9911796707
TMI Blog1977 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Share income from the firm of M/s. Murugan Talkies 5,776 ------- 27,556 ------- Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property 1,347 Income from business 3,13,854 -------- 3,15,201 -------- Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that the assessment had been taken on appeal and that the assessee had made a claim therein for a deduction of 50% of the licence value of the import licences in question towards middleman's profit and had also claimed loss on export remittances which were being allowed in other similar cases and that if these claims were to be allowed, the income determined would get reduced by about Rs. 1,50,000. The Inspecting Assistant Commissioner did not see any merit in these submissions and he levied the penalty in question mainly for the following reasons: (i) In the second return filed by the assessee on February 7, 1968, a further income of about Rs. 48,000 relatable to the assessee's trafficking in import licences was disclosed. Concealment had to be adjudged with reference to the return originally filed and with reference to the revised return. Hence, the assessee was guilty of concealment. (ii) Even the revised return was only an understatement because it did not clearly set out the basis on which the profit on sale of licences had been computed and what deductions had been claimed for expenses and on what basis. The assessee cannot, therefore, justifiably complain against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and for that purpose referred to the decision of this court in Commissioner of Income-tax v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad). The Tribunal further held that the Explanation to section 271(1)(c) of the Act could not be invoked in so far as the assessment year 1963-64 was concerned, because it was put on the statute book only from April 1, 1964. On these findings and conclusions, the Tribunal cancelled the penalty imposed on the assessee. It is the correctness of this order that is challenged by the Commissioner of Income-tax, Madras (Central), Madras, who applied for and obtained a reference on the following question, arising out of the order of the Tribunal, for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee had not concealed the income or furnished inaccurate particulars of income and in cancelling the penalty of Rs. 47,500 levied under section 271(1)(c) of the Income-tax Act, 1961?" Section 271 of the Act dealing with the levy of penalty in so far as it is relevant reads as follows: "271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus, that his account books could not be relied upon and that he had not utilised the import licences, but had sold them away. From the above facts, it is clear that the assessee had concealed his income both in the first return filed on March 16, 1964, and in the second return filed on February 7, 1968. The only other question for consideration is whether the said concealment will come within the scope of the provision in section 271(1)(c) of the Act which we have extracted already or not. The section uses the expression "has concealed the particulars of his income." It is implicit in the word "concealed" that there has been a deliberate act on the part of the assessee. The meaning of the word "concealment" as found in Shorter Oxford English Dictionary, third edition, volume I, is as follows: "In law, the intentional suppression of truth or fact known, to the injury or prejudice of another." Consequently, there can be no doubt, with reference to the facts stated above, that both in the first return as well as in the second return the assessee had intentionally and deliberately concealed the particulars of his income. The question then for consideration is whether the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectness of the particulars of income even at the time when he filed the original return, there was no question of that person subsequently discovering the existence of the omission or creeping in of the wrong statement in the return already filed by him. Therefore, we are of the opinion that section 139(5) will apply only to cases of "omission or wrong statements" and not to cases of "concealment or false statements". This conclusion of ours derives support from the language used in section 139(5). As far as the present case is concerned, the second return filed by the assessee on February 7, 1968, whether the same was filed before any investigation was started by the income-tax department or after the investigation was started by it, will not be a revised return as contemplated by section 139(5) of the Act. All that can be stated is that if, after having filed the return on March 16, 1964, the assessee furnished further particulars to the Income-tax Officer with reference to his income, the Income-tax Officer was certainly bound to take note of those particulars, as he was bound to take note of the particulars even if they were furnished by a third party. Therefore, the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 Act owing to the concealment of income. It was this act of the assessee which led to the levy of penalty which came up to this court. This court observed: "It is argued here that the assessee discovered on the 7th January, 1929, that his previous return was an inaccurate one and that he was, therefore, entitled to claim the benefit of section 22(3) and make a revised return and as that has been accepted no penalty can be inflicted upon him for having concealed his income. That certainly is the correct statement of what an assessee is entitled to do, if he makes a bona fide discovery that he has made a previous incorrect return but it certainly does not apply to the facts of this case which show clearly that the previous return was deliberately dishonestly made. It is seriously argued that, notwithstanding that fact, the assessee is still enabled to put in a return correcting his former inaccurate one and that he is to be absolved from liability to have any penalty inflicted upon him. That, it seems to me, is to put a premium on dishonesty and nowhere in the Income-tax Act do we find any provision which does anything of the kind. The contention that this was a discovery with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not accepted and that, therefore, the penalty had to be calculated on the basis of the original return and the Tribunal erred in holding that the revised return subsequently filed had to be taken into account and that the assessee was not liable to penalty. In Dayabhai Girdharbhai v. Commissioner of Income-tax [1957] 32 ITR 677 (Bom) the Bombay High Court again, dealing with section 28(1)(c) of the 1922 Act, pointed out: "Now, Mr. Pandit on behalf of the assessee, in the first instance, has argued that every assessee has a right to file a revised return under section 22, sub-section (3), and if that return is in effect accepted, the earlier return must be treated as cancelled for all purposes and no penalty can be imposed in respect of any concealment in the earlier return. Now, it is perfectly true that every assessee has the right under section 22, sub-section (3), to submit a revised return if he discovers any omission or wrong statement in his original return before the assessment is made. But the omission or wrong statement may be accidental or deliberate. Where it is accidental, no result may ensue by reason of the omission; but where the omission is deliberate, the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28(1)(c)." We may point out, with respect, that there would appear to be a mixing up of two things-(1) the act of filing of the subsequent return giving full particulars of the income, while in the original return the assessee had deliberately furnished inaccurate particulars of income, and (2) the stage and the time at which the subsequent return was filed, namely, whether it was done voluntarily or at the time when the department had probed into the matter and was at the point of discovering the concealment made by the assessee. As we have pointed out already, the second aspect will have no relevancy whatever to a case where there was concealment in the original return, because the concealment must necessarily imply a deliberate and intentional act, on the part of the assessee. After having originally concealed the income, if an assessee subsequently files a fresh return voluntarily before the income-tax department has made any investigation or detected concealment of income, even then he cannot escape from the consequence of his having concealed the income and he will be liable to penalty. If, on the other hand, the defect in the original return was merely an inadvertent omi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion or the wrong statement, a penalty proceeding for concealment of the particulars of income or furnishing inaccurate particulars of such income as contemplated under clause (c) of sub-section (1) of section 271 may not be attracted. But, to avoid the penalty proceeding as contemplated under section 271(1)(c) by reason of submission of revised return, the revised return itself must be within the correct ambit and scope of sub-section (5) of section 139 of the Act. If it cannot be said that a revised return in fact does come within the correct ambit and scope of section 139(5), then immunity from section 271(1)(c) cannot be availed of by the assessee." If we may say so with respect, we entirely agree with the above observations of the Gauhati High Court. We may also point out that the liability to penalty under section 271(1)(c) of the Act and the filing of a revised return under section 139(5) of the Act are mutually exclusive. Section 139(5) of the Act proceeds on the basis of omission or wrong statement which had crept into the original return being inadvertent and unintentional, while section 271(1)(c) of the Act proceeds on the basis of concealment being deliberate and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts, the question came to be considered whether the assessee was liable to penalty under section 28(1)(c) of the 1922 Act or not. The Tribunal held that the assessee was not liable to penalty. After referring to the earlier decisions, this court referred to the facts as stated above and stated: "The Tribunal took the view that, as the assessee has made a true disclosure of his income in the revised return before the assessment is completed, the assessee cannot be said to have deliberately concealed the true income. Normally, whether there was a deliberate concealment of income or not is a question of fact and the Tribunal has, on the facts and circumstances of this case, held that the assessee had not deliberately concealed income and that, therefore, the penalty levied under section 28(1)(c) was not justifiable. The Tribunal felt that merely because the assessing and appellate authorities made an addition to the income on the basis of an estimate of the gross profit, it will not lead to the inference that there was deliberate concealment of income on the part of the assessee in the revised return. We are not in a position to say that the assessment of the evidence in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there is a finding that the assessee had concealed particulars of income or deliberately furnished inaccurate particulars of income in the original return, the question as to his liability to penalty will arise. The last decision is that of the Gujarat High Court in D. V. Patel & Co. v. Commissioner of Income-tax [1975] 100 ITR 524 (Guj), which avowedly dealt with the Explanation to section 271(1)(c) of the Act introduced with effect from April 1, 1964. In the course of the judgment, that decision merely referred to the decision of this court in Commissioner of Income-tax v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad), and extracted a portion of the head-note to that decision as reported in the Income Tax Reports. That decision dealing with the Explanation has not taken a view different from the one which we have indicated as flowing from the decisions we have discussed. In view of the conclusion of ours, it is unnecessary to consider whether the Explanation to section 271(1)(c) of the Act introduced with effect from April 1, 1964, is attracted or not to the facts of this case. Consequently, we answer the question referred to this court in the negative and against the assessee. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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