Commissioner of Income-tax Vs. Sri Rajram Cloth Stores - Court Judgment

Mishra, J.

1. We are not going into any details of examining whether, on the facts and in the circumstances of the case, the question under reference for answer, whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the assessee had not concealed particulars of income and accordingly in cancelling the penalty of Rs. 78,600 imposed under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 1965-66, is one of law, or a pure question of fact, for we shall presently notice that the answer to the question by the Tribunal, in our opinion, reflects a true and correct appreciation of the law as engrafted under section 271(1)(c) of the Act. The Act has made elaborate provisions for the submission of returns of income, assessment, etc., and in Chapter XXI provided for penalties for the failure to furnish returns, etc.

2. Section 271 in this Chapter in particular is the provision for imposition of penalty upon the assessee, if the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person, -

(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or

(b) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income.

3. In a clause particularly applicable to the penalty, falling under section 271(1)(c) of the Act, it provides that in addition to any tax payable by the assessee, penalty of a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income, can be imposed; provided that, if the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting assistant Commissioner. The words in this part of the law that the penalty is not to exceed twice the amount of tax sought to be evaded, imply that it should be found that there has been concealment by the assessee to evade the tax or inaccurate particulars were furnished by him with that intention.

4. In the case on hand, the assessee is a partnership-firm which is in the business of manufacturing and selling art silk cloth. Its return was filed initially showing an income of Rs. 8,274 which, however, was voluntarily revised by it and the return showing an income of Rs. 22,970 was filed. While filing the return showing an income of Rs. 8,274, the assessee stated that it had sold the goods manufactured by it and that it had earned a profit of Rs. 8,274. Subsequently, when it filed a fresh return, however, the assessee said that it had transferred its import licence during the accounting year and that it had manufactured no cloth. The inaccuracy or concealment, if any, thus is noticed only when the revised income return is filed by the assessee. The Tribunal has, on these facts, stated as follows :

'On a careful consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed. The assessee had tiled a return originally in which the income earned by selling the import licences were not shown. To that extent, therefore, there was concealment in the original return. But before that concealment came to light, the assessee itself filed a revised return disclosing the income from the sale of the import licences. By the filing of the revised return the concealment in the original return was wiped out. It is not the case of the Revenue that any investigation had been made or that the concealment in the original return had come to light before the filing of the revised return. On the other hand, by filing the revised return, the assessee had in fact come up to admit the concealment. In the circumstances, we do not think that the facts of this case warrant the imposition of penalty. We, therefore, cancel the imposition of penalty.'

5. The answer given by the Tribunal is the only correct approach, as there is no discovery of any concealment or inaccurate statement by any representative of the Revenue or any other source, but it has come only from the assessee. The reference is answered accordingly. No costs.