TMI Blog1969 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... Laboratories Ltd. from whom the assessee had purchased goods of the value of Rs. 4,00,000 odd. He also discovered huge deposits amounting to Rs. 2,79,112 in the bank accounts of some of the partners of the firm. When called upon to explain these discrepancies and the deposits, the partner representing the assessee-firm explained that there were some differences between the partners, that partners 4 and 5 were carrying on business in the same line in contravention of the partnership, that in order to offset extra profits, the remaining partners had prepared bills showing lesser sale price than the actual sale price and deposited the extra sale proceeds in the names of its three partners and that remittances to Messrs. Amrit Laboratories Ltd. were made with the extra cash but the entries were postponed to dates when the cash balance as per the cash book maintained were sufficient to accommodate the remittances already made. It was further explained that all the bank deposits in the names of some of the partners except to the extent of Rs. 28,618 have been accounted for in the firm's accounts and that the said sum of Rs. 28,618 alone represented the sale proceeds that were not disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be either logical or fair, that if the entire sum of Rs. 2,90,000 is taken as suppressed sale proceeds then it would work out a gross profit of nearly 27%, which was obviously high and absurd, and that having regard to the rate of gross profits shown by the assesseee for the previous years at 11% as against 15% adopted on comparable business, it was not possible to take the entire sum of Rs. 2,90,000 as the sale proceeds unless there is any comparable case showing such a high rate of gross profit at 27%. He also noted that the Income-tax Officer has himself accepted the assessee's explanation that the deposits in the banks had already been credited to the sales account except a portion of the sale proceeds which have been admittedly divided between the three partners without showing it in the bills and without the knowledge of the other two partners, and that was why he did not add the entire deposit to the gross profit, but added only a sum of Rs. 84, 305. The Appellate Assistant Commissioner, therefore, took the view that the addition of Rs. 2,90,000, being the deposits with the two banks, as wholly suppressed sales, did not seem to be either logical or fair in view of the accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 28(1)(c), the Tribunal took note of the facts that the departmental officers had accepted the assessee's case that all the deposits in the banks had already been credited in the sales account except the sum of Rs. 28,618 which had been divided between the three partners without showing it in the bills, and without the knowledge of the other two partners and that the said amount of Rs. 28,618 which was kept off from the sales account had been shown in the revised return. The Tribunal was of the view that the conduct of the assessee in filing a revised return bringing in the entire excess sale proceeds divided between three partners without bringing it into the sales account should be taken into consideration in applying the provisions of section 28(1)(c) of the Act, that the Income-tax Officer had ignored the revised return while passing the penalty order, that section 22(3) having given to the assessee a right to file a revised return at any time before the assessment is completed, and the assessee having come forward with true disclosure of his income in his revised return. before the assessment is completed, it would be unreasonable and unfair to levy penalty upon the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w to this court as arising out of its order dated October 31, 1964: " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that service of notice on some of the partners was sufficient compliance with the requirements of law? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that in view of the revised return filed by the assessee, there was no concealment of income by the assessee ? " Of these two questions, the first question was referred at the instance of the assessee and the second at the instance of the revenue. While the reference in respect of the above two questions was pending in T.C. No. 80 of 1966, the revenue wanted the following further question of law to be referred to this court as arising out of the same order of the Tribunal dated March 31, 1954, and that question is comprised in T.C. No. 189 of 1967. " Whether, on the facts and circumstances of the case, the Appellate Tribunal has power to determine the quantum of penalty when cancelling the order of penalty itself as invalid ? " As regards the first question raised in T.C. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may apply to the High Court and the High Court may, if it is not satisfied with the correctness of the decision of the Tribunal, require it to state a case and refer it and, on such requisition, the Appellate Tribunal shall state the case and refer it accordingly." With respect, we agree with the decision of this court in the above case and we hold, following the above decision, that the reference so far as it relates to the above question is incompetent and cannot be answered by this court. As regards the second question as to whether the Tribunal was right in holding that there was no concealment of income by the assessee in view of the revised return filed by the firm before the assessment was completed, it was contended by the revenue that the filing of a revised return by the assessee or the acceptance of the revised return by the Income-tax Officer will not relieve the assessee of the liability under section 28(1)(c) of the Act. It was urged that the provisions of the Act cast a duty on the assessee to act in good faith and to disclose the correct income and that in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 22(3) should be voluntary and not as a result of a discovery of the omission or wrong statement being made by the departmental officers. It was also urged that the verification by the assessee as to the truth of the return submitted is sufficient to bring the assessee within the mischief of section 28(3), if it is found that such verification has been made with a view to induce the Income-tax Officer to accept the return as a true one, and reference was made to rule 19, item 4 of Part IV in Form A and the form of verification at the end of Form A, in support of the above submission. It is further submitted that the Tribunal was in error in thinking that in view of the revised return filed by the assessee, there is no blame on the assessee for non-disclosure of the correct amount of income in the original return filed by him, and that in any event filing of the revised return would be an extenuating circumstance to levy a nominal penalty. As against this, the learned counsel for the assessee contends that section 28(1)(c) does not penalise any attempt at concealment as section 22(3) gives the assessee a locus poenitentiae, that if a revised return is filed disclosing the true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case that the concealment or the deliberate furnishing of inaccurate particulars can take place at the time of making the original return, as well as the time of the return in compliance with the notice under section 34, that if the discovery takes place during " any proceedings under the Act ", it can be said that income had been concealed or inaccurate particulars of income were deliberately furnished and that this will vest jurisdiction to impose a penalty under section 23(1)(c). The court expressed that, if concealment or deliberate omission to furnish true particulars is made at any stage of any proceedings under the Act, the jurisdiction to initiate penalty proceedings arises with respect to the default of contumacious conduct in the initial proceedings or in the subsequent proceedings for escaped income. The principle of the above decision will apply to the facts of this case also. There was an original return and revised return after the initial enquiry by the Income-tax Officer. The mere fact that the assessee filed a revised return after the concealment had been detected by the Income-tax Officer will not wipe out the contumacious conduct on the part of the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a case more or less similar to the present case. There the assessee carried on business in cloth and yarn at Madurai. Part of the business of the assessee was to export handloom products to Ceylon. For the assessment year 1945-46, the assessee submitted its return and the return was based on entries in the account books. Later, the assessee himself submitted particulars of invoice price of the goods sent abroad to the Income-tax Officer. The Income-tax Officer found some disparity between the invoice price and the price as entered in the account books as shown in the return of the assessee. The assessee explained that the invoice price was inflated and did not represent the correct price, but this explanation was not accepted by the Income-tax Officer. On the initiation of penalty proceedings under section 28(1)(c), the assessee questioned the validity of the penalty proceedings. It was contended for the assessee that all the particulars of invoice prices having been given by the assessee himself before the assessment, the assessee's conduct cannot be construed as contumacious attracting the penalty under section 28(1)(c). After referring to the earlier decisions on the point th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n support of his contention that penalty is leviable under section 28(1)(c) only if escapement has in fact taken place or the tax has been avoided as a result of the filing of the false return and the acceptance thereof by the income-tax authorities, and that in this case as the original return has been replaced by a fresh return and had not been acted upon by the Income-tax Officer, the penalty proceedings under section 28(1)(c) cannot be invoked with reference to the omission or concealment in the original return. We are of the view that the above contention of the assessee does not get support from the above decision of the Supreme Court in Mansukhlal and Brothers v. Commissioner of Income-tax. In that case the learned judges were concerned with the question whether the penalty was leviable 1 1/2 times of the tax payable on the income actually concealed or times on the difference of the tax on total income as finally assessed and the tax on the income returned irrespective of the amount of concealment, and the court held that, once the penal provisions are attracted under section 28(1)(c), the quantum of penalty cannot be restricted to 1 1/2 times the tax on the income concealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22(3) will not expatiate the contumacious conduct, if any, on the part of the assessee in not having disclosed a true income in the original return. We are, at the same time, not willing to accept the contention put forward on behalf of the revenue that the filing of the second return is of no consequence at all, while considering the liability of the assessee under section 28(1)(c) of the Act. As expressed by this court in Sivagaminatha Moopanar Sons v. Commissioner of Income-tax, it is not possible to construe the original return alone in isolation without reference to the assessee's conduct subsequent to the filing of the original return. We are of the view that all the facts and circumstances commencing with the filing of the original return and ending with the assessment may be taken as relevant for considering the assessee's liability for penalty under section 28(1)(c). The facts and circumstances of this case as pointed out by the Tribunal are that the assessee had brought into account all the sale transactions, and the original return prepared in accordance with the assessee's accounts were filed before the Income-tax Officer under section 22(2) of the Act. It is true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept the explanation offered by the assessee for the omission or non-disclosure of the sum of Rs. 28,618 in the original return. The Tribunal took the view that, as the assessee has made a true disclosure of his income in the revised return before the assessment is completed, the assessee cannot be said to have deliberately concealed the true income. Normally, whether there was a deliberate concealment of income or not is a question of fact and the Tribunal has, on the facts and circumstances of this case, held that the assessee had not deliberately concealed income and that therefore the penalty levied under section 28(1)(c) was not justifiable. The Tribunal felt that merely because the assessing and appellate authorities made an addition to the income on the basis of an estimate of the gross profit, it will not lead to the inference that there was deliberate concealment of income on the part of the assessee in the revised return. We are not in a position to say that the assessment of the evidence in the case by the Tribunal and its conclusion thereon is in any way vitiated. We are also of the view that the explanation offered by the assessee for not disclosing the sum of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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