TMI Blog1983 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1967-68 was respectively Rs. 3,692 and Rs. 2,723. Revised returns were filed by him on January 30, 1971. The income returned for the two years was respectively Rs. 23,435 and Rs. 24,882, which included income from cloth business, from the contract business and the share of profit from a firm " Kallatra Constructions ". The ITO referred to the IAC, the proceedings for imposition of penalty under s. 274(2) read with s. 271 of the Act, even prior to the completion of the assessment. The assessments for the two years were duly completed computing the total income respectively in the sum of Rs. 22,850 and Rs. 33,140. Notices under s. 271(1)(c) of the Act were issued to the assessee to show cause why penalty should not be imposed. The reply of the assessee dated February 13, 1973, in respect of the year 1967-68 is annexure " B ". The notice dated March 26, 1973, proposing penalty in respect of the year 1966-67 was also replied in similar terms. The gist of the reply was that there was no concealment of income, and the difference between the assessed and returned income was " due to the adoption of the correct share income from the firm ". It was maintained that inasmuch as the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only with reference to the income from Messrs. Kallatra Constructions, as regards the subsequent year. The share of profit of the assessee under that head was noted by the Tribunal to be Rs. 14,242. It also stated : " It is quite possible to argue that the minimum penalty should be Rs. 14,242, that being the income which was assessed. " The penalty was, however reduced to Rs. 6,000 as, in the view of the Tribunal, the income under the concealed head as returned by the assessee was only Rs. 5,982. The Tribunal declined the prayer of the Revenue for referring the questions of law formulated in the reference application for the two years. This court, however, by its order in O.P. Nos. 3772 and 3773 of 1976, directed the Tribunal to state a case and refer the questions of law made mention of in the order. The frame and form of the first two questions are the same, the only difference being the assessment year. It is, therefore, sufficient to extract these questions as they pertain to the year 1966-67 : " (1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in deciding the appeal for the assessment year 1966 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in December, 1798, in the background of an apprehended French invasion. About the time at which the tax was so introduced it is recorded: " Never in the history of England was there a darker hour ". The French writer Mallet du Pan, who heard the oration in which Pitt boldly carried through " an Income-tax of minute and complicated graduation ", says: " it is not a speech spoken by the Minister; it is a complete course of public economy; a work, and one of the finest works, upon practical and theoretical finance that ever distinguished the pen of a philosopher and statesman." (See Pitt by Lord Rosebory, Mc Millan Co. 1921, pages 135, 136 and 163). The Commissioners of Inland Revenue, in their report of 1870, said: "................... We find the Income-tax returns largely deficient. And, moreover, this is not confined to any particular class, trade or profession ..........." It is not necessary for the purpose of this case to make a detailed reference to the attempts of assessees to evade and avoid tax, and the parliamentary exercises in making the patches, and the phenomenon of the patches on patches growing thicker. H. H. Monroe, in his lecture referred to above, obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolve him from liability to penalty. A different conclusion, according to the court, was " to put a premium on dishonesty. " It is not necessary to pursue this stand of logical reasoning over the years, for, the relevant and important decisions on this aspect have been, if we may say so with great respect, neatly and exhaustively analysed in CIT v. J. K. A. Subramania Chettiar [1977] 110 ITR 602 (Mad). The decisions considered by the court in the aforesaid judgment include . : Ayyasami Nadar Bros. v. CIT [1956] 30 ITR 565 (Mad), Vadilal Ichhachand v. CIT [1957] 32 ITR 569 (Bom), Dayabhai Girdharbhai v. CIT (1957] 32 ITR 677 (Bom), Sivagaminatha Moopanar Sons v. CIT [1964] 52 ITR 591 (Mad), CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad), Bakshi Mohd. Yusuf and Bakshi Mohd. Shafi v. CIT [1974] 93 ITR 38 (J K) and F. C. Agarwal v. CIT [1976] 102 ITR 408 (Gauhati). Certain observations in Sivagaminatha Moopanar Sons v. CIT [1964] 52 ITR 591 (Mad) were liable to be misunderstood, if read torn out of the context. Such is, for example, the observation therein, which reads (p. 596) : " Where for example the original return is incorrect, but the assessee voluntarily submits t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in question, were held to be totally irrelevant and unsustainable reasons for the cancellation of penalty imposed by the ITO. It was pointed out there that the assessee could not have been unaware of the fact of his having received a substantial income which was about 1/3rd of the aggregate income received by him during the relevant accounting period in respect of a Public Works Division in which he had executed works. We do not underrate the difficulty in the preparation of a return under the Act, a legislation which lacks charm, which has " a poor name and a worse record ", and which according to some, may be " fairly castigated as unnecessarily complex and obscure " (as posed in the question by H. H. Munroe in his Hamlyn Lectures, pages 1 and 40). It is quite likely that notwithstanding the best of diligence and care, omissions or wrong statements might occur in the return filed by an assessee. (The 1870 Report of the Special Commissioners in England noted : " We are far from saying that in all the cases in which income-tax returns are deficient, there has been a wilful attempt to defraud the Revenue. In many instances no doubt the errors which are committed are unintenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt certificates and that as and when be obtained additional payment certificates from certain divisions in which be carried out the work, he submitted revised return of his income. The taxing authorities and the Tribunal took the view that the assessee was fully aware of the total volume of, work done by him and the payment to which he was entitled on that account and that there was an intention to conceal the income. The High Court, however, observed (p. 607-608) "The only material, if at all that can be called a material, is a mere presumption that the assessee must be aware of the total volume of work done by him and of the payments that he was entitled to receive on that account. Presumption of fact cannot be equated to a finding of fact and more so when against the concrete assertion by the assessee, the Department has not been able to find any fact to contradict such assertion ". It is not necessary for us to consider the correctness of the above conclusion. The decision quoted with approval the principles laid down by the Gauhati High Court in F. C. Agarwal v. CIT [1976] 102 ITR 408. Other decisions, particularly that of the Madras High Court in CIT v. J. K. A., Subraman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on its part to conceal income, as it had substantially brought out the true income. The misfortune of the death of one of the partners before the filing of the return has also been taken note of. Considering these circumstances, I am inclined to concur with the final conclusion that the penalty be quashed. In the light of the discussion already made above, it is difficult to agree with the approach made by the Delhi High Court which, as stated earlier, does not appear to have considered other relevant decisions including the later one of the Madras High Court itself. The principles emerging from the decisions alluded to above have, however, not been applied by the Tribunal in relation to the facts of the case. The Tribunal oversimplified the issue and enunciated the legal principles incorrectly when it observed: " If the assessee had filed the returns by himself voluntarily and he disclosed the income from contracts which was omitted in the original return, we think, there cannot be any case for penalty." The submission of the revised return may, in given cases, be voluntary, but such a voluntary filing by itself does not lead to the conclusion that there was no intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see from the liability for penalty under s. 271(1)(c) of the Act. We would, therefore, answer the first question in the negative, that is, in favour of the Department and against the assessee. Having regard to the frame of the questions referred for our decision, we find that the proper course to be adopted in this case is to answer those questions and direct the Tribunal to consider the appeals and dispose them of afresh in the light of the answer given by us and in the light of the discussion contained hereinabove. We have, in view of the course so adopted, refrained from expressing ourselves on the culpability or otherwise of the assessee in a more categoric or conclusive manner. In the light of our answer to question No. 1, it may not be necessary to enter a specific answer to question No. 2, particularly having regard to the way in which the latter limb of the question is couched. The question is: " Whether the finding of the Income-tax Appellate Tribunal that.................................. he (assessee) had disclosed the income for the assessment year 1966-67 is perverse and unreasonable ". If it relates to the sustainability of the finding relating to a disclosure o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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