee has also disclosed the liabilities which may be offered for assessment for want of evidence. It was claimed before the Assessing Officer that the liabilities were genuine but there was no evidence to prove the genuineness of the liabilities and, therefore, the claim of the assessee regarding genuineness of the liabilities was not accepted by the Assessing Officer. The assessee did not produce any confirmatory letters in respect of liabilities. The assessee claimed that borrowed funds were utilised for investments but since there was no evidence to show the genuineness of the borrowed funds, the Assessing Officer came to the conclusion that the advances made to the agriculturists or investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stt. CIT [1995] 81 Taxman 107 (Delhi) (Mag.). 6. The learned Departmental Representative, on the other hand, argued that the assessee could not have filed the revised returns but for the search operation conducted in the premises of the assessee. The learned Departmental Representative also referred to the decision of the Madras High Court in the cases of (i) CIT v. Krishna Co. [1979] 120 ITR 144, (ii) H.V. Venugopal Chettiar v. CIT [1985] 153 ITR 376/23 Taxman 412 and the decision of the Allahabad High Court in the case of CIT v. Malhotra Cold Storage Fruit Industries [1996] 219 ITR 131/86 Taxman 1. The learned Departmental Representative also invited our attention to page 19 of the paper book which is a letter dated 25-10-1989 by the assessee to the Assistant Director of Inspector, Trichy in which the assessee has admitted that he had kept outside accounts, certain loans which were utilised as advances for the agriculturists from whom he purchased coconuts. In the letter dated 25th October, 1989, the assessee has admitted that the loans and advances were recorded separately by the assessee and they have been seized by the department at the time of raid. The assessee has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the books of M/s. B.R. Industries. No corresponding entry in the assessee's books was available. The assessee offered to get itself assessed on a sum of Rs. 2,25,010 but, instead of being taxed in the assessment year 1978-79, requested for a spread over of that amount for the assessment years 1974-75 to 1978-79 and filed revised returns for those years including the amounts spread over for each year. The Income-tax Officer levied penalty under section 271(1)(c) of the Act for concealment of income for those years and the Appellate Tribunal confirmed those levies. The Appellate Tribunal also rejected the assessee's application for reference. The assessee filed applications in the High Court for an order directing the Tribunal to state a case. The Hon'ble Delhi High Court dismissed the application of the assessee and held that there was concealed income to the extent of Rs. 2,25,010 which was a finding of fact. It was at the instance of the assessee that the Department agreed for a spread over of the sum over a number of years. The mere fact that the assessee's contention for spreading the addition of Rs. 2,25,010 over a number of years had been accepted could not be reason for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liability. The assessment has been made in respect of each assessment years on the basis of income disclosed by the assessee in the revised returns filed and the only implication in law was that in each of those years, there was concealment of income. 11. In the case of H. V. Venugopal Chettiar, the facts of the case were that in the course of the assessee's wealth-tax proceedings for 1972-73, it came to light that the value of the assessee's residential house was more than the admitted value of Rs. 50,000 and the Inspector after inspection estimated the cost of construction at Rs. 98,000 and was also of the opinion that the construction should have been spread over a period of three years. On the ground that the assessee had omitted to disclose in his books of account the cost of construction, notices to reopen the income-tax assessments for the three years 1969-70, 1970-71 and 1971-72 were issued. However, before the said notices could be served, the assessee filed returns purporting to be revised returns, in which he included a sum of Rs. 15,000 for each of the three assessment years under the head 'Other sources'. The Income-tax Officer examined the assessee on oath in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making the disclosure, the assessee also stated that the amount of penalty to be levied has not been agreed upon and it may be considered on merits after completion of assessments. In due course, the Inspecting Assistant Commissioner of Income-tax levied penalty of varying amounts for assessment years 1956-57 to 1965-66, which were the assessment years involved. In appeal, the Income-tax Appellate Tribunal by a consolidated order reduced the penalties to the minimum imposable under the Act. The assessee's plea that it was not liable to penalty, was not accepted by the Tribunal. At the instance of the assessee, the Tribunal made a reference to the Allahabad High Court. It was argued before the Hon'ble Court that the assessments having been made on an agreed basis on the voluntarily disclosed income by the assessee, no penalty was leviable. The Hon'ble High Court held that the assessee having by a voluntary disclosure, disclosed a concealed income of Rs. 6 lakhs, there could be no manner of doubt that the assessee was guilty of concealment and, as such, was liable to penalty. The law does not provide that if an assessee makes a voluntary disclosure of its concealed income, it has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see filed revised return. The Hon'ble Allahabad High Court held that section 139(1) of the Act, makes it obligatory on an assessee, whose income exceeds the maximum, which is not chargeable to income-tax, to file a return of this total income. In this case, the High Court considered that the amount of Rs. 61,460 which was revealed in the revised return was not on account of discovery of a mistake after the filing of the original return but of deliberate omission of a fact which was in the knowledge of the assessee which the assessee attempted to conceal with a view to evade tax till the end and came out with the disclosure only when it became sure that his game was up. 16. Similarly, in the present case, the assessee filed returns and disclosed income which was not deliberately disclosed in the original returns and the concealed income was admitted in the revised returns only when the assessee became sure that there is no alternative except the disclosure of correct income after the department conducted search and seizure operations. Incriminating documents and books of account were seized which contained concealed income of the assessee. 17. In the case of CIT v. K. Mahim [198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revised return is belated, and after investigation had advanced much, by itself, will not visit him with penal consequences. The assessment of the assessee for the relevant assessment year was reopened by the ITO and detailed enquiries were pursued in respect of the same. The assessee, however, filed a revised return voluntarily and the assessment was completed by the ITO on that basis. Thereafter, the ITO issued notice to the assessee under section 271(1)(c) of the Income-tax Act, 1961, for concealment of income and referred the matter to the IAC. The assessee contended before the IAC that inasmuch as he had filed the revised return voluntarily and that the assessment had been completed on the basis of such revised return, the levy of penalty would be invalid as no concealment could be established with reference to the revised return. The IAC rejected the contention of the assessee and imposed penalty on him. On appeal, the Tribunal cancelled the penalty on the ground that so long as the assessment proceedings were pending and investigations were being conducted by the Department, an assessee could rectify a return by filing a revised return under section 139(5), before the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, held that the bankers had merely lent their names in what was known as bogus hawala transactions. The assessee, thereupon, agreed to the addition of the peak credit to his income. In the penalty proceedings, the assessee's submission that no penalty was exigible was rejected by the I.A.C. but accepted by the Tribunal. On a reference, the Hon'ble High Court held that in a case where the assessee himself has admitted that the amount represented his own income, no further evidence would be necessary to show that it was the amount which represented his income and it represented his concealed income. In the case before us, the assessee had himself stated before the Department that he had kept separate accounts, certain loans and advances which were recorded separately in the accounts seized by the Department at the time of raid. The assessee admitted that he inflated purchases and the unaccounted money so generated was utilised to make advances to agriculturists. In view of these facts, no further evidence is necessary to show that the income was concealed by the assessee. 20. After examining the propositions of law laid down by the various High Courts in the preceding paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 S.B.I. 2,42,000 Others 3,18,500 Rs. 6,57,500 --------------------------- Total Rs. 9,98,100 --------------------------- II. Hire receipts, income from Lorries and, inflation in purchases, less depreciation due on Lorries, is Rs. 1,01,400 as per working below: (a) Fibre Receipts Rs. 46,950 (b) Lorry Hire Charges (NET) Rs. 35,000 (c) Inflation Rs. 2,58,700 --------------------------- Rs. 3,40,650 Less: Depreciation on Lorries Rs. 2,39,250 --------------------------- Balance Rs. 1,01,400 --------------------------- This additional income is now being offered for assessment. It may kindly be accepted. In view of the voluntary Disclosure, protection from penal Interest, Penalty and Prosecution may kindly be extended. Thanking you," Similarly, the assessee vide letter dated 21-9-1993 to the Assistant Commissioner of Income-tax, Trichy admitted as under: " Sub : In the case of Sri S. Sivakumar -- G.I. No. 1094-S Reply for the penalty notice under sections 271 and 273 - submission of. In continuation of the earlier reply submitted on 9-8-1993 and on 20-9-1993. I am herewith furnishing the following further particulars. The assessee made a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and the amount concealed. However, filing of a revised return will not create a fresh cause of action or a fresh concealment. Even though same concealment existed in the return filed in the reassessment proceedings, no fresh cause of action arose for the levy of penalty when the second return was filed as it was only a continuation of what had happened earlier, and that the repetition of the same mistake does not give rise to a fresh cause of action. Accordingly, the penalty will have to be calculated in accordance with the law as it existed when the original return for wealth-tax was filed. For a particular year, an assessee can commit the offence only once when he furnishes incorrect particulars of his income, and that he does, by filing the original return. " 23. The Department has levied minimum penalty under section 271(1)(c) because the assessee has disclosed after the search, the concealed income which was utilised for making advances to agriculturists which was earned by the assessee out of his business on purchase and sale of coconuts to Mamaseth Co. If the Department has not conducted search, the assessee never would have filed the return of income admitting co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 96,434 was made by the Assessing Officer on account of hundi loans. The assessee filed a petition before the Commissioner under section 271(4A) which made it clear that, though the hundi loans were genuine, the assessee's willingness to get assessed on the amounts was only because it would be difficult to prove the genuineness of the credits under the conditions created by the denial by the multani bankers of their advances. But in the case of the assessee before us, certain incriminating documents were seized from the residential premises and business promises of the firm in which the assessee was a partner. After incriminating documents were seized in the course of search, the assessee declared concealed income in the revised returns of income. The facts of the case of the assessee are, therefore, totally different and the ratio laid down by the Madras High Court in the case cited supra are not fully applicable to the assessee's case. 26. In the case of the assessee before us, no details of borrowed funds were furnished before the Assessing Officer and only a vague claim was made that borrowed funds have been utilised for investments which was not supported by any evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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