2003 (1) TMI 25 - HC - Income Tax

Penalty - Whether, Tribunal was justified in cancelling the penalty? - Whether, Tribunal was justified in holding and had materials to hold that the assessee was under a bona fide belief that he was not liable to include the share income of his wife from the firm in which he was a partner, even though the assessee had failed to give the information as required by column 13 of the return of income and annexure E of the return of income? - contents of the return in the form of return themselves are prescribed by rule 12 of the rules that have come into force with effect from July 1, 1972 - There need not be any deliberate attempt on the part of an assessee in refusing to comply with the requirements as prescribed under rule 12 of the Rules - Tribunal was not justified in setting aside the penalty - The requirement in law is that the assessee should furnish the share of income of his wife as is required after July 1, 1972. Both the questions referred for our opinion are answered in favour of the Revenue

Summary

Issues:
1. Justification of cancelling penalty for non-inclusion of spouse's income in the return.
2. Assessment of whether the assessee was under a bona fide belief regarding the inclusion of spouse's income in the return.

Issue 1: Justification of Cancelling Penalty
The case involved a situation where the assessee did not include the share of income of his wife in his returns for the years 1982-83 and 1983-84. The Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, considering the non-inclusion as concealment of income. However, the Income-tax Appellate Tribunal disagreed, stating that there was no deliberate attempt to hide income from the authorities. The Tribunal referred to various dictionaries to define concealment and concluded that the return filed by the assessee was not false, leading to the cancellation of the penalty.

Issue 2: Bona Fide Belief of the Assessee
The assessee argued that he believed his wife's share of income should only be included in her returns, not his. He claimed that both of them used different auditors and submitted returns from different locations. The Income-tax Officer rejected this argument, asserting that the omission to disclose the wife's income amounted to concealment. However, the Appellate Tribunal held that there was no conscious disregard of legal provisions by the assessee and no deliberate attempt to conceal income. The Tribunal emphasized that the return was not false and there was no intentional effort to hide any part of the income.

In addressing the first issue, the High Court referred to the Supreme Court decision in CIT v. P.K. Kochammu Ammu [1980] 125 ITR 624, which clarified that the spouse's income should be included in the assessee's return as per the Income-tax Act. The Court highlighted the statutory requirement, post-July 1, 1972, for disclosing income of the spouse or minor child separately in the return. The Court emphasized that the form of the return has a statutory basis and cannot be considered formal. Therefore, the Court concluded that the Tribunal erred in canceling the penalty, as the Supreme Court decision applied to the current case, and deliberate intent was not necessary to comply with the statutory requirements.

Regarding the second issue, the High Court ruled in favor of the Revenue, rejecting the assessee's claim of bona fide belief. The Court reiterated the statutory obligation to disclose the spouse's income in the return post-July 1, 1972. The Court emphasized that compliance with the legal requirements was necessary, regardless of the assessee's belief. Both questions were answered in favor of the Revenue, and no costs were awarded. The judgment underscored the importance of adhering to statutory provisions and the implications of non-disclosure of income as required by law.