2021 (3) TMI 595 - HC - Income Tax

Levy of penalty u/s 271(1)(c) - concealment of income - suppression of turnover for sales tax purposes - Filing of revised return offering an additions sum after initiating enquiry proceedings after the expiry of permissible period - HELD THAT - revised return was filed only on 14.1.1991, while the two years period for filing the revised return under Section 139(5) as it then stood for the assessment year 1987-88 expired on 31.3.1990. In the aforesaid factual scenario, it cannot be held that the revised return filed by the assessee can be treated in the eye of law as a return to substitute the original return with the revised one with the effect of completely effacing the original return. Once we have found that the revised return cannot have the effect of effacing the original return, it is explicit that concealment of the particulars of income and furnishing of inaccurate particulars of income were revealed to the assessing officer in the course of proceedings under the Act. There could be no manner of doubt that, if the assessing officer in the course of any proceedings under the then Act becomes satisfied about the concealment of income or furnishing of inaccurate particulars of such income, he is entitled to initiate proceedings for imposition of penalty as per Section 271(1)(c) of the Act. Decided against the assessee.

Summary

Issues:
1. Validity of revised return filed by the appellant.
2. Justification of penalty imposition under Section 271(1)(c) of the Income Tax Act, 1961.

Issue 1: Validity of Revised Return:
The appellant filed a revised return for the assessment year 1987-88 after initially reporting a loss in income. The appellant contended that once a revised return is accepted, it should replace the original return in the eyes of the law, eliminating any grounds for penalty imposition. The appellant cited legal precedents to support this argument. However, the respondent argued that the revised return was not legally recognized and that penalty proceedings were initiated during the assessment process based on information provided by the appellant during the revised assessment. The court examined Section 139(5) of the Income Tax Act, which allows for filing a revised return within a specified timeframe. The court determined that the revised return, filed after the deadline, could not replace the original return, and therefore, the concealment of income revealed in the revised return justified penalty proceedings.

Issue 2: Justification of Penalty Imposition:
The penalty under Section 271(1)(c) of the Income Tax Act was imposed on the appellant, leading to an appeal before the High Court. The appellant argued that since the revised return should be considered the valid return, penalty imposition was unwarranted. However, the court found that the assessing officer discovered the concealment of income and inaccurate particulars during the revised assessment process, justifying the initiation of penalty proceedings. The court emphasized that if the assessing officer becomes aware of such discrepancies during any proceedings under the Act, penalty proceedings can be rightfully initiated. Consequently, the court dismissed the appeal, affirming the validity of penalty imposition under Section 271(1)(c) of the Income Tax Act, 1961.

In conclusion, the High Court ruled that the revised return filed by the appellant after the specified timeframe could not replace the original return, leading to the validation of penalty imposition based on the concealment of income revealed during the revised assessment process.