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TMI Blog1984 (12) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... urned income of Rs. 1,03,740. The ITO made more additions. The Commissioner (Appeals) confirmed those. But the Tribunal determined the income computed as per the revised return. Reference has been rejected. There is no departmental appeal to restore the penalty imposed by the ITO. That means that the Tribunal's order in the assessment matter has been accepted by the department at least for the purpose of penalty proceedings. 3. The Madras High Court has held in CIT v. Ramdas Pharmacy [1970] 77 ITR 276 that all the facts and circumstances commencing with the filing of the original return and ending with the assessment, is relevant for deciding the question of concealment. CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602 (Mad.) has not made any deviation. If in that case, the answer was against the assessee, it was principally because of concealment even in the revised return and perhaps for the further reason that the revised return did not satisfy the requirements of section 139(5) of the Income-tax Act, 1961 ('the Act') like discovery of omission or wrong statement in the original return. This is a case where the revised return was accepted by the Tribunal as true and correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee and, also the view of my learned brother, is that the revised return satisfied completely the requirements of section 139(5) and inasmuch as the income as per the revised return has been accepted by the Tribunal, there is no concealment of income and, hence, the levy of penalty is not called for. In my humble opinion, this is rather oversimplification of the issue involved. The question involved is whether there was concealment of income in the original return of income filed and whether the revised return filed subsequently, was voluntary in nature, so as to exonerate the assessee from the contumacious conduct in not disclosing the true income in the original return. The Madras High Court has observed in the case of Ramdas Pharmacy it is not as if the revised return filed was of no consequence at all, while considering the liability for penalty for concealment of income under section 271(1)(c) of the Act, but all the facts and circumstances commencing with the filing of the original return and ending with the assessment may be taken as relevant for the consideration of the assessee's liability for penalty. Therefore, it is essential to take into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realisation and unexplainable expenses. " [Emphasis supplied] From the above extract, it is clear that the assessee prayed to the Commissioner for allowances of normal expenses of publicity and other expenses as he had no knowledge of verifying the accounts written up by his part time accountant. It is also clear that the assessee was willing to offer the peak credit of Rs. 1,32,500 for which a reference has been made to the assessee to be merged with the omission in film realisation account and unexplainable expenses. Thus, he has offered the peak credit as additional income in the revised return in order to account for the suppressed receipts in films business and inflated expenses in trading and profit and loss accounts. In other words, the peak credit of Rs. 1,32,500 actually represented the suppressed receipts and inflated expenditure in trading and profit and loss accounts. This fact is abundantly clear from the assessee's letter, dated 28-4-1978, accompanying the revised return inasmuch as the assessee has not shown the actual extent of omission of receipts in films account and the extent of inflation of expenses. Therefore, it is only after discovery of omission of recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot cover a case where the omission or wrong statement contained in the first return was deliberate. In cases where an assessee has deliberately omitted particulars of his income or made wrong statement in the return, the revised return filed by him would be outside the pale of section 139(5) of the Act and it would not be a revised return as contemplated by the Act, and the question of considering the revised return for the purpose of penalty would hardly arise. Such a revised return cannot supplant the original return and, for the purposes of penalty, it will be only the original return that will have to be looked into. The position would, however, be different where the omission or the wrong statement in the return was not deliberate. . . ." The Madras High Court has observed as follows in the case of J.K.A. Subramania Chettiar : ". . . The word 'omission' occurring in section 139(5) connotes an unintentional act. Equally, the words 'wrong statement' will not take in 'a statement known to be false to the person who made the statement'. However, the word 'discovers' occurring in section 139(5) will make it clear that only at the time of discovery a person who had furnished a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd allowed the entire claim of the expenses and, thus, deleted the additions made by the ITO. In other words, the Tribunal sustained the income returned by the assessee as per the revised return. Be that as it may, in my humble opinion, the assessee has intentionally and deliberately concealed the income or furnished inaccurate particulars of income in the original return filed and has offered additional income in the revised income only after the department has investigated the matter and detected concealment of receipts. Therefore, it was not a simple case of omission or any wrong statement, which was sought to be corrected in the revised return and, thus, the conditions prescribed for filing of revised returns were not at all satisfied. Therefore, on the facts and in the circumstances of the case, the penalty for concealment of income in the original return is quite warranted and, in this view of the matter, the order passed by the Commissioner (Appeals) is to be upheld and the appeal filed by the assessee deserves to be dismissed. 5. In the result, the penalty imposed by the Commissioner (Appeals) is upheld and the appeal filed by the assessee is dismissed. REFERENCE UNDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee had not shown the proper income. 4. In the meantime, on 28-4-1978, the assessee filed a revised return admitting an income of Rs. 2,36,248 that is more by Rs. 1,32,500 shown in the original return. After the receipt of the revised return disclosing the income of Rs. 2,36,248, the ITO made the assessment on a total income of Rs. 3,29,464 arrived at in the following manner : Rs. " Gross profit as per trading account 2,97,627 Less : Difference in opening stock of pictures as per 1976-77 assessment order 17,956 ------------------- 2,79,670 Add : (i) Suppression of realisation from pictures 1,10,256 (ii) One-fourth of car maintenance expenditure ---one-fourth of Rs. 3,988 997 (iii) Inflation of publicity expenses 21,652 (iv) Interest claimed on the spurious credits 5,575 ------------------- 4,18,150 Rs. Less : Expenses allowed as per SD 13 as against the assessee's claim of Rs. 1,93,883 83,517 Add: Audit fees discussed above 300 Correct depreciation on car after disallowing one-fourth as relating to personal use 2,362 Depreciation on fan 210 Depreciation on furniture 274 Depreciation on cycle 116 86,779 ----------- ------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of penalty by pointing out that it was the seizure of books in the raid, the prompt scrutiny of the same within a month from the seizure of books by the department, which actuated the assessee to rush with a revised return of income and the admission by the assessee's representative in the first instance about the discrepancies in the figures. He, however, varied the amount of penalty by pointing out that it should be minimum because the assessee co-operated with the department immediately after the search. By the time the Commissioner (Appeals) passed his order, the order of the Tribunal in quantum appeal was available. It was keeping that order in view that the Commissioner (Appeals) gave this direction. 9. When the matter came on appeal before the Tribunal, the learned Judicial Member took the view that penalty was not leviable. His reasoning was that, when the revised return filed by the assessee was, eventually, accepted by the Tribunal as true and correct, it must be held that there was no concealment of income. According to him, that the filing of the revised return was only after the search and the assessee was cornered by the department, was not material. He sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned brothers, which is referred to me for my opinion. 10. After carefully considering the surrounding facts, the background of filing the revised return and the law enunciated on the subject as to the validity of levy of penalty when a revised return was filed, it appeared to me that it is very difficult in this case to say that the assessee's contention that he was not aware of what contained in the other books maintained, whether at his instance or not, is acceptable. It is primarily for the assessee to explain why he maintained three sets of account books, and he cannot be allowed to take advantage of the inability of the department to decipher the accounts maintained by him. The meaning and purpose of accounts maintained by an assessee primarily is known to him and it was his duty to explain to the department as to why he maintained the accounts. No one would agree that the assessee would seek just for the sake of fun of it to maintain three sets of accounts. If it is endeavoured by the Tribunal and by the department to find out the purpose in vain, it does not mean that the assessee is absolved of his responsibility to explain the purpose of maintaining three sets of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ak of the credits of Rs. 1,32,500 out of Rs. 1,44,500 cash credits shown in the accounts to cover (i) omission in the realisation and (ii) inflation in unexplainable expenses. Thus, the offer of Rs. 1,32,500 by way of income amounted to an admission that there was omission regarding realisation in full and inflation of expenses and the cash credits were none other than that income brought to the accounts by way of cash credits. This, in my opinion, amounted to a clear admission on the part of the assessee that there was furnishing of inaccurate particulars in the original return. Now the question is, whether that is deliberate, intentional, with a design or out of innocence or without knowledge. From the way the case has proceeded from the time the return was filed on 11-10-1977 till the revised return came to be filed and the other attendant circumstances, I am unable to subscribe to the view that the assessee was not aware of the fact that the return filed originally did not disclose the correct income. There is no explanation as to why there was omission of Rs. 1,10,000 in receipts and about Rs. 1,06,000 by way of inflation in expenditure. For the purpose of finding out whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed the original return, there was no question of that person subsequently discovering the existence of the omission or creeping in of the wrong statement in the return already filed by him. Therefore, section 139(5) will apply only to cases of 'omission or wrong statements' and not to cases of 'concealment or false statements'. " This is the law enunciated by the Madras High Court, which we have to apply to the facts of this case. The Kerala High Court in the case of CIT v. Haji P. Mohammed [1981] 132 ITR 623 has also expressed an identical view. After referring to the facts in that case, the Kerala High Court held : "...Since at the time of filing the original return the assessee must be taken to have been aware of his having received the amount from the E.E., but had nevertheless omitted to disclose the receipt in the original return, the second return filed by the assessee cannot be regarded as a 'revised return' filed under section 139(5) of the Act, because there was no discovery by the assessee of any omission or wrong statement having been made by him by inadvertence in the original return. Therefore, the assessee was guilty of concealment of income under section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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