TMI Blog2004 (3) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be evaded. The assessee carried the matter in appeal and learned CIT(A), cancelled the penalty on the ground that Explanation 3 as well as Explanation 5 of section 271(1)(c) are not applicable to the facts of assessee's case. Aggrieved by the order of learned CIT(A) revenue is in appeal before us. 3. At the time of hearing before us on behalf of revenue Shri P.N. Tatoo, learned D.R. appeared and contended that assessee has concealed the particulars of income because the assessee did not file the return of income and excess stock was found during the course of search which was conducted on 31-8-84. Relying on the reasons given by the Assessing Officer in the penalty order, learned DR contended that penalty was correctly levied and learned CIT(A) is not justified in cancelling the same. 4. On the other hand, learned authorised representative appeared for the assessee supported the order of learned CIT(A). The counsel of the assessee submitted that mere failure to file the return by any person who is previously assessed to tax, do not tent amount to concealment as per Explanation 3 of section 271(1)(c) (operative between on 1-4-76 31-3-1989). The counsel of the assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order passed under section 144 it is seen that as many as ten opportunities were given to file the return of income. The Assessing Officer, in absence of return, had no option but to complete the assessment to the best of his judgment as required under section 144 of the Act. The assessee was found to carry large amount of inventory in the business carried on by him. The stock found during search was much larger than that recorded in the books of account. The business of trading in footware was also carried on during the assessment year. The Assessing Officer therefore estimated the turnover based on the average turnover of last three years. The rate of net profit was also applied based on the basis of average net profit of last three years. The addition by way of excess stock found during search was also made. In the penalty proceedings no satisfactory reply was furnished except stating that in computing income on estimate basis, penalty under section 271 (1)(c) is not attracted. Learned Commissioner (Appeals) deleted the penalty on the ground that since the assessee is a regular assessee. Explanation (3) to section 271(1)(c) is not attracted. The concealment of income ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in advantageous position than the person filing the return of income and not showing the correct income in the return. In my opinion both the persons are equally responsible for concealment of particulars of income. Thus even though Explanation 3 to section 271(1)(c) is not attracted, the provisions of section itself, irrespective of any Explanation, is attracted. 12. It was held by the Commissioner (Appeals) that concealment of income can be with reference only to the return of income filed by the assessee. During the course of discussing the issue with my learned brother, we came across cases in S. Santhosa Nadar v. First Addl ITO [1962] 46 ITR 411 (Mad.) and Thoppil Kutti Eroor v. CIT [1958] 34 ITR 850 (Ker.) holding so. I have gone through the cases cited. All these decisions were rendered in the context of time limit for completion of assessment. In these cases it was held that so long as return of income is not filed, it cannot be said that assessee has concealed the particulars of income so as to avail longer time limit available for completion of assessment. The decisions were rendered under the Indian Income-tax Act, 1922, where the provisions of penalty were prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the following question has been referred to me for consideration under section 255(4) of the Income-tax Act:- "Whether on the facts and circumstances of the case, the learned CIT(A) is justified in cancelling the penalty of Rs. 4,95,410 levied by Assessing Officer under section 271(1)(c) of the I.T. Act, 1961 for the assessment year 1985-86?" 2. The facts of the case are given in the proposed orders of the learned Members. All the same brief history of the case may be noted to appreciate the controversy. (i) That the assessee is a dealer in shoes and sells shoes on wholesale and retail basis. A search under section 132 of the Income-tax Act was carried on by the revenue department on the premises of the assessee. The stock found was inventorised and its value was fixed at Rs. 15,66,568. The assessee did not maintain day-to-day stock register and therefore, did not have exact value of stock in the books on the date of search. The Authorised Officer on the basis of rough and ready calculation and after applying G.P. rate of 7 per cent, worked out stock at Rs.10,29,730. This way, discrepancy of Rs.5,36,838 was noted by the revenue authorities. (ii) That after the clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained stock was found with the assessee at the time of search cancelled the levy of the penalty. Before him the main argument advanced was that the assessee did not file any return of income and therefore, could not be penalized for concealment of income or furnishing of inaccurate particulars of income in terms of section 271(1)(c) of the Act. It was submitted that Explanation 3 or Explanation 5 to section 271(1)(c), was not applicable in this case. Explanation 3 was applicable to the assessees who have not yet been assessed under the Income-tax Act whereas Explanation 5 was applicable to the cases where search took place after 1-10-1984 whereas in this case, search had taken place much earlier that is on 31-8-1984. The learned CIT(A) accepted that above two Explanations were not applicable to the facts of the case. He further observed that no penalty for concealment can be imposed where the assessee did not submit any return of income. The learned CIT(A) further held that it was not a fit case for levy of penalty as income was computed on estimate basis and no concealment or furnishing of inaccurate particulars of income was established. 7. The revenue being aggrieved challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and not showing the correct income in the return. In my opinion both the persons are equally responsible for concealment of particulars of income. Thus even though Explanation 3 to section 271(1)(c) is not attracted, the provisions of section itself, irrespective of any Explanation, is attracted. 12. It was held by the Commissioner (Appeals) that concealment of income can be with reference only to the return of income filed by the assessee. During the course of discussing the issue with my learned brother, we came across cases in S. Santhosa Nadar v. First Addl. ITO [1962] 46 ITR 411 (Mad.) and Thoppil Kutti Eroor v. CIT [1958] 34 ITR 850 (Ker.) holding so. I have gone through the cases cited. All these decisions were rendered in the context of time limit for completion of assessment. In these cases it was held that so long as return of income is not filed, it cannot be said that assessee has concealed the particulars of income so as to avail longer time limit available for completion of assessment. The decisions were rendered under the Indian Income-tax Act, 1922, where the provisions of penalty were prescribed with reference to deliberate concealment of particulars of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, is satisfied that any person - (a)" (b)" (c) has concealed the particulars of his income or furnished inaccurate particulars of such income." 9. It was emphasized by Shri R.C. Gupta, learned DR that when assessee did not submit his return, he concealed the particulars of his income. No income was shown in the return in respect of the discrepancies found by the search party at the time of search. Thus entire income assessed in his hands was income which was concealed from the revenue. When it was not shown in the return, it was concealed. It was accordingly emphasized that first limb of clause (c) i.e., "has concealed the particulars of his income" was fully applicable and therefore, levy of penalty was justified. The above provision fully supports the view taken by the learned AM as the main section was applicable, there was no necessity to go to the Explanations in this case. 10. Shri Gupta also emphasized that after amendment of section 271(1)(c), the word "deliberate" was omitted from Statute Book with effect from 1-4-1964 and therefore, onus stood shifted to the assessee to prove that he did not conceal any income. Shri Gupta further submitted that even where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court in the case of S. Narayanappa Bros. v. CIT [1961] 41 ITR 125 wherein their Lordships have held as under:- "But the learned Government Pleader at one stage urged before us that the mere fact that an assessee has not produced a return before the Income-tax Officer in a case like the one which is before us, would not necessarily make it incompetent for the Income-tax Officer to impose a penalty under section 28(I)(b). What was urged before us was that in a case where an assessee has furnished no return at all before the Income-tax Officer, it should be presumed for the purposes of section 28(I)(b) that he has furnished a return of his income intimating the Income-tax Officer that his income is nil It seems to me that the language of section 28(I) does not admit of any such construction since the clear requirement of the provisions of this sub-section is that an assessee on whom a penalty is proposed to be imposed under section 28(I)(b) should have in the first instance furnished his return. That, in my opinion, is the ordinary and grammatical meaning of the words occurring in the Act. To interpret the language of this provision in the manner suggested by the learned G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment made beyond the period of four years would be invalid." Shri Shah accordingly supported the proposed order of the learned Judicial Member. 13. I have carefully considered the submissions of both the parties. It is clear from above quoted case law that the matter in issue is not res Integra but is covered by three decisions of High Courts. No decision taking a contrary view was cited on behalf of the revenue. The decisions cited by the learned DR in the case of Reddy (K.P.) v. CIT [1968] 68 ITR 638 (AP); Thakur Veerpal Singh v. CIT [1988] 172 ITR 238 (MP); CIT v. Dass Jewellers [2002] 258 ITR 668 (Delhi) do not deal with controversy before me. In all the above cases, the assessee submitted a return and did show return income which was much less than the assessed income and accordingly it was held that onus was on the assessee to prove that it was not a case of concealment or of deemed concealment. No such situation arise in this case. Likewise omission of word 'deliberate' from section 271(1)(c) of I.T. Act is not relevant to solve the controversy. The above omission has shifted burden of proof from the revenue to the assessee. It has nothing to do with effect of no ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
