TMI Blog2005 (10) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") relating to the assessment years 1983-84 to 1987-88 for opinion to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law to hold that penalty under section 271(1)(c) was chargeable in the case of the assessee in respect of excess claim of interest made by the assessee notwithstanding the fact that the assessee has subsequently volunteered the information co-operated with the Department?" For the assessment year 1983-84, the following additional question has also been referred for opinion to this court: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law to uphold the penalty in regard to a sum of Rs. 10,22,770 being the amount remitted by the bank on the basis of compromise decree granted during the relevant assessment year notwithstanding the fact that the decree was satisfied in a subsequent assessment year?" At the instance of the Revenue, the Tribunal has also referred the following question for the assessment years 1983-84 to 1987-88 for opinion to this court: "Whether on the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the decreed amount. For the assessment years 1983-84 to 1987-88, it had returned originally on the basis of the books of account maintained by it in which the claim of interest was provided as mentioned above. The Assessing Officer had completed the assessments for the assessment years 1983-84, 1984-85 and 1985-86 and the claim made by the assessee had been allowed. For the assessment years 1986-87 and 1987-88, it had filed a revised return on May 13, 1988. In the revised return the interest provided in respect of the sum of Rs. 52,07,873.15 was omitted and the claim limited to the interest at the rate of 16 per cent, on the unpaid instalments of the decreed amount. For the assessment years 1984-85 and 1985-86 at the time of giving effect to the appellate orders, it had requested the Assessing Officer to include the interest wrongly claimed by it in respect of the outstanding amount of Rs. 52,07,873.15. Though the Assessing Officer had originally included the amounts as assessable for the assessment years 1984-85 and 1985-86, while giving effect to the appellate orders, he added the interest as offered by the assessee. The Commissioner of Income-tax (Admin.) exercising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer initiated penalty proceedings for the concealment of income and furnishing of inaccurate particulars and imposed penalty as under: Assessment year Amount Rs. 1983-84 18,73,378 1984-85 5,87,914 1985-86 3,75,522 1986-87 2,50,000 1987-88 2,50,000 The penalty was calculated at the rate of 200 per cent, of the difference between the returned income filed originally and the income assessed finally. The Commissioner of Income-tax (Appeals) had confirmed the levy of penalty but had reduced the quantum of penalty to 150 per cent. The assessee appealed to the Tribunal and it was claimed that it had provided interest in the books of account as according to their understanding, the compromise with the bank would get finalised only as and when the entire amount was liquidated and the security realised. It was further claimed that the bank loan had been liquidated in November, 1987, and it had voluntarily disclosed the interest and co-operated with the Department in assessing the income. It has also been pointed out that for the assessment years 1986-87 and 1987-88 since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e penalty relating to the sum of Rs. 98,054 for the assessment year 1983-84. The Assessing Officer had imposed a penalty at the rate of 200 per cent, which is the maximum provided under section 271(1)(c) of the Act. Considering the facts and circumstances of the case and the conduct of the assessee, the Tribunal was of the view that penalty at the rate of 100 per cent, only would be warranted. Similarly for the subsequent assessment years also, the Tribunal found that the assessee had made excess claim of interest. In regard to the excess claim made on the basis of misunderstanding of the decree, the Tribunal deleted the penalty. However, in respect of the wrong claim made by the assessee, the penalty at the rate of 100 per cent, has been confirmed. It would be better to refer to the findings recorded by the Tribunal which are as follows: "We have given our careful consideration to the rival contentions. In this case, the assessee had filed the original returns for the assessment years 1983-84 to 1987-88 claiming interest on the outstandings of Rs. 52,07,873 notwithstanding a compromise decree passed on April 30, 1982, as a result of which, the liability of the assessee had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the revised return are reproduced hereunder: 'Due to certain error and oversight interest was charged at a higher figure instead of the amount settled with the bank in the consent decree dated April 30, 1982. As per the revised computation interest at the rate of 16 per cent, per annum calculated on product basis with quarterly rests comes to Rs. 4,43,276 thereby leaving a surplus of Rs. 3,01,724 being interest excess provided. The return is now revised by reducing the interest provided earlier by Rs. 3,01,724 to loss of Rs. 1,62,693. A copy of consent decree is also enclosed.' From the facts stated above, one fact gets established that though the assessee had made wrong claims in the original returns for the assessment years 1983-84 to 1987-88, the information regarding the compromise decree was given by the assessee voluntarily without any detection by the Assessing Officer notwithstanding the search on March 30, 1984, at the premises of the assessee. On these facts, we are called upon to decide as to whether the assessee is guilty of having concealed the income or having furnished inaccurate particulars of income in the original returns. Section 139(1) makes it obligatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee voluntarily does not necessarily absolve the assessee from imposition of penalty. The imposition of penalty and waiver of penalty under section 273A are two separate proceedings. Whereas in law penalty is imposable for the assessee's failure to disclose the correct income in the return of income and if subsequently the assessee voluntarily disclosed the income pays the taxes and co-operates with the Department, a case might be made out for waiver of the penalty but that is a matter to be considered by the administrative authorities. In penalty proceedings the issue that weights heavily is as to whether the assessee had consciously concealed the income or furnished inaccurate particulars of income at the time of filing the original returns. Once a finding is recorded that the assessee had failed to disclose the income in the original assessment consciously, the assessee would be liable to penalty notwithstanding the fact that he has later on volunteered the information and co-operated with the Department in getting the amount assessed to tax. His subsequent conduct, as already stated, would be relevant for waiver of penalty. But in so far as the assessee as per our f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acknowledge their liability to pay interest on the said amount at the rate of 16 per cent, per annum with effect from the date hereof. Accordingly a final mortgaged decree in respect of.' At page 4 of the order, the decree provided as under: 'On the defendants failing to pay to the plaintiff any of the instalments over April, 1982 to July, 1982 or defaulting twice in making the payments of the monthly instalments starting August, 1982 within 30 days from the due date stipulated herein together with interest thereon (i.e., on the unpaid instalments) calculated at 16 per cent, per annum from the due date till the date of payment, the entire amount of the decree then outstanding shall become immediately, due and payable to the plaintiff and the plaintiff shall be entitled to take steps in court for the sale of the said mortgaged properties and the sale of the said properties and the mortgage decree shall then not be held in abeyance. The plaintiff shall also be entitled in that event to execute the decree personally against the defendants 1 to 5 who shall be jointly and severally liable under the decree. The penalty in respect of Rs. 98,054 is thus not justified where the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,43,410. This was assessed at Rs. 3,39,356. The assessee had claimed interest of Rs. 6,99,637 in the original return. However, later on the sum of Rs. 2,21,300 was surrendered by the assessee out of the said claim. The Assessing Officer worked out the interest on the basis of compromise decree at Rs. 1,40,135. The difference of Rs. 3,38,194 was disallowed. For the reasons as given for the assessment year 1983-84, the assessee in our view, will not be liable to penalty in respect of the sum of Rs. 3,38,194. As a result of the quantum appeal, the assessee's income would further get reduced. The Assessing Officer shall recalculate the penalty at the rate of 100 per cent, after excluding a sum of Rs. 3,38,194. For the assessment years 1986-87 and 1987-88, assessments have been made by the Assessing Officer on the basis of the revised returns. The assessee had undisputedly made excess claim in the original returns. Filing of the revised return does not absolve the assessee from liability of the penalty unless the assessee establishes that there was a bona fide mistake or omission in the original return. This view is supported by the decision of the Gauhati High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it does not absolve the assessee from penalty as it had concealed the income by claiming wrong deduction in the returns and original assessment proceeding and even it had not disclosed anything about the decree during the course of the assessment proceedings. He further submitted that the conduct of the assessee has to be examined at the stage of filing of original return and subsequent conduct is wholly irrelevant. He submitted that the Tribunal on the facts and circumstances of the case has recorded the categorical findings that the action of the assessee was not bona fide and in fact, income has been knowingly concealed. The finding of the Tribunal is a finding of fact and- does not require any interference. We have given our anxious consideration to the submissions made by learned counsel for the parties and perused the order of the Tribunal and the authorities below. Section 271(1)(c) of the Act as it stood at the relevant time was as follows: "Section 271.(1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person - ... (c) has concealed the particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, in its books of account, had provided interest in respect of the entire outstanding amount of Rs. 52,07,873.15 and also provided for penal interest at the rate of 16 per cent, in respect of the decreed amount. There appears to be no reason when the order was passed by the First Additional Civil Judge, Agra on April 30,1982, why such an entry was made in the books of account and the claim of higher interest was made, though it was not legally due. This act of the assessee cannot be said to be unintentional or unconscious act. In the returns filed for the assessment years 1983-84, 1984-85 and 1985-86, reference to the decree passed by the First Additional Civil Judge, Agra was not made. Even during the course of the assessment proceedings, the said decree was not brought to the notice of the assessing authority which resulted in the allowance of excess amount of the interest. Thus, though the decree was in existence before filing of the return and during the course of the assessment proceedings still higher interest had been claimed on the entire outstanding amount and the decree has not been brought to the notice of the assessing authority, amounts to consciously claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified. For these two years, during the course of the assessment proceeding, the assessee had voluntarily filed the revised return offering the interest claimed in the original return. There is no material that the revised return was filed after detection of the excess amount claimed by the assessee. The assessing authority has also completed the assessment on the basis of the revised return. In the circumstances, for these years, it cannot be said that there was conscious concealment of income. So far as the question raised by the Revenue is concerned, the Tribunal has dealt with the issue in detail and we do not find any error in it. In view of the foregoing discussions, the question for the assessment 21 years 1983-84,1984-85 and 1985-86 referred at the instance of the assessee and the additional question for the assessment year 1983-84 are answered in the affirmative, i.e., in favour of the Revenue and against the assessee. But for the assessment years 1986-87 and 1987-88 the question referred above at the instance of the assessee, is answered in the negative, i.e., in favour of the assessee and against the Revenue. The question referred at the instance of the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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