1983 (1) TMI 9 - HC - Income Tax

Summary

Issues involved: The judgment deals with penalties imposed on the assessee under section 271(1)(c) of the Income-tax Act, 1961 for the assessment years 1963-64 and 1964-65, which were subsequently cancelled by the Income-tax Appellate Tribunal.

Penalty for 1963-64:
The Income-tax Appellate Tribunal cancelled the penalty after finding that the assessee had made a voluntary disclosure under section 68 of the Finance Act, 1965, and filed revised returns. The Tribunal considered the entire course of assessment proceedings to determine if there was concealment of income by the assessee. It was observed that the original returns filed by the assessee were false, but the Income Tax Officer did not pursue them as the focus shifted to the voluntary disclosure and revised returns. The Tribunal concluded that there was no concealment of income by the assessee based on the assessment proceedings.

Penalty for 1964-65:
Similarly, for the penalty imposed for the assessment year 1964-65, the Tribunal found that the assessee's voluntary disclosure and revised returns were crucial in determining the profit from the sale of licenses. As the assessment was based on estimates due to lack of factual data, the Tribunal held that the question of concealment of income hardly arose. The Tribunal justified the cancellation of the penalty based on the facts of the case and the absence of concealment by the assessee.

Interpretation of Section 271(1)(c):
The court analyzed the provisions of section 271(1)(c) and emphasized that the officer must be satisfied "in the course of any proceedings" regarding concealment of income, not solely based on the assessee's return. The court highlighted that the assessment process involves discussions and inquiries beyond the formal return of income, and the officer's satisfaction must consider the entirety of the proceedings. The court differentiated this provision from section 277, which focuses on false verification in a return.

Comparison with Previous Decisions:
The court distinguished a previous case where penalty was upheld despite the assessee filing revised returns, stating that the considerations for penalty under section 271(4A) are different from section 271(1)(c). The court clarified that a revised return can only be filed to correct errors, not to absolve the assessee from a false return. The court asserted that the previous decision did not extensively address the interpretation of section 271(1)(c) as done in the current case.

Conclusion:
The court upheld the Tribunal's decision to delete the penalties for both assessment years, stating that there was no concealment of income by the assessee. The court answered the questions of law in favor of the assessee and awarded costs to the assessee since the Department lost in both references.