1977 (9) TMI 49 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Voluntariness and timing of filing the revised return.
3. Whether the revised return absolves the assessee from the penalty for concealment.
4. Furnishing inaccurate particulars of income.
5. Legal implications of filing a revised return before the detection of concealment.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the IT Act, 1961:
The central issue revolves around the imposition of penalty on the assessee under Section 271(1)(c) for allegedly concealing income or furnishing inaccurate particulars. The assessee, a practicing physician employed by the Government of Assam, filed an original return showing a professional income of Rs. 5,500, which was later revised to Rs. 20,000. The Income Tax Officer (ITO) determined the total income at Rs. 35,271, which was later reduced to Rs. 26,500 by the Commissioner of Income Tax (CIT) on revision. The ITO initiated penalty proceedings, which were confirmed by the Appellate Assistant Commissioner (AAC).

2. Voluntariness and Timing of Filing the Revised Return:
The assessee contended that the revised return was filed voluntarily before any detection of understatement. The ITO received information from the Post Master General and other Central Government offices on 27th Oct., 1972, after the revised return was filed on 23rd Oct., 1972. The AAC found it challenging to determine whether the revised return was filed voluntarily or after the assessee was cornered by his statements. However, the tribunal concluded that the revised return was filed voluntarily before the detection of concealment.

3. Whether the Revised Return Absolves the Assessee from the Penalty for Concealment:
The tribunal held that the filing of a revised return before the detection of concealment by the authorities negates the concealment offense. The tribunal cited legal precedents, including the Nagpur High Court in Badridas Ramrai Shop, Akola, stating that Section 139(5) allows correction of omissions or wrong statements before assessment. The tribunal concluded that since the revised return was filed voluntarily before the concealment was discovered, the penalty provisions under Section 271(1)(c) were not attracted.

4. Furnishing Inaccurate Particulars of Income:
The tribunal examined whether the assessee furnished inaccurate particulars in the original return. The assessee provided a satisfactory explanation that the original return was an estimate without referring to bank deposits, whereas the revised return was based on actual bank deposits. The tribunal found the explanation satisfactory and supported by adequate material, distinguishing it from the case of F.C. Agarwal, where the penalty was upheld due to the lack of a satisfactory explanation.

5. Legal Implications of Filing a Revised Return Before the Detection of Concealment:
The tribunal emphasized that the filing of a revised return before the discovery of concealment prevents the imposition of penalty under Section 271(1)(c). The tribunal rejected the Revenue's contention that the revised return amounted to an admission of guilt. The tribunal clarified that the Income Tax Act does not penalize attempts to conceal income but only actual concealment. The tribunal concluded that the revised return, filed voluntarily and before detection, effectively replaced the original return and negated any concealment or inaccurate particulars.

Conclusion:
The tribunal allowed the appeal, canceling the penalty imposed on the assessee. The tribunal's decision was based on the voluntary filing of the revised return before the detection of concealment, the satisfactory explanation for inaccuracies in the original return, and the legal principles governing the imposition of penalties under Section 271(1)(c).