TMI Blog1994 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... with M/s. Manipal Printers Publishers was also not shown. Various omissions in the income-tax return by way of not depicting the capital gains on sale of Reliance shares and showing of the income of Rs. 1,07,119 in the proprietary concern of the assessee as loss were found. The assessment, which had originally been completed on 19-12-1990 by virtually accepting the return filed by the assessee, was reopened under section 147(a) by issue of a notice under section 148 on 8-12-1989. The assessee filed another return in response to this notice on 12-1-1990, this time claiming the loss of Rs. 1,04,531. However, this return also continued not to disclose the capital gains and some of the other items of income as in the original return. Around the same time, the assessee filed a petition before the Settlement Commission, which was rejected by the Additional Bench of the Settlement Commission, Madras by its order dated 26-9-1990 as unsuitable for admission inasmuch as no complexities of issues were involved in that case. 2.1 Thereafter, the assessee filed a further revised return on 23-11-1990 admitting total income of Rs. 4,92,880. The Assessing Officer found out that there were gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d inadvertence on the part of his authorised agents is a matter to be settled between the assessee and the said agents and that this does not absolve the assessee of his responsibility to furnish his income and wealth correctly as required under the Law. The AO harped on the point that when the assessee had signed the verification in the return, it does not lie in his mouth to plead that being an engineer, he is not conversant with the taxation and financial laws. The AO states that the assessee has been an income-tax and wealth-tax payee for a number of years and, therefore, it is his duty before signing the verification to make sure that correct income has been disclosed. The AO enumerated the different items of omission/mis-statement in the original return filed by the assessee. He stated that the assessee had not disclosed in the return, capital gains amounting to Rs. 6,44,514 and that the profit of Rs. 1,07,119 made in his proprietary business M/s. Associated Trading Co., had been shown as loss of the corresponding amount in the return. The AO furthermore states that the assessee did not disclose interest amount of Rs. 45,000 from M/s. Manipal Printers Publishers Pvt. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the correctness of the return. 6. Finally, the AO concluded from the detailed discussions made by him in the penalty order that the assessee himself is solely responsible for furnishing the inaccurate particulars and, therefore, penalty for concealment of income is attracted. The AO detailed out once more the various items of omissions/mis-statements in the original return filed and held that the total amount concealed by furnishing inaccurate particulars was Rs. 9,55,611 as shown below : "Share income shown as loss from Rs. M/s. Manipal Security Printers 33,858 Share income shown as loss from M/s. Manipal Bottling Company 18,000 Share income shown as loss from M/s. Associated Trading Co. 2,14,238 Capital gains on sale of shares as discussed 6,44,515 Interest from M/s. Manipal Security Printers 45,000 ----------------------- 9,55,611" ----------------------- 7. The AO found out that tax on the above amount of income sought to be evaded was Rs. 5,69,064. He, therefore, levied a penalty of Rs. 5,70,000 under section 271(1)(c). 8. In appeal before her, the learned CIT(A) considered all the detailed facts of the case. She also paid attention to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses that Shri Madhusudhanan appeared before the AO and in the statement recorded on 28-1-1992, reiterated the stand taken by him that the returns had been prepared on the basis of information furnished by the assessee. Shri Madhusudhanan also stated to have denied before the AO that there had been any letter indicating the sale of Reliance shares by the assessee. The CIT(A) thus came to the conclusion that it was very clear that the bank had prepared the return only on the basis of the information supplied by the assessee. The CIT(A) finally remarked that if the assessee's explanation was to be accepted then every tax evader could take shelter by shifting the blame on his clerks and accountants who invariably prepare the returns for them. At last, the CIT(A) fully agreed with the contention of the AO that the assessee was guilty of concealing his income and also furnishing inaccurate particulars thereof. She thus confirmed the penalty levied by the AO under section 271(1) (c). 9. Shri G. Sarangan, learned counsel on behalf of the assessee, appearing before us, contended that the first return had been filed by the assessee on the basis of what had been prepared by the Syndicate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all advert to at appropriate times during the course of our order. So far as further deposition given by Shri Madhusudhanan of Syndicate Bank before the AO is concerned, Shri Sarangan brought to our notice the chronology of facts in this connection. He stated that the original affidavit was filed by Shri Madhusudhanan on 12-7-1991, whereas the examination of Shri Madhusudhanan took place by the AO at Mangalore at the instance of the CIT(A) on 28-1-1992. The CIT(A) herself however, passed her appellate order at Bangalore on 29-1-1992. The opportunity of cross-examining Shri Madhusudhanan by the auditors of the assessee at Mangalore was however, afforded on 21-1-1993, i.e., much after the passing of the appellate order by the CIT(A). 10. Shri Puniha, the Departmental Representative, on the other hand, strongly contended that this was a case of concealment and furnishing of inaccurate particulars by the assessee. He pointed out that the original return of loss of Rs. 2,41,650 was accepted by the Department in good faith under section 143(1) and that at the time of scrutiny of the wealth-tax return only, the reduction in the number of shares of Reliance was noticed which led to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, when used in law, must imply an injury or prejudice to another, which in a tax case must mean the revenue. The connotation of the "concealment" must therefore cover a mental act to hide some thing with the purpose of reducing the income of the assessee thereby defrauding revenue. Hence, although the expression "deliberately" was omitted from the relevant section by the Finance Act, 1964 with effect from 1-4-1964, even then it has got to be said that in order to constitute the offence of concealment, play of the mind towards evasion of tax in a designed manner has got to be present. Conversely therefore, if there be understatement of income in a very haphazard manner and if strong indications be there that there was no conscious effort on the part of the assessee to show his income at a lower figure, the assessee, in such a case, cannot be considered to be guilty of concealment of income. 12. In this particular case, references have been made by the departmental authorities on furnishing of inaccurate particulars of income by the assessee ultimately constituting concealment of income thereby. The expression "furnishing inaccurate particulars of income" in its simple form as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the assessee. Shri Sarangan has pointed out that the net salary income of Rs. 16,200 shown in the computation sheet was not ultimately considered in the final computation of loss. It has also been pointed out that the computation sheet did not show whether the figures of "share of income/loss" from the different firms and the proprietary concern M/s. Associated Trading Co., represented positive (income) or negative (loss) figures. Our attention has been drawn to another paper found in the working file of the bank in which the figures of Rs. 16,929, Rs. 1,15,855, Rs. 9,000 and Rs. 1,07,118.75 were all considered as negative figures representing loss. The aggregate of these four figures was arrived at Rs. 2,48,902.75. The other figure of Rs. 12,964 was deducted from the above-mentioned figure by obviously considering the said figure to be a positive figure showing income. The net result was the loss figure of Rs. 2,35,938.75, to which the positive figure of Rs. 5,708.60 representing income from other sources was added back (instead of being deducted) to arrive at the final figure of loss at Rs. 2,41,647.35. Ibis figure was ultimately shown in the return filed originally. Shri Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the guilt lies completely with the person who prepared the computation of total income. 14. As regards the question of non-inclusion of the interest amount of Rs. 45,000 on the deposit of Rs. 3 lakhs with M/s. Manipal Printers Publishers Ltd., Shri Sarangan has drawn our attention to the two different sheets of papers containing the computation of dividend and interest income lying with the bank, in its file. In one of these sheets, besides dividend income and also interest income from M/s. Manipal Industries and I.O.DS, the gross interest of Rs. 45,000 was correctly shown. The second sheet however, in which the total interest income was shown as Rs. 6,727 only omitting the item relating to M/s. Manipal Printers Publishers Ltd., completely, seems to have been taken into consideration while preparing the computation of total income. Shri Sarangan has argued that in doing so, not only the income of Rs. 45,000 was omitted to be shown in the statement of computation of income, but also the tax deduction of Rs. 4,500 therefrom also remained omitted to be claimed in the first return. Shri Sarangan argues that how this happened is beyond his comprehension. In any case, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gains on this transaction required to be ascertained in assessment year 1985-86. Shri Madhusudhanan also stated in the said affidavit that it was a fact that the shares were originally in the custody of the bank in the Division and that the same were delivered (to the buyers) during July 1984. 16. The discussions above clearly show that there was no conscious act on the part of the assessee himself to omit any of the five items considered in the impugned penalty order from his statement of income/loss filed along with the original return. The other inaccuracies about claiming losses in case of positive income cannot also be ascribed to the assessee. There also does not seem to be any design with the bank authorities in preparing a completely distorted picture about the income/loss of the assessee for this year. On the other hand, the facts, as discussed above, clearly show that the particular officer who was in-charge of preparation of the relevant statement suffered from lack of application of mind and acted thoroughly in an inadvertent manner. However, deliberateness on his part also cannot at all be presumed. From our discussions earlier about the connotation of the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the bank in the preparation of the said income went completely against the assessee, clearly prove the lack of any collusion between the two parties. 18. Reliance has also been placed by the assessee on two decisions of the Orissa High Court viz., CWT v. Chiranjilal Agarwala [1983] 140 ITR 687, Special Leave Petition against which decision was refused by the Supreme Court as reported at 187 ITR (Statutes) 45 and the case of CWT v. Ajit Kumar Sur [1983] 140 ITR 389 (Ori.). In the case of Chiranjilal Agarwala, the High Court came up with the opinion that where the assessee for the first time is assessed to wealth-tax and acts on the advice of his lawyer in the matter of filing of his return, the explanation of delay based upon such advice is acceptable. In the instant case, Shri T. Ashok Pai, assessee, did not become assessable to income-tax for the first time in the instant year and hence, this particular judgment does not seem to help his case much. In the other case however, Shri Ajit Kumar Sur, assessee, did not submit his returns of net wealth for assessment years 1964-65 to 1968-69 as, on the advice of his counsel, he was under the bona fide belief that certain HU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n collusion with the assessee, the assessee should not be visited with penalty under section 271(1)(c). The argument taken up by the learned CIT(A), that if the assessee's contention be accepted then every tax evader can take shelter by shifting the blame on to his clerks and accountants who invariably prepare the return, also does not seem to have much force. In such ordinary cases, which have been thought of by the CIT(A), the direct employees of the assessees prepare the returns and the assessees are expected to oversee the working of the said employees and clerks who work under the direct authority of the assessees. In the instant case however, the work of preparing the return had duly been entrusted with a professional concern. For a large number of years, the said professional concern carried on its duty rather faithfully and also competently. The assessee could not, therefore, have any reason to doubt the efficiency of the professional concern, viz.. Syndicate Bank in the present case. It is very clear from our discussions above that in this particular year, the bank people bungled the entire affairs and committed rather silly mistakes out of sheer misapplication of mind or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Madhusudhanan made these statements to save his own skin. Nobody would declare himself to be responsible for any default which might be committed during the course of his official business. Again, when the notation dated 24-8-1984 was already in the file of the Bank, how and why Shri Madhusudhanan missed that notation at the time of preparation of the return of income of the assessee is not of much importance. 22. Finally, it is required to take into consideration the reliance placed by Shri Puniha on the decision of the Gauhati High Court in the case of F.C. Agarwal. In that particular case, the High Court held, which was later on approved by the Supreme Court, that as a proposition of law it may be correct that where a revised return is submitted under section 139(5) before the assessment is made after the assessee has discovered some omission or some wrong statement in the original return, a penalty proceeding for concealment of the particulars of income or furnishing inaccurate particulars of such income as contemplated under section 271(1)(c) of the Act may not be attracted. The High Court, however, furthermore held that for that purpose however, the revised return itself ..... X X X X Extracts X X X X X X X X Extracts X X X X
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