Judgment:
1. Feed-back of the facts is that the assessee filed the return of its income on 21 -7-1979 at a positive figure of Rs. 20,10. It stood revised on 24-7-1980 and income stood revised to Rs. 26,830. In the revised return of income filed by the assessee, income was computed by applying 3% net rate on sales of Rs. 8,94,269 which figure was determined by the State Excise & Taxation Deptt. vide order of 12th June, 1980, made by the Excise & Taxation Officer. This assessment by the State Excise & Taxation Department was on the basis of a survey conducted by the said department on the business premises of the assessee on 22-5-1980. In the course of the said survey, the State Excise & Taxation Deptt. found out that the total sales of the assessee were to the tune of Rs. 8,94.269 as against the figure of Rs. 6,68,384 declared by the assessee. The unaccounted sales, detected by the said sales authority were to the tune of Rs. 2,25,885. The assessment stood completed under the State Sales-tax Act by the State Excise & Taxation Officer, as mentioned earlier, on 12-6-1980 and at that stage the assessee did not produce the books of accounts since the assessee claimed that these having been lost were not traceable. The assessee is said to be doing wholesale business in Kiryana at the relevant time.
The assessment order made under the provisions of the Income-tax Act, 1961 was framed on the basis of original return taking the base figure of net profit as Rs. 20,110. Unexplained investment involved in the sales of Rs. 2,25,885 was also worked out at Rs. 20,590 and unexplained and undeclared profit on the sales was worked out as Rs. 14,118.
Suppressed sales of Rs. 2,25,885 was held to be a cause of action for initiation of penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961 and penalty imposed at Rs. 16,400, i.e., in between the minimum and maximum penalty imposable. The penalty order reveals that the amount of tax, which was sought to be evaded by the assessee, stood at Rs. 16,360. In a detailed order, penalty was imposed.
2. The ld. first appellate authority on appeal by the assessee cancelled the penalty, his main reasoning being that the revised return was filed by the assessee suo motu and voluntarily that enhancement of income was by an estimate; that no penalty for concealment was leviable insofar as addition of Rs. 14,118 representing the profit on unaccounted sales is concerned; that on the facts and in the circumstances of the case, it was not a fit case for levy of penalty under Section 271 (1)(c) of the Act. CIT v. Nadir Ali & Co. [1977] 106 ITR 151 (All.), CIT v. Harnam Singh & Co. [1977] 106 ITR 532 (AIL), CIT v. Patna Timber Works [1977] 106 ITR 452 (Pat.), CIT v. Lalit Mohan Deb [1977] 107 ITR 84 (Cal.) and CIT v. M.S.T.V. Neethinwhan & Co. [1977] 107 ITR 585 (Mad.) were pressed into service by the ld. CIT(A).
3. The revenue is aggrieved and we have heard the parties at length.
The case of the assessee remains that the higher income declared in the revised return was on estimate and further that alleged capital investment in alleged unaccounted for sales could not be a subject matter of concealment. Further that return was filed voluntarily and it was so revised suo mow and voluntarily under Section 139(5) of the Act.
Yet further that there was no detection by the Income-tax Department about any unaccounted for sales or else understatement of net profit much less inaccuracy of particulars, since no books of account have been produced, these having been lost. CWT v. Suraj Parkash Modi [1983] 144 ITR 259 (Punj. & Har.), Chandulal Lallubhai (HUF) v. CIT [1983] 139 ITR 642 (Guj.), CIT v. Amalendu Paul [1984] 145 ITR 439 (Cal.), CIT v.J.K.A. Rajappa Chettiar [1985] 153 ITR 215/23 Taxman 350 (Mad.), CIT v.Jaskaran Sohanlai (P.) Ltd. [1985] 154 ITR 291 (Cal.), CIT v.Bengaliron Galvanising Works [1987] 165 ITR 249/32 Taxman 19 (Cal.), CIT v. M. George & Bros. [1986] 160 ITR 511 (Ker.), CIT v. Dr. Kumari M. Duhey [1988] 171 ITR 144 (MP) and CIT v. Mediwala & Co. [1988] 170 ITR 48 (MP) have been relied upon.
4. The case of the revenue remains as in the penalty order, i.e., that the concealment has to be reckoned vis-a-vis, the first return and the very fact that the assessee himself filed a revised return proves that qua the first return there was concealment of income, because according to the revenue, the assessee was silting on the fence but had to revise the return disclosing unaccounted for sales as a result of the action of the State Excise & Taxation Authorities. The assessee could foresee that those unaccounted for sales and the resultant figures will be provided to the Income-tax Department by the State Excise & Taxation Authorities. Hence, the assessee was made to revise the return which fact by itself proves that the first return filed by the assessee did involve concealment 167 ITR 88 (Punj. & Har.)(Sic), CIT v. J.K.A.Subramania Cheltiar [1977] 110 ITR 602 (Mad.), CIT v. BA.Balasubramaniam & Bros. [1985] 152 ITR 529 (Mad.), Chuharmal v. CIT [1988] 172 ITR 250/38 Taxman 190 (SC), Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (All.), Addl. CIT v. Chandravilas Hotel [1987] 165 ITR 300/[1986] 29 Taxman 492 (Guj.), CIT v. Meerut Construction Co.
[1987[ 166 ITR 702 (All.), CIT v. Rajeshwar Singh [1986] 162 ITR 173/26 Taxman 439 (Punj. & Har.), Vishwakarma Industries v. CIT [1982] 133 ITR 652 (Punj. & Har.)(FB) and CIT v. Ram Singh Harmohan Singh 1[980] 121 ITR 381 (Punj. & Har.) (FB), Patna Timber Works' case (supra), Lalit Mohan Deb's case (supra), M.S.T.V. Neelhimohan &Co.' s case (supra) and Harnam Singh & Co.'s case (supra) have been pressed into service. The revenue's stand is that the assessee filed the original return on 21-7-1979. Income was declared at a positive figure of Rs. 20,100.
Turnover was disclosed at Rs. 6,68,384. Survey by the Sales-tax Deptt.
was on 25-2-1980 and sales were assessed at Rs. 8,94,260 on 12-6-1980.
Penalty was levied on the assessee by the said Sales-tax deptt. on 12-6-1980 at Rs. 13,180. Turnover as mentioned earlier was at Rs. 8,94,260. The assessee revised the return under the Income-tax Acton 24-7-1980. Turnover was declared at Rs. 8,94,260. Income-tax was declared at Rs. 26,830. Presently the impugned assessment has been framed on 16-6-1981 on an income of Rs. 57,220. The assessee did not produce books of account at the assessment stage. The revenue on the basis of above data imputes concealment visa-vis return filed by the assessee on 21-7-1979 and contends that the data in the first return has to be referred to in the context of turnover in the revised return.
It is further claimed by the revenue that within the meaning of Sub-section (5) of Section 139, it cannot be said to be a revised return since the assessee could not discover any omission or wrong statement in the original return but it was a case of understatement of turnover and the resultant total income in the original return and the assessee was made to revise the return anticipating action by the Sales-tax Department in passing an information to the Income-tax Department since there is always inter-Deptt./inter-State intelligence about assessee vis-a-vis turnover and income. The revenue contends that it was a fit case for levy of penalty under Section 271 (1)(c) of the Act and the subsequent filing of the return which the assessee claims to be a revised return, shows a deliberate act of suppression of sales and the resultant total income when the original return was filed.
5. We have heard the parties at length and gone through the case law relied upon from which we have been benefited much. Sub-section (5) of Section 139, as it stood in relation to the assessment year under appeal, read as under : Section 139(5) - If any person having furnished a return under Sub-section (1) or Sub-section (2) discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made.
6. Qua the return revised by the assessee and which the assessee claims to be a revised return and which he filed on 24-7-1980, vis-a-vis the original return filed on 21-7-1979, there cannot be said to be "any omission", hence first limb of justification for filing of revised return under Sub-section (5) of Section 139 of the Act was not applicable.
7. Now coming to the words "any wrong statement", the assessee had estimated the profits in the return as also in the so-called revised return. According to the assessee, original estimate was on the basis of turnover of Rs. 6,68,384 whereas the so-called revised return was based on the turnover of Rs. 8,94,260. This difference in turnover cannot be said to be on the basis of "any wrong statement" vis-a-vis the first return to justify the filing of so-called revised return under Sub-section (5) of Section 139 of the Act.
8. The assessee has one right to file a return and it is either under Sub-section (1) of Section 139 of the Act or else under Sub-section (2) of Section 139 of the Act. He does not have a second right to file a return but certainly he has a right to revise the return within the framework of Sub-section (5) of Section 139 of the Act.
9. The justification for revising a return has to be on the basis of discovery of any omission or any wrong statement. On the facts and in the circumstances of the assessee's case, where the assessee has not produced account books and where the first return as also the so-called revised return was based on the turnover and estimate of that profit, vis-a-vis the first return when the turnover was worked out at Rs. 6,68,384 but which in actuality was Rs. 8,94,260, the assessee has to be held as having concealed the particulars of the income, hence has to be held guilty of the charge of concealment as provided under Section 271(1)(c) of the Act vis-a-vis the. first return filed by the assessee on 21 -7-1979. The penalty is leviable when this return was filed. In view of the ratio of the decision of the Full Bench of the Hon'ble Punjab and Haryana High Court in the case of Ram Singh Harmohan Singh (supra), concealment of income, which attracts penal provisions of Section 271(1)(c) of the Act, takes place when the return is filed and the quantum of punishment is imposable when the offence was committed, in the case of the assessee, this concealment of income has to be attributed to the filing of the original false return, i.e., the return filed by the assessee on 21 -7-1979. The impugned order of the ld.CIT(A) stands reversed and that of the ITO imposing penalty stands sustained.
10. Before parting we like to clarify that o the facts and in the circumstances of the assessee's case, which are peculiar one, the assessee having filed the so-called revised return, has himself conceded the suppression of the turnover and the resultant total income, hence there is no question of revenue proving anything further for bringing home the offence of concealment by the assessee under the provisions of Section 271(1)(c) of the Act. Yet further, before concluding, we like to clarify that concealment penalty shall be levied by working out the income-tax evaded by the assessee vis-a-vis net profit worked out on the turnover disclosed in the return of income filed on 21 -7-1979 and the turnover disclosed by the assessee in the return of income filed on 24-7-J980, i.e., the difference of the two shall only be taken as the concealed income because taking of the unexplained investment involved in the sales, in our considered opinion, has no basis for imposition of concealment penalty inasmuch as this issue is debatable one and positive concealment is not attributable to the assessee qua this income of Rs. 22,590.
11. The penalty shall be worked out afresh in the above terms. The revenue succeeds in its appeal which we will term as partly allowed.