TMI Blog1980 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment for taxation and requesting that it may be permitted to file such returns before March 15, 1966. In the meantime, the ITO himself issued notices under s. 148 of the I.T. Act, 1961, on March 2, 1966, seeking to reopen the assessments for the above-mentioned assessment years on the ground that it had been found that there were hundi credits in the books of the assessee in the names of black-listed bankers. These notices were served on the assessee on March 7, 1966. The assessee did not file the returns in response to such notices within the time mentioned therein. Neither the department nor the assessee were able to enlighten as to what happened thereafter till the end of 1969. On January 16, 1970, the assessee applied to the Commissioner of Income-tax informing him that they were filing revised returns and praying for the acceptance of the revised returns and for a waiver of the penalty under s. 271(1)(c) of the Act. But, in fact, the revised returns were filed on February 5, 1970, disclosing incomes of Rs. 31,302, Rs. 57,493 and Rs. 47,194, respectively, for the assessment years 1961-62, 1962-63 and 1963-64. Along with these returns it also sent a covering letter to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect particulars regarding the premium prevailing in the market at the relevant time. The IAC then observed: " Under the above circumstances, the concealment of income clearly admitted in the revised returns filed only after the issue of notice under section 148 has to be penalised, which was filed after April 1, 1968. Hence the amended provision of law would apply." He then levied the minimum penalty of Rs. 18,741, Rs. 36,764 and Rs. 24,575, respectively, in respect of each of the assessment years, being the amount equal to the income concealed. The assessee preferred appeals before the Tribunal. The Tribunal also held that the assessee had concealed its income in the original returns, that the contention of the assessee that the revised returns were submitted by it voluntarily could not be accepted, that the returns were submitted only in pursuance of the notices under s. 148 of the Act and that, therefore, the penalty is exigible for the concealment of income in the original returns. The Tribunal then proceeded to consider as to whether the provisions of s. 271(1)(c) of the Act as they stood prior to the amendment by the Finance Act of 1968 only were applicable or whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1968 with effect from 1st April, 1968: "(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished." It may be seen from the above provisions that originally the quantum of penalty was to be determined with reference to the amount of tax avoided, whereas under the substituted provision which came into effect from 1st April, 1968, the quantum of penalty is to be calculated with reference to the amount of income concealed or with respect to which inaccurate particulars have been furnished. The original return in respect of each of the three assessment years in this case was long prior to April 1, 1968, but the revised returns submitted in pursuance of the notice under s. 148 were subsequent to April 1, 1968. If the penalty that could be imposed in these cases is to be determined with reference to the law that was in force on the day when the revised returns were submitted, it would be much more than what is imposable with reference to the date on which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted prior to April 1, 1968, the penalty in cases of concealment of income or furnishing of inaccurate particulars shall not be less than 20 per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if " the income as returned by such person had been accepted as the correct income ". Even under the provisions which came into force on 1st April, 1968, the penalty depended on the amount of income in respect of which particulars have been concealed or inaccurate particulars have been " furnished ". Thus, it is the concealment or furnishing of inaccurate particulars in the return filed by the assessee that attracts the penal provision. If in the original return there was a concealment and this was detected by the ITO in the course of the assessment proceedings, it will attract the penal provisions whether the amount concealed was determined with reference to any records or evidence produced or whether it was decided by best of judgment. The quantification of the penalty would have depended on the tax which would have been avoided if the income as returned by the assessee had been accepted as the correct income and the return w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to disclose his real, total income in the original return filed under s. 139, if he had failed to do so but concealed or furnished inaccurate particulars in that return, the offence becomes complete. The fact that for a number of times he persisted in such concealment while submitting his revised returns in pursuance of the notices issued under s. 148, or that the ITO was not able to detect the whole or part of the amount concealed in the original proceedings or in the reassessment proceedings, but had to invoke the provisions of s. 147, does not and cannot alter the situation that the concealment was in the original return. This is also clear from the fact that the penalty is leviable only with reference to the amount of income concealed in the original return as found in the reassessment proceedings. In N. A. Malbary and Bros. v. CIT [1964] 51 ITR 295, the Supreme Court had occasion to consider the scope of s. 28(1)(c) and 28(3) of the Indian I.T. Act,1922, corresponding to s. 271(1)(c) The facts in that case, shortly stated, are as follows : For the assessment year 1951-52, in respect of which the accounting year was the calendar year 1950, the assessee submitted its return. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Tribunal. It was contended before the Supreme Court that there was only one concealment, in respect of which an order of penalty of Rs. 20,000 had already been made, and that the ITO had no jurisdiction to make a second order of penalty while the first order stood, and for that reason the second order must be treated as a nullity. Rejecting this contention, the Supreme Court held (p. 298): "It may be that in respect of the same concealment two orders of penalty would not stand but it is not a question of jurisdiction. The Penalty under the section has to be correlated to the amount of the tax which would have been evaded if the assessee had got away with the concealment. In this case having assessed the income by an estimate, the Income-tax Officer levied a penalty on the basis of that estimate. Later, When he ascertained the true facts and realised that a much higher penalty could have been imposed, he was entitled to recall the earlier order and pass another order imposing the higher penalty. If he had omitted to recall the earlier order that would not make the second order invalid. He had full jurisdiction to make the second order and he would not lose that jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 40,000 but the ITO does not accept this return also and determines the income escaped as Rs. 60,000. Again the ITO invokes s. 147 and a further revised return is filed by the assessee admitting Rs. 1,50,000 which is the real income and that is accepted by the ITO. Then in the original proceedings on the basis of best judgment assessment, a penalty with reference to Rs. 20,000 of income which had escaped could be levied. When the reassessment proceeding was taken for the first time since the ITO had determined the escaped income as Rs. 60,000, on the ratio of the judgment of the Supreme Court in Malbary's case [1964] 51 ITR 295, the first order of penalty will have to be recalled and another order passed imposing a higher penalty on the basis that the income that was concealed was Rs. 60,000 and not Rs. 20,000. If it is considered that the assessee had committed another offence in filing the revised return disclosing only Rs. 40,000 as against Rs. 60,000 determined, the penalty could be levied on the basis of the income of Rs. 20,000 concealed in the revised return. That will be a second order of penalty. Though it will be in terms a third order, since the original order has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income-tax proceedings, deduction of these debts was disallowed. Consequent on this, the WTO took reassessment proceedings. The assessee filed a fresh return on 3rd March, 1970, and in this return also, she claimed the deduction of debts of Rs. 30,655 but ultimately the WTO added back this amount to the net wealth. Penalty proceedings were thereafter initiated and penalty of Rs. 30,655 equal to the wealth concealed, was levied under s. 18(1)(c) of the W.T. Act, on the ground that the law applicable was the law that prevailed on March 3, 1970, when the fresh return was filed and not the law that prevailed on 9th November, 1964, when the original return was filed. The Tribunal held that though penalty could be levied, it could be levied only in accordance with the provisions as they were in force at the time when the original return under the W.T. Act was submitted. On a reference to this court, it was held that even though the same concealment existed in the return filed in the reassessment proceedings, no fresh cause of action arose for the levy of penalty when the second return was filed as it was only a continuation of what had happened earlier, and that the repetition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be four times the amount of income concealed. We do not feel that such a consequence was intended by the legislature. This apart, where an assessee has concealed the particulars of his income or furnished inaccurate particulars of such income once, it cannot be said that if he repeats the same act again, there is fresh concealment or furnishing of inaccurate particulars of the same income. There are other difficulties in accepting this contention. Suppose an assessee has in the original return which was filed before April, 1964, concealed or furnished inaccurate particulars in respect of an income of Rs. 50,000 while in the return filed in pursuance of a notice under section 148, there is no concealment or the concealment is only Rs. 25,000. If the relevant return for the purposes of fixing the penalty is filed in pursuance of the proceedings under section 148, no penalty can be imposed in the first case while, in the second case, the penalty would be reduced as the concealment in the second return is less than that in the original return. The legislature, it seems to us, did not intend to allow such an assessee to go scot-free in the first case or subject him to a lesser penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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