1983 (12) TMI 136 - AT - Income Tax

Summary

Issues Involved:
1. Concealment of Income
2. Penalty under Section 271(1)(c) of the Income-tax Act, 1961
3. Validity of Revised Returns
4. Applicability of Case Law

Issue-Wise Analysis:

1. Concealment of Income:
The primary issue was whether the assessee had concealed income for the assessment years 1972-73, 1973-74, and 1974-75. The Income Tax Officer (ITO) argued that the assessee had concealed income by not disclosing transactions related to his agency with the Civil Supplies Corporation in the original returns. The ITO discovered these transactions during the assessment for the year 1976-77, which led to the assessee filing revised returns for the earlier years, including additional income. The ITO considered this as evidence of concealment.

2. Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The ITO imposed penalties under Section 271(1)(c) for the alleged concealment of income. The penalties were Rs. 12,500 for 1972-73, Rs. 13,000 for 1973-74, and Rs. 20,000 for 1974-75. The ITO justified the penalties by stating that the revised returns filed by the assessee, which included additional income, proved that the original returns were false and that there was concealment of income.

3. Validity of Revised Returns:
The assessee argued that the revised returns were filed as part of an arrangement with the Income-tax authorities to spread the peak credit of Rs. 97,500 over five years (1972-73 to 1976-77) to avoid prolonged litigation and maintain cordiality with the department. The assessee contended that this did not constitute an admission of concealment. The Appellate Assistant Commissioner (AAC) accepted this explanation and cancelled the penalties, stating that there was no clear finding that the additional income represented concealed income for the years under appeal.

4. Applicability of Case Law:
The ITO relied on the Madras High Court decision in CIT v. Krishna & Co. [1979] 120 ITR 144 to justify the penalties. The AAC, however, referred to the Supreme Court decision in CIT v. Anwar Ali [1970] 76 ITR 696 and the Madras High Court decisions in CIT v. P.M.P. Soundara Pandian & Bros. [1983] 140 ITR 385 and CIT v. Prakasam Readymade Stores [1983] 140 ITR 601. These cases established that mere offer of income for assessment does not ipso facto prove that it represented concealed income.

Separate Judgments:

Majority Opinion:
The majority opinion, delivered by the Vice President, held that the assessee should succeed. It was emphasized that there was no admission by the assessee that the additional income offered for the three years was concealed income. The revised returns were filed as part of an arrangement with the department, and there was no categorical finding by the ITO that these sums represented concealed income. The majority opinion also referred to the decisions in P.M.P. Soundara Pandian & Bros. and Prakasam Readymade Stores, which supported the view that mere offer of income does not constitute an admission of concealment. The penalties were thus cancelled.

Dissenting Opinion:
The Judicial Member disagreed with the majority opinion, arguing that the facts clearly indicated concealment of income. The Judicial Member emphasized that the assessee had not disclosed the source of income from the Civil Supplies Corporation agency in the original returns and only admitted to additional income after the ITO's investigation. The Judicial Member believed that the decision in Krishna & Co.'s case applied and that the penalties should be upheld.

Third Member Opinion:
The Third Member agreed with the majority opinion, concluding that there was no case for levy of penalty. It was noted that the revised returns were filed as part of a scheme to avoid litigation and maintain cordiality with the department, not as an admission of concealed income. The Third Member also found that the decision in Krishna & Co.'s case did not apply to the present case, as the facts were different. The penalties were thus cancelled.

Conclusion:
The majority opinion, supported by the Third Member, concluded that the penalties under Section 271(1)(c) should be cancelled as there was no clear evidence of concealment of income by the assessee for the assessment years 1972-73, 1973-74, and 1974-75. The revised returns were filed as part of an arrangement with the department and did not constitute an admission of concealment.