TMI Blog1973 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, the assessee was liable for penalty for default in original return, it having filed a revised return ? " We may state at the outset that the first question was not pressed on behalf of the applicant-assessee. In order to understand the rival contentions in connection with the second question, a few facts need be stated. The relevant assessment year is 1964-65. The assessee originally filed a return showing an income of Rs. 23,957 on June 29, 1964. A revised return was filed by the assessee showing an income of Rs. 44,800 on September 13, 1965. The revised return was filed by adding certain in admissible expenses as also profit which had arisen under section 41(2) of the 1961 Act. The Income-tax Officer passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting the amount of Rs. 23,610 allowed in the appeal from the order of assessment by the Appellate Assistant Commissioner, the case of the assessee did not come within the mischief of the Explanation to section 271(1)(c) and, therefore, the assessee could not be deemed to be concealing the income and the order of penalty was, therefore, bad. The Tribunal did not accept the explanation of the assessee that there was no wilful or gross negligence in not including the profit under section 41(2) at the time of filing the original return, as, according to the Tribunal, the assessee did not explain this omission either before the Inspecting Assistant Commissioner or at the time of filing the revised return. In the opinion of the Tribunal, fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessee's liability for penalty under section 28(1)(c). " It is no doubt true that the Madras High Court as well as all the decisions of the different High Courts digested therein dealt with the question of penalty under section 28(1)(c) with reference to revised returns filed under section 22(3) of the 1922 Act. The present case with which we are concerned is a case arising under section 271(1)(c) read with the Explanation. The scope and width of the powers of the Inspecting Assistant Commissioner have been considered by the Division Bench of this High Court in Income-tax References Nos. 70 and 76 of 1970 (Commissioner of Income-tax v. S. P. Bhatt ), where the assessee for the assessment year 1964-65 showed an income of Rs. 14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe and ambit of the Explanation by making an effort to bring every possible case within it, but we should instead construe the Explanation and apply it in a fair and reasonable way with a view to achieving the purpose of the main provision, namely, that an assessee who has concealed the particulars of his income or furnished inaccurate particulars of such income should not escape penalty. " After referring to the fiction created by the Explanation, the Division Bench proceeded to observe as under : " But this legal fiction can be displaced if the assessee proves that the failure to return the correct income, that is the total income assessed, did not arise from any fraud or gross or wilful neglect on his part. If the assessee wants to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul neglect on the part of the assessee. " It appears to us that the Tribunal, while dealing with this question of penalty of the assessee, was of the opinion that the filing of revised return was of no consequence. In paragraph 4 of its order, the Tribunal replying to the contention urged on behalf of the assessee that the Explanation to section 271(1)(c) can have no application if the subsequent return filed is taken into consideration, observed as under : " ........ but we fail to understand why the subsequent return should be taken into consideration in judging whether the assessee is liable for penalty under section 271(1)(c) read with Explanation. " After referring to the fact that there was no explanation for not including in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the assessment may be taken as relevant for considering the assessee's liability for penalty under section 28(1)(c). The Tribunal has not thought fit to attach any significance or importance to the filing of the revised return and merely proceeded on the fact that there was no explanation by the assessee for not making a return of the income he has earned from the profit under section 41(2) and as the assessee was represented by experienced chartered accountants at various stages of income-tax proceedings, he should be held guilty of gross negligence and, therefore, liable to be subjected to penalty. The Tribunal had, therefore, no occasion to find out and to address itself to the important question, whether this revised return was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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