1. This is an appeal filed by the revenue and is directed against the order of CIT(A) dated 29-7-1999 for assessment year 1992-93.
1. The Id, CIT(A) has erred in law and on facts in holding that penalty under Section 271(1)(c) was not leviable on the amount of Rs. 8,70,941 being the amount of cash sales of copper scrap.
3. The return of income originally was filed at Rs. 4,94,458 on 23-10-1992 which was processed under Section 143(1)(a) on 18-12-1992 accepting the returned income. Notice under Section 143(2) was issued for the first time on 12-11-1992 for 25-11-1992 - (sic) on which date none appeared on behalf of the assessee. A second notice was issued on 30-11-1993 fixing the date of hearing on 10-12-1993. The assessee was required to submit the gross profit rate with the comparative figures of three years and from the details Assessing Officer found that GP rate for the year under consideration was at 8.45 per cent as against 11.16 per cent of immediate preceding year. The assessee was asked to explain the steep fall in GP rate along with other information of monthwise purchase and sales. Certain other details were also called for and the case was adjourned to 27-12-1993 on which date the assessee did not furnish the information as called for. Accordingly, the adjournment was granted on 6-1-1994. Thereafter chronology of fixed dates as described at page 2 of the assessment order is as under:-On 6-1-1994 Monthwise purchase and sales with the date of delivering challans, dateOn 12-1-1994 Complete details of purchases of January, 1992 to March, 1992, bill-On 19-1-1994 & 20-1-1994 Details of purchases furnished, asked to attend on 25-1-1994 either25-1-1994 No partner attended, asked to be present on 3-2-1994 with books and3-2-1994 None attended but filed a revised return of income in which sales of The assessee in the revised return appended the following note which has been reproduced in the assessment order as under:-- During the year 7,771 kg. of copper scrap was purchased to use in the castings manufactured. However, during the course of testing it was found that it was not feasible to do so. In view of the same it was decided to dispose of the copper scrap. Since there were no buyers being available immediately and the assessee being in need of funds cash sales was made to the scrap dealers. While going through the records it was found that cash so realized was left to be incorporated in the books of account. Hence revised return of income is being filed.
The Assessing Officer found that assessee was not dealer in copper scrap. Apparently, the raw material for the assessee was mild steel and stainless steel scrap. As against this, the Assessing Officer found that assessee had purchased copper scraps as under:-Bill Date Name of the supplier Quantity Rate & ValueNo. Rs.43 16-1-1992 Shah Mohanlal Kajodimal 3651 kgs.
112 per kg.,45 25-1-1992 -do- 4119.900 112 per kg, According to Assessing Officer the assessee had furnished details of purchases after due pursuance and assessee also could not show any consumption of copper scraps or sale thereof and also did not show the said copper scraps in its closing stock. The Assessing Officer observed that the assessee was repeatedly asked about these purchases and consumption etc. of copper scraps and the assessee instead of explaining the nature of purchases and purpose of use of scrap, the assessee filed a revised return of income in which the sales of copper scraps was disclosed and appended a note stating that the sale proceeds amounting to Rs. 8,70,941 were not recorded in the regular books of account. For the sake of convenience relevant observations of Assessing Officer in this regard as appearing at pages 3 and 4 of the assessment order are reproduced below:-- Apparently, the purchase of copper scrap was not the raw materials used by the assessee nor the assessee was dealing in scrap of copper. Further it was noticed that the assessee could not show any consumption of the copper scrap purchased by him nor it showed any sales thereof nor scrap of copper form part of the closing stock shown by the assessee. The assessee was therefore, repeatedly asked about these purchases and consumption etc. of copper scrap. Instead of explaining the nature of purchases and purpose of use of scrap, the assessee filed a revised return of income in which the sales of copper scrap was disclosed and appended a note stating that the sale proceeds amounting to Rs. 8,70,941 were not recorded in the regular books of account. All these facts prove that the assessee has not filed the revised return of income voluntarily and on its own voliation but the same has been filed because the department persistently asked the assessee to furnish the details and as a matter of fact came to the concluding point that the purchases of copper scrap were either inflated one or a bogus purchases debited with the intention to claim the purchases at higher value and by that way reduce the tax incidence on its real income. The assessee's case is therefore, covered under the provisions of Section 271(1)(c) for concealing and furnishing inaccurate particulars of income. The assessee cannot escape from the penal provisions by way of filing of revised return as the revised return cannot wipe out the default already committed in the original return. In view of these facts penalty under Section 271(1)(c) is leviable. A notice under Section 274 read with Section 271(1)(c) is separately sent.
It is on the very addition the penalty under Section 271(1)(c) has been levied. In the penalty order it has been mentioned that assessee avoided to furnish the details of purchase and in spite of repeated reminder on each and every date of hearing and after due pursuance the assessee has filed the details of purchases which showed the purchase of copper scraps. The revised return was filed by assessee only because of the reasons that the department had persistently asked to furnish the details in respect of purchases and consumption of copper scraps.
Therefore, the revised return filed by the assessee was not voluntary but by the efforts of the department. It is, therefore, the penalty has been levied. Before Assessing Officer the assessee did not furnish any explanation but requested for keeping the penalty proceedings in abeyance which request was declined to be accepted by Assessing Officer and he imposed penalty at the rate of 200 per cent. Matter was carried in appeal before CIT(A). It was explained before CIT(A) that assessee had furnished the details of purchase on 19-1-1994/20-1-1994 as per order sheet entry and it was explained that assessee was in need of the funds and since there was no buyer available it had to sell the scrap in the market. By mistake cash realized was left out from being incorporated in the books of account and once the mistake was discovered by the assessee, it filed revised return and disclosed sales of copper scraps and since the disclosure made is voluntary and before detection made by the Assessing Officer the penalty has wrongly been imposed. Reliance was placed on the following decisions:--J.P. Sharma & Sons v. CIT Considering these submissions, Id. CIT(A) has deleted the penalty as per paragraph 11 of the impugned order which is reproduced below for the sake of convenience:-- 11. I have carefully considered the submissions made before me. As regards addition of Rs. 8,70,941 the same was disclosed by the appellant by way of revised return filed during the course of assessment proceedings. It is also seen from the assessment order that the Assessing Officer had asked for details of purchase which were furnished on 19-1-1994/20-1-1994. There is nothing on record to show that the detection of concealment had already been made by the Assessing Officer before the filing of the revised return. No show-cause notice was issued in respect of this amount by the Assessing Officer and merely because details of purchases and sales were held up for sometime does not necessarily mean that the detection has been made. The details of purchase and sales are clearly made in a routine manner and since the revised return has been filed by the appellant well before the date of assessment there was no intention of any concealment of the unrecorded sales, I hold that in the event of revised return having filed by the appellant on its own there can be no penalty on the amount of Rs. 8,70,941.
4. The revenue is aggrieved with such deletion of penalty hence in appeal.
5. Ld. DR after narrating the facts, pleaded that Id. CIT(A) was wrong in arriving at the conclusion that there was nothing on record to show that the detection of the concealment had already been made by the Assessing Officer before filing revised return by the assessee. He contended that it has been recorded in the assessment order as well as in the penalty order that after repeated requests by the department the assessee had filed the details of sales and purchases and it was only when Assessing Officer had already detected the concealment the assessee was cornered and thus filed revised return. He contended that the amount of sale of scrap was not a small amount which could escape the attention of the assessee so as to be entered in the books of account. The assessee knowingly and deliberately did not show the sale, consumption or stock of the copper scrap and when it was detected by the department the assessee had filed the revised return. Thus, he contended that the findings of Id. CIT(A) that since there was no intention of concealment with regard to unrecorded sales, the assessee cannot be held liable for penalty arc factually wrong. To support his contention he relied on the following decisions:-- A. A.M. Shah & Co. v. CIT to raise the contention that any concealment or inaccuracy in the particulars of income in the return occurring at any stage up to and inclusive of the ultimate stage of working out of total income would attract the penalty provisions of Section 271(1)(c); as the assessee had clearly resorted to recording bogus purchases and non-recording of certain items either in sales or stocks there was concealment of particulars of income which attracts penalty under Section 271(1)(c).B. Yamuna Restaurant v. CIT that where there is an evidence on record to prove that there was understatement of income on account of suppression of sales the Tribunal was held right in levying penalty under Section 271(1)(c).C. CIT v. D.K.B. & Co.
cannot be estoppel against a statute and there is no principle of universal application that whenever an assessment has been completed by accepting the offer of an assessee, no penalty can be imposed.
D. G.C. Agarwal v. CIT to contend that there being no satisfactory explanation for filing false original return and conditions necessary for application of Explanation to Section 271(1)(c) existing qua original return explanation rightly invoked notwithstanding filing of revised return.
income definitely omitted from the original return constituted concealment and the contention of the assessee that the books were seized by the department and income was returned on estimate basis as the assessee could have sought time for final return and asked for inspection and taken extracts of the books which was not done.
In this case Hon'ble Madras High Court has relied on its earlier decision namely CIT v. S.K.G. Arthanariswamy Chettiar in which it was held that offence of concealment 6. As against these arguments of Id. DR, the Id. Counsel appearing on behalf of assessee drew our attention towards the chronology of the dates as appearing at page 2 of the assessment order and reproduced in the above part of this order. Referring to the said chronology it was pleaded that assessee had furnished all the details required for by the Assessing Officer. From the details assessee came to know that it left to incorporate the realized amount in respect of copper scraps in the books of account. It was, therefore, on 3-2-1994, the assessee filed revised return declaring therein an additional income of Rs. 8,70,941 being sale amount of copper scraps. Till that date the assessee was not confronted with the query of having omitted entry of any such sale in its books of account. No show-cause notice was issued till that date.
In these circumstances it was vehemently pleaded that the action of assessee of filing revised return should be considered voluntary and before detection by the revenue. Having declared the income in the revised return and acceptance of the same, no penalty could have been imposed under Section 271(1)(c). To raise such contention, reliance was placed by the Id. Counsel on the following decisions:--A. CIT v. Suresh Chandra Mittal where the assessee surrendered additional income by way of revised return after precise queries by Assessing Officer and once the revised return is regularized by revenue, the explanation of the assessee, that he has declared additional income to buy peace and to avoid litigation could be treated as bona fide belief and penalty therefore, cannot be levied.
that where the assessee has filed revised return before the completion of assessment stating correct valuation of the property as arrived at by the approved valuer and both the appellate authorities having come to the conclusion that the assessee had no intention to furnish inaccurate particulars, penalty of concealment cannot be levied.
though the assessee conceded the total mistake which resulted in under-estimation only after he had received the notice of the Assessing Officer pointing out the mistake, the Tribunal's conclusion that the assessee had no intention of concealing particulars of his income or misguiding the Assessing Officer was acceptable and for that penalty was held rightly not leviable.
mere omission of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon.E. Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT [2005] 149 Taxman 456 (Guj.) in the said case referring to the decision in the aforecited case of K.C. Builders (supra) their Lordships of Hon'ble Jurisdictional High Court have observed that where there is no mala fide intention or mens rea found by any of the authorities, mere omission from the return of income of an item of receipt neither amounts to concealment nor deliberate furnishing of inaccurate particulars of income.
Referring to these decisions it was pleaded that it was the bona fide mistake of the assessee and the said mistake has been corrected by filing the revised return. There is no material or evidence found by the department that in fact the said amount of sale of copper scrap was the concealed income of the assessee. Therefore, the CIT(A) has rightly deleted the penalty.
7. Ld. DR in reply to the argument of the Id. AR referred to the decision of Hon'ble Madras High Court in the case of P. Govindaswami v.CIT and department to prove that the assessee had concealed the income in respect of sale of copper scrap as the assessee itself has admitted the addition thereof. Referring to the above decision he pleaded that according to Section 58 of the Evidence Act an admitted fact need not at all to be proved. Therefore, he pleaded that Id. CIT(A) has wrongly deleted the penalty.
8. We have carefully considered the rival submissions in the light of material placed before us. As a matter of fact the assessee did not record the sale amount of Rs. 8,70,941 in its books of account which was received by the assessee on account of sale of copper scraps which was purchased by the assessee during the year under consideration. The original return or income was riled by the assessee without considering the sale price of above mentioned copper scrap. During the course of assessment proceedings when details of sales and purchases were required to be furnished by the Assessing Officer the assessee submitted revised return which included the sale price of copper scrap as income. The reason given for filing revised return stated in the note has been inscribed in paragraph 3 of this order. In the note it was mentioned that the copper scrap was purchased for use in the castings manufacture, however, during the course of casting it was found that it was not feasible to do so. Thus it was decided to dispose of the copper scraps. It is further mentioned that since there was no buyer available immediately and the assessee was in need of funds, cash sales were made to the scrap dealers and while going through the records it was found that cash so realized was left to be incorporated in the books of account, therefore, the revised return is being filed.
Before CIT(A) also it was explained that assessee was badly in need of funds and since there was no buyer available it had to sell the scrap in the market and by mistake cash realized was left out to be incorporated in the books of account and once the mistake was discovered by the assessee it filed revised return and disclosed sales of copper scraps and since the disclosure is voluntary and before detection made by the Assessing Officer the penalty has wrongly been imposed.
9. Before proceeding further it will be relevant to examine Explanation 1 to Section 271(1)(c).
Explanation 1.--Where in respect of any facts material to the computation of the total income of any person under this Act.
(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
The plain statutory language of these two Clauses i.e., (A) and (B) get referable to two separate and independent situations. The first Clause (A) contemplates failure to offer an explanation or offer of an explanation which is found to be false. At the other end, the second situation covered by Clause (B) relates to a position that the assessee is not able to substantiate the explanation offered by him. Thus it is quite clear that the two situations are independent and separate.
Initially the consequence is provided in the language of Explanation 1 it created what is known as "deeming situation". It would thus be seen that the amount added or disallowed in the above process of computation is deemed to represent the income in respect of which particulars have been concealed. In other words the addition of the amount or otherwise disallowance of the amount in the computation of total income would assume a deemed character of concealment by reason of Explanation 1.
Therefore, the statutory requirement of Section 271(1)(c) requires satisfaction of the officer as regards concealment gets understood in the light of above deeming situation. From the facts it can be seen that assessee has offered an explanation and, therefore, it has to be examined whether the assessee is able to substantiate the said explanation and whether he is able to prove that such explanation is bona fide that all the facts relating to the same and material to the computation of income were disclosed. Thus in our view the case of assessee will be covered by Clause (B) of Explanation 1. The explanation of the assessee before the Assessing Officer as well as the CIT(A) was that copper scraps was purchased for use in the casting manufacture. As regards this claim of assessee Assessing Officer has found that assessee has never done copper casting and these were the purchases made during the year and no casting was done for copper. It was explained in the note filed before the Assessing Officer that during the course of testing it was found that it was not feasible to use copper scraps in the casting. No evidence whatsoever has been produced by the assessee to substantiate that any testing was done for the casting of copper. The next explanation of the assessee is that it was in need of funds and due to non-availability of buyers the copper scrap was sold in the market by way of cash sales. No evidence has been filed to support such contention also and no evidence has been furnished to show that when these cash sales were made. It is also not explained that there was need of funds and how the said need of funds was met with particularly when the sale price of copper scrap was available with the assessee as cash amount. The amount of Rs. 8,70,941 is a substantial sum. If the amount was required for business needs of the assessee then it is unlikely that assessee would not enter the realized amount in its books of account. Moreover assessee concern is a partnership concern, the amount of Rs. 8,70,941 being a substantial sum cannot escape the attention of all the partners to be entered in the books of account. Rather it suggests that copper scrap was purchased by the assessee with a view to claim more expenses to reduce incidence of taxation and the same was sold outside the books of account and the intention of the assessee right from the beginning was not to show or disclose the sale price of copper scrap in the books of account. Thus the explanation given has not been substantiated at all by the assessee and the assessee failed to prove that explanation furnished by it was bona fide and facts relating to the same and material to the computation of its total income were disclosed. Therefore, in our opinion the Assessing Officer was right in considering the sale price of copper scraps as deemed concealment of income.
The decision in the case of Suresh Chandra Mittal (supra) will have no bearing on the present case as it is not the case of assessee that it declared the additional income to buy peace or to avoid litigation. In the present case the assessee himself admitted that the amount disclosed in the revised return is the income of the assessee.
The decision in the case of Hasmukhlal Gandalal (supra) has also no bearing to the present case as in that case the question related to valuation of property and both the appellate authorities had concluded that the assessee had no intention to furnish inaccurate particulars.
The decision in the case of CIT v. Milex Cable Industries (supra) also cannot be applied to the facts of the present case as in the said case there was a mistake in the total which came to the notice of assessee when it was pointed out by Assessing Officer and it was the conclusion of Tribunal that assessee had no intention to conceal the particulars of its income.
In the case of K.C. Builders (supra) Hon'ble Supreme Court has held that mere omission of an item of receipt does neither amount to concealment nor furnishing of inaccurate particulars of income unless and until there is some evidence to show or circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. However, in the present case, as pointed out earlier there are circumstances from which it can be gathered that there was an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax.
Similar is position is with the decision of Hon'ble Gujarat High Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. (supra) where their Lordships have followed the aforecited decision of Hon'ble Supreme Court in the case of K.C. Builders (supra).
10. So far as it relates to contention of Id. AR that as revised return was filed before detection by the Revenue, therefore, no penalty should be levied, we may observe that when an assessee files a revised return in fact it is admitted that original return was not correct and complete and it is intended to be substituted by a revised return which according to the assessee, is correct and complete. It is quite possible and natural that in submitting a return and disclosing full particulars of income in the return some bona fide omission or some wrong statement may have occurred. In order to obviate this possibility, Legislature enacted Section 139(5) enabling the assessee to furnish a revised return. But to come under the said provision, the omission or wrong statement that might have occurred or crept in (i) must be bona fide and (ii) must have been discovered by the assessee himself. If, however, omission or wrong statement is discovered by the Department as a result of enquiry thereafter a revised return is furnished making amendments that will not amount to a revised return as contemplated under Section 139(5). Section 139(5) is nothing more than to permit an assessee when a genuine omission or wrong statement is detected, to file a revised return in time before assessment is made.
This could only mean that right to file a revised return may be exercised to cure an omission or wrong statement when it was inadvertent or accidental and not deliberate, Such revised return does not save consequences or intentional filing of false or incorrect return. Where, in order to make good an omission in the originally filed return, assessee voluntarily furnishes revised return inclusive of so omitted income, a question arises whether filing of revised return will not expatiate contumacious conduct, if any, on the part of assessee in not having disclosed a true income in the originally filed return. Blameworthiness attached to assessee with reference to original return cannot be avoided by filing a fresh return after concealment was detected by Assessing Officer. Where revised return is made by assessee on his own volition before concealment was detected in the course of assessment proceedings, conduct of assessee has to be taken note of Section 139(5) applies only to cases of omission or wrong statement and not to cases of concealment or false statements. Thus Section 139(5) has application to limited category of cases, namely, where in the original return there was an omission or any wrong statement. The very word "omission" denotes an omission bona fide. Equally, the words "wrong statement" will not take in "a statement known to be false to the person who made statement". However, the word "discovered" coming in Section 139(5) makes it clear that at the time of discovering only a person who has furnished return finds out that an inadvertent omission or an unintended wrong statement had crept in the return filed by him.
If a person who filed return was aware of the falsity of statement and incorrectness of the particulars of income even at the time when he filed original returns, there was no question of that person subsequently discovering existence of omission or creeping in of wrong statement in the return already filed by him. In other words, return filed so as to include concealed income cannot be treated as revised return because omission to file the correct income in the original return cannot be said in such circumstances to be due to any bona fide mistake or omission, Onus is, therefore, on assessee to show that omission or wrong statement was discovered subsequent to filing of the original return. This onus can be discharged with reference to material aspects to be brought on record by assessee. In the instant case, few relevant dates are necessary to be noted. Original return was filed at an income of Rs. 4,94,458 on 23-10-1992. Notice under Section 143(2) was issued for the first time on 12-11-1992 for 25-11-1992 (sic). The assessee was required to submit details with respect to sales and purchases along with all relevant details. Thus an enquiry was started by Assessing Officer with regard to the sale and purchase of the assessee when he found that the GP for the year under consideration was very much low as compared to immediate preceding year. Thus the Assessing Officer started probe to verify the sale and purchases recorded by the assessee. Prior to the year under consideration, assessee had never dealt in copper scraps. The assessee purchased copper scraps only during the month of January i.e., at the fag end of the relevant accounting year. The purchases were also substantial i.e., above Rs. 8 lakhs. According to the note furnished with the revised return the assessee was in need of funds, therefore, it sold copper scraps purchased by it by way of cash sales. If so was the position then it was very much required that assessee should have entered the said cash received out of sales in the books of account. This explanation of assessee is thus not substantiated and is contrary to the facts as assessee did not enter the cash received by it from sales despite there was necessity of funds. The only inference which can be drawn from the note given by assessee in the revised return and subsequent explanation that assessee did not credit the amount of sale of copper scraps in the books of account to show lesser income in the original return of income. This inference is further strengthen from the fact that return of income of assessee is filed at Rs. 4,94,458 and the amount not disclosed by assessee was almost double to the said amount and that the amount was not so small which could escape the attention of the assessee from being entered in the books of account by an inadvertent mistake or omission.
11. In view of above discussion of legal and factual position, we are of the opinion that the Assessing Officer had rightly held the assessee is liable for penalty of concealment despite having filed revised return and CIT(A) was wrong in deleting the penalty. The order of CIT(A) is, therefore, set aside. However, we find that penalty levied by Assessing Officer is 200 per cent as against the minimum penalty leviable at the rate of 100 per cent. Keeping in view the facts of the present case, we find that levy of penalty at the rate of 100 per cent will be justified. Therefore, we direct the Assessing Officer to reduce the penalty to 100 per cent. The appeal filed by the revenue is, therefore, partly allowed.