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TMI Blog1994 (5) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... yrs. 1978-79 to 1985-86. The returned income was accepted in the assessments subject to minor variations. The assessee did not file any appeals against the disallowances made in the assessments and accepted the assessed income for all these assessment years. It is also seen that the assessee had co- operated with the Revenue in the completion of the assessments and had paid the taxes thereon. The learned Assessing Officer invoked the provisions of s. 271(1)(c) and 271(1)(a) of the IT Act, 1961 and called upon the assessee why penalty should not be levied on him under the above sections. The assessee contended as follows: (i) He was under the bona fide belief that as the business was conducted by the partnership firm of which he was one of the partners, he was not bound to file the return in his individual capacity. (ii) It was only at the instance of the Assessing Officer that he filed the returns for the asst. yrs. 1978-79 to 1985-86 in the status of individual. (iii) The assessments for all these years were completed on agreed basis and, therefore, penalty is not leviable. The above contentions were rejected by the Assessing Officer and penalty was levied under s. 271(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed were acted upon by the Revenue and practically the income offered for assessment for all these years was accepted, except for minor variations or disallowances. Thus, it is a case of agreed assessment on which penalt{ is not leviable. The CIT(A) on a consideration of the above submissions and after going through the copies of bank accounts showing the operation of the accounts in the name of the firm, copy of the partnership deed and the certificate of registration of the firm with the Registrar of Firms, which were all recovered in the course of the search, held that there was sufficient evidence to believe that the business was carried on in the name of the unregistered firm of M/s Aishwaryaa Agencies. In the light of the judicial pronouncements of the Kerala High Court in CIT vs. T. Govindankutty Menon (1989) 178 ITR 509 (Ker), CIT vs. Pawan Kumar Dalmia (1987) 66 CTR (Ker) 167 : (1987) 168 ITR 1 (Ker), CIT vs. Saraf Trading Corporation (1987) 65 CTR (Ker) 60 : (1987) 167 ITR 909 (Ker) and CIT vs. M. George Bros. held that in the facts and circumstances of the case, there was no evidence to show that the assessee had deliberately concealed the particulars of his income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the time allowed in the status of the firm. This he did not do. Therefore, it cannot be said that there was bona fide belief on the part of the assessee that the income really belonged to the firm. For these reasons, Sri Abraham vehemently contended that the orders of the CIT(A) should be set aside restoring the orders of the Assessing Officer. 6. Sri R. Srinivasan, the learned Chartered Accountant submitted that in the context of the partnership deed, bank accounts and the transactions found therein, the learned CIT(A) came to the conclusion that there was sufficient evidence that the income belonged to the firm rather than to the individual and in such circumstances filing of the returns, though belatedly, in the status of individual, as has been done in this case, be only at the instance of the oral advice given by the then Assessing Officer. This inference was reinforced by the fact that the income returned by the assessee in the asst. yrs. 1978-79 to 1985-86 was accepted in the assessments with only minor variations. The mere fact that the assessments were made in the status of individual though the income really belonged to the firm of which evidence surfaced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment that this is a fit case for levy of penalty and such satisfaction he should reach having regard to the facts of the case and also the applicability of particular section, sub-section and Explanation thereto. In these cases, the satisfaction of the Assessing Officer was only that the assessee has concealed the particulars of his income. There was no reference to the Expln. 3 to s. 271(1)(c) either in the course of the assessment order when he reached the satisfaction or in the notice that was issued prior to the levy of penalty. Sri Srinivasan referred to the xerox copy of the notice and submitted that in the notice no reference has been made to Expln. 3 to s. 271(1)(c). It is only in the orders levying penalty, the Assessing Officer has invoked the Expln. 3 to s. 271(1)(c). Therefore, the orders levying penalty under s. 271(1)(c) should fail for want of jurisdiction. He relied on the decision of the Bombay High Court in the case of CIT vs. P.M. Shah (1993) 203 ITR 792 (Bom). 7. Turning to the cancellation of penalty under s. 271(1)(a) of the IT Act, Sri Srinivasan submitted that the first appellate authority has found that there was sufficient evidence that the income rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als with failure to furnish the return within the time allowed under s. 139(1), etc., is found to have been struck off in the notice itself. But from a perusal of the penalty order passed in these cases, it is clear that penalty has been levied by invoking Expln. 3 to s. 271(1)(c). Therefore, in the light of the decision of the Bombay High Court in CIT vs. P.M. Shah, the levy of penalty cannot be sustained in law. In that case, it was held as follows: "A proper reading of s. 271(1)(c) makes it quite clear that the Explanation makes a considerable difference to what was contained in s. 271(1)(c). The Explanation creates a legal fiction in certain circumstances to the effect that the assessee shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of his income in the circumstances set out in the Explanation. But for such a legal fiction, it could never have been said that there was any concealment or furnishing of inaccurate particulars of income simply because the returned income was less than 80% of the assessed income. The Explanation also shifts the burden of proof on to the assessee. Therefore, when the Explanation is being resorte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the assessee under Expln. 3 to s. 271(1)(c) of the IT Act, no penalty can be levied in respect of the asst. yrs. 1983-84, 1984-85 and 1985-86. The period of limitation for completion of assessment and, therefore, for filing of the return under s. 139 will begin from 1st April, 1986 in respect of the asst. yr. 1983-84, 1st April, 1987 in respect of the asst. yr. 1984-85 and 1st April, 1988 in respect of the asst. yr. 1985-86 respectively. For these three years, the assessee has filed his return of income well within that period that is on 12th Sept., 1985, either in response to a notice under s. 148 as for the asst. yrs. 1983-84 and 1984-85 or in response to a notice under s. 139(2) as in the case of the asst. yr. 1985-86. Therefore, the Expln. 3 to s. 271(1)(c) cannot be invoked in so far as the asst. yrs. 1983-84, 1984-85 and 1985-86 are concerned. For this additional reason also we uphold the cancellation of penalty in respect of the above three years. 11. Turning to the levy of penalty under s. 271(1)(a) of the Act we hold that no materials have been placed before us to dislodge the finding of the CIT(A) that there was sufficient evidence to show that the income belong ..... X X X X Extracts X X X X X X X X Extracts X X X X
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