1993 (3) TMI 149 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the revised return filed by the assessee.
3. Whether the revised return can be considered voluntary.
4. Application of legal precedents and judicial interpretations.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):

The primary issue in this case is the levy of penalty under Section 271(1)(c) of the IT Act, 1961. The assessee, a registered firm engaged in the purchase and sale of provision goods, filed its return of income declaring a taxable income of Rs. 2,77,698. During the assessment, the Income Tax Officer (ITO) impounded the books of accounts under Section 131(3) due to doubts about the credit balances. Subsequently, the assessee filed a revised return offering an additional income of Rs. 3,24,650 under the head "other sources." The ITO held that the revised return was not voluntary and initiated penalty proceedings under Section 271(1)(c). The CIT(A) upheld the ITO's decision, leading to the present appeal.

2. Validity of the Revised Return:

The ITO and CIT(A) both concluded that the revised return filed by the assessee could not be considered a valid revised return under Section 139(5) of the IT Act, as it was filed after the Department had started making enquiries. The ITO argued that the revised return was not voluntary and was filed only after the Department had initiated enquiries regarding the credit balances and Demand Drafts (DDs) accounts. Therefore, the ITO levied a 100% penalty on the amount of tax sought to be evaded.

3. Voluntariness of the Revised Return:

The assessee contended that the revised return was voluntary and that the Department had not unearthed any evidence against it. The assessee's representative emphasized that the disclosure was made during the assessment proceedings and relied on various judicial decisions to support the argument that penalty was not exigible. The Tribunal examined the sequence of events and found that the Revenue had not revealed its suspicions or enquiries to the assessee before the filing of the revised return. The Tribunal held that the second return filed by the assessee should be construed as a voluntary disclosure of higher income before any detection by the Revenue.

4. Application of Legal Precedents and Judicial Interpretations:

The Tribunal analyzed several judicial decisions cited by both parties. The Revenue relied on cases like CIT vs. Krishna & Co., where the High Court justified the levy of penalty when the assessee admitted to concealed income after the ITO's examination. However, the Tribunal distinguished these cases based on the facts and circumstances of the present case. The Tribunal also considered the decision in Sir Shadilal Sugar & General Mills Ltd. vs. CIT, where the Supreme Court held that voluntary disclosure made before detection by the Department should not attract penalty.

The Tribunal concluded that the revised return filed by the assessee was full and complete and made voluntarily before any detection by the Revenue. The Tribunal held that the charge of concealment could not be laid against the assessee and that the penalty under Section 271(1)(c) was not justified.

Conclusion:

The Tribunal allowed the appeal, holding that the revised return filed by the assessee was voluntary and that the disclosure was full and complete. Consequently, the levy of penalty under Section 271(1)(c) was not warranted. The Tribunal's decision was based on the facts and circumstances of the case, distinguishing it from other judicial precedents cited by the Revenue.