TMI Blog1981 (11) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 1963-64, the assessee's original return in the original assessment proceedings disclosed an income of Rs. 47,086. The accompanying statements showed that this income was derived by the assessee from the carrying on of a business in the manufacture and sale of art silk textiles. The assessee's accounts contained entries to show that art silk yarn was imported from abroad under import permits, manufactured in the assessee's looms as textiles and, thereafter, sold for a price in the market. The ITO accepted the nature of the business transactions as disclosed by the assessee's accounts. He then determined the assessee's taxable income substantially on the basis of the assessee's return. The assessment was completed by the ITO on December 21, 1963, on a total income of Rs. 52,014 after some miscellaneous additions were made to the income returned. Subsequently, this assessment was reopened on the ground that income had escaped assessment. In response to the notice of reassessment issued by the ITO, the assessee filed a return disclosing an income of Rs. 58,291. A few months before the reopening of the assessment, the assessee had filed a petition before the Commissioner of Income-tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original assessment had been completed. In that return, the assessee did not disclose the income from the sale of import licences and the sale of imported art-silk yarn in respect of which it had made admissions in its disclosure petition dated May 25, 1965. However, before the ITO could proceed with the reassessment, the assessee filed a revised return. In this return, the assessee incorporated the figures furnished in the voluntary disclosure petition as representing the estimated profits realised by the assessee on its direct sale of import permits and direct sale of imported yarn. The ITO completed the reassessment for this year 1963-64 acting on the admissions made by the assessee in the voluntary disclosure petition. He proceeded on the basis that the assessee derived its profits only by sale of import permits and sale of imported art silk yarn without subjecting such yarn to any manufacturing process. He did not, however, accept the revised return filed by the assessee in the course of reassessment proceedings as disclosing the correct income from sale of import permits. He rejected the basis of the assessee's estimate of the profit margin in its sale of import permits. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al return which was based on its discredited accounts. According to the Tribunal, when once this revised return was filed on the basis of the estimate made by the assessee of its income by sale of import licences, those figures were enhanced by the ITO when he finalised the reassessment proceedings. According to the Tribunal, the ultimate reassessment only showed that in the place of the assessee's estimated figure, a higher figure, according to the ITO's own estimate, was substituted. The Tribunal regarded the voluntary disclosure petition dated May 25, 1965, as an important factor in considering the question of concealment of income on the part of the assessee. The Tribunal also took note of the fact that the officer himself had only substituted one estimated figure for another in completing, the assessment. On this reasoning, the Tribunal held that there was no case for imposition of penalty on the assessee for this assessment year. The Tribunal, accordingly, cancelled the penalty for 1963-64. We do not agree with the reasoning of the Tribunal. The Tribunal had clearly overlooked that the assessee was sought to be penalised not with respect to what it had furnished in its retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f estimated profit which it set out as aggregating to Rs. 77,924, according to the revised return filed by the assessee for that year. The ITO estimated it at Rs. 1,47,500. In the penalty proceedings which were initiated for the assessment year, the IAC held that the assessee must be held to have concealed the income even though it had disclosed the fact regarding the sale of licences even before any detection was made by the Income-tax Department. According to the IAC, even though the assessee had admitted its books of account to be not genuine and it had accepted the real course of its business to involve only sale of licences, yet the actual profits disclosed by the assessee in its revised return cannot be accepted as true profits since the assessee did not reveal the particulars of persons to whom the licences were sold and at what precise rates, nor were any details given regarding the brokers who had arranged the deals. For these reasons, the IAC held that penalty was called for and levied a penalty of Rs. 12,000. On appeal by the assessee, the Tribunal considered the question from two angles. One was to see what part the voluntary disclosure petition played both in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, on its part, of the income or as a fraud or wilful neglect in the matter of disclosure of its income. We are, therefore, in agreement with the Tribunal in its decision to cancel the penalty. Mr. Jayaraman, the learned standing counsel for the Income-tax Department, submitted that the Tribunal had not properly applied the substantive provisions of s. 271(1)(c), much less the provisions of the Explanation to that section. According to the learned counsel, the Tribunal had missed the fact that even for the year 1964-65 the assessee had, in point of fact, filed the original return in which it had disclosed its income only on the basis of its accounts which, even according to the assessee's own admission, did not reflect the true state of affairs. It was only in a revised return which the assessee subsequently filed in the course of the assessment proceedings, that the assessee had made a clean breast of the facts and disclosed the income derived by it from the sale of import licences. Even while doing so, the learned counsel pointed out, the assessee had not cared to report the correct income accurately by reference to the particulars of the purchases, the rates at which the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X
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