TMI Blog1990 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... order. We may now proceed to set out the facts relevant for a consideration of the questions referred to this court. The assessees in all these cases, during the relevant assessment years, carried on a business, including export, in art silk fabrics, handloom cloth, handicrafts, etc. In respect of the assessment years 1962-63 to 1964-65, the assessees had filed returns disclosing in some cases loss and in some others, a marginal income, based on accounts maintained by them. Some time in January, 1965, there was a raid on the business premises of most of the assessees by the Economic Offences Wing. Thereafter, in May, 1965, the assessees came forward with certain disclosures under section 68 of the Finance Act, 1965. Later, the assessees purported to file revised returns and in January, 1969, the assessees accepted and agreed to offer large amounts for assessment. Again, the assessees admitted nondisclosure of substantial amounts running into several lakhs and agreed to offer those amounts also to assessment. The Income-tax Officer who finalised the assessments of the several assessees found that there had been a very large scale suppression of income by the assessees in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the part of the assessees. Referring to the sale of the import licences by the assessees, the Tribunal found that the Income-tax Officer, by several of his communications, had informed the assessees that the estimate of profit made by them from the sale of licences should be much more than what had been disclosed and ultimately had assessed the profits at a higher rate, and, at best, as against the estimate given by the assessees, a higher estimate had been arrived at by the Department and there could, therefore, be no levy of penalty. Yet another aspect emphasized by the Tribunal was that the revised returns had been filed by the assessees before any detection. Finally, the Tribunal opined that it was impossible to state what income was concealed by any particular assessee for any particular assessment year and, therefore, any charge of concealment cannot be specific, but could only be indefinite and penalty cannot be levied on such a basis. On the aforesaid reasonings as well as conclusions, the Tribunal deleted the penalty levied on the assessees for all the three assessment years in question, viz., 1962-63 to 1964-65. That is how the two questions earlier set out have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an additional Rs. 9 lakhs for assessment. By yet another letter, the assessees accepted that nearly Rs. 12.34 lakhs had been held as cash. Thus, it is seen that the assessees had not, even in the revised returns, come forward with correct particulars. Ultimately, the assessees were agreeable for an addition of Rs. 28.62 lakhs, thus bringing the total additions to Rs. 50.85 lakhs. All the additions were agreed to by the assessees and, on that basis, the income was assessed and allocated to the different groups of assessees on a basis agreed to by the assessees themselves. From the foregoing, it is clearly established that the original returns as well as the revised returns did not disclose the correct particulars of income of the assessees and the profits on the sale of the import licences had also been suppressed and in the course of the assessment proceedings, the assessees had agreed to inclusion and assessment of very large amounts which were accordingly assessed and apportioned in the hands of the respective groups of assessees for the relevant assessment years as agreed to by the assessees themselves. We may now proceed to consider the reasoning of the Tribunal bearing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have it. Even if the Revenue had assessed the income at a higher estimate than that furnished by the assessees, it cannot be stated as an inflexible rule that, in all cases, estimated income is not liable to penalty, as it is always open to draw an inference of deliberate underestimate on the facts and circumstances and if there was such an underestimate, an inference of concealment can also be drawn. We, therefore, are unable to appreciate the reasoning of the Tribunal that the estimate of the Revenue being higher than that of the assessees, there can be no concealment. Yet another reason given by the Tribunal is that even before any detection, the assessees had filed the revised returns and that would exonerate them from the failure to show the correct income in the original returns. We would like to point out that, in this case, neither the original returns nor even the revised ones filed, in any manner, purported to disclose the correct particulars of the income. If there is concealment of income in the original as well as the revised returns, we do not see how there can be any escape from the liability to penalty and the question of detection, in our view, is hardly rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 964-65. We may now refer to a few decisions to which our attention was drawn by counsel for the Revenue as well as the assessees, with a view to support the levy of penalty and the deletion thereof, respectively. It would be appropriate to remember in this connection the caution administered by Lord Reid in Regent Oil Co. Ltd. v. Strick (Inspector of Taxes) [1969] 73 ITR 301, 317 (HL) to the effect that general statements made in cases should not be taken too literally and applied to cases of different kinds and that each case would turn upon its own facts and no infallible criterion could emerge and even so, decisions would be useful only as affording indications of relevant considerations to be borne in mind in approaching the problem. Bearing this caution in mind, we may now refer to A. K. Bashu Sahib v. CIT [1977] 108 ITR 736 (Mad), where it had been clearly pointed out that, when the assessee knew that the methods adopted by him did not reflect his real income, he must have been aware of his real income, but if he had still estimated the same in a particular way for the assessment years, the argument that, in all cases where the taxing authority estimated the income at a hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation sought for by the Department, there was no justification for the cancellation of the penalty. In CIT v. Sri Venkateswara Textiles [1985] 153 ITR 687 (Mad), the assessee, after filing a return of income, filed a petition before the Commissioner under section 271(4A) of the Act, admitting that the entries in the books of account were not real, but reiterating that the income relevant for the assessment year was the same as that returned earlier. The Income-tax Officer found that the assessee had trafficked in the licences granted to it for importing art-silk yarn a premium, but had made entries in its account books as if the art-silk yarn was imported and used in the manufacture of cloth and the cloth so manufactured was sold and, accordingly, estimated the total income. In considering the question whether the estimate so made would justify the levy of penalty, it was pointed out that the entries in the books of account did not reflect the true position as in this case, and the assessee had thus furnished particulars of income in the original return on the basis of entries in accounts, false to its knowledge and that would amount to furnishing of inaccurate particulars attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptance of additions of income by the assessee is not acceptance of concealment of income and that there may be a hundred and one reasons for such admission. These observations have to be understood in the context in which they were made and with reference to additions made as a result of disallowance, in the case of an assessee, relating to a known source of income. We are, therefore, of the view that that decision cannot have any application to the facts of these references. The reliance placed upon the decisions in Anantharam Veerasinghaiah and Co. v. CIT [1980] 123 ITR 457 (SC) and CIT v. Imperial Automobiles [1983] 141 ITR 60 (Mad), by learned counsel for the assessee is of no assistance in advancing the case of the assessees. In Anantharam Veerasinghaiah and Co. v. CIT [1980] 123 ITR 457, the Supreme Court laid down that no doubt the fact that the assessment order contains a finding that the disputed amount represents income constituted good evidence in penalty proceedings, but that finding cannot be regarded as conclusive for purposes of penalty and the mere falsity of the Explanation offered by the assessee is insufficient without other cogent material or evidence to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even perverse. That revised returns had been filed prior to detection again with incorrect and inaccurate particulars of income cannot be a justification at all for deleting the levy of penalty. We may, in this connection, refer to the decision in CIT v. J. K. A. Subramania Chettiar [1977] 110 ITR 602 (Mad), relied on by learned counsel for the Revenue. In that case, the levy of penalty was cancelled by the Tribunal on the view that the assessee had filed the revised return before the Officer started investigation into the bogus nature of the hundi transactions. This court held that the fact that the assessee furnished particulars before any detection was made by the Department will be relevant only when the Commissioner considered the question whether the minimum penalty imposable under section 271(1) of the Act should be waived or reduced, on an application made by the assessee under section 271(4A), but they are foreign to the scope of section 271(1)(c) of the Act and, therefore, the Tribunal was in error in deleting the penalty. We may also observe that in Kandasami Mudaliar and Sons (K. P.) v. CIT [1985] 156 ITR 638 (Mad) (at page 643), it had been pointed out that proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mad), relied on by learned counsel for the assessees. In that case, it was categorically found that the amount added by the Income-tax Officer could not be related to the assessment year 1964-65 and, therefore, no penalty was leviable. We are unable to find any support in that decision in favour of the assessees in these cases, as, by agreement of the assessees, the amounts disclosed had been assessed in the hands of the different assessees in the different groups and for each relevant assessment year and the amounts so assessed had been clearly and definitely indicated as well. We may now very briefly refer to an argument raised by learned counsel for the assessees based on the decision in Addl. CIT v. Kanhaiyalal Jessaram [1977] 106 ITR 168 (MP) to the effect that the Revenue cannot be permitted to dissect the disclosures made in an application under section 271(4A) of the Act and use its contents against the assessee. We are unable to appreciate the relevance of the submission so made. It is not the case of the assessees that any application under section 271 (4A) of the Act had been filed by them and that was sought to be used against them in the course of the penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Of course, this could be rebutted by the assessees in the course of the penalty proceedings. But the assessees in these cases did not, in any manner, attempt to establish that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on their part. Prima facie, therefore, the assessees had not dislodged the presumption arising as a result of the application of the Explanation on the facts. In other words, the presumption raised by the application of the Explanation had remained wholly unrebutted and, in such an event, there was no justification whatever for the deletion of the penalty by the Tribunal for the assessment year 1964-65. We may now refer to the decision of the Supreme Court in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 regarding the scope of the Explanation to section 271(1)(c) of the Act. The Supreme Court had laid down that when once the Explanation is held to be applicable to the case of an assessee, three legal presumptions are raised (1) that the amount of the assessed income is the correct income and it is in fact the income of the assessee himself ; (2) that the failure of the assessee to return the correct assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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