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TMI Blog1988 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,28,547 under the substantive provisions of section 271(1)(c) of the Act or in the alternative under the Explanation to section 271(1)(c) of the Act ? (4) Whether, on the facts and in the circumstances of the case, the .Tribunal was justified in law in holding that the assessee was liable to penalty of Rs. 7,92,820-150% of the income concealed ? " The controversy involved in the questions which are referred to us for our opinion relates to the assessment year 1968-69. The assessee is registered partnership firm carrying on the business of manufacture of cloth. It purchases yarn from the local market and also imports the same. Sometimes the yarn is sold as such and sometimes art silk cloth is manufactured from yarn and sold in the local market as well as exported. The assessee submitted in all four returns for the assessment year under reference as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- S. No. Date of filing the return Total income returned ------------------------------------------------------------------------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Rs. 14,95,537. In the further appeal by the assessee, the Tribunal confirmed the assessment of the total income made by the Appellate Assistant Commissioner. The Income-tax Officer had initiated penalty proceedings as stated above for the following items of income which were not disclosed by the assessee in the original return Rs. (1) Profit on goods imported and sold 5,67,523 (2) Investment and expenses sources of which remained unexplained (a) Amount paid into the United Bank of India, Jhaveri Bazar Branch, for opening letters of credit 1,13,253 (b) Customs duty paid on different dates 4,33,403 (c) Payment made to one Shri Pankaj for forgery 20,000 ----------------- Total 11,34,179 ----------------- An addition in respect of the first item of income was reduced to Rs. 528,407 from Rs. 5,67,523 as a result of the decisions of the Appellate Assistant Commissioner and the Tribunal in the appeals preferred by the assessee. The addition in respect of item No. 2(a) was reduced to Rs. 87,152 from Rs. 1,13,253 in the appeal by the Appellate Assistant Commissioner which was confirmed by the Tribunal. The addition of item No. 2(b) was reduced by the Tribunal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s leviable in respect of items Nos. 2, 3 and 4. In other words, the question of levy of penalty was confined to the first item of Rs. 5,28,547. The Tribunal rejected various contentions raised before it by the assessee in the context of the above item of income and decided to levy penalty of Rs. 7,92,800. In other words, penalty of Rs. 11,02,000 levied by the, Inspecting Assistant Commissioner was reduced to Rs. 7,92,820 under section 271(1)(c) of the Act. It is in the background of the above facts that the four questions set out above are referred to us for our opinion. Section 271(1)(c), in so far as is relevant and as it stood at the relevant time read as under : "271(1). If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-... (iii) in the cases referred to in clause (c), in addition to any tax payable by him a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvertisement was given. (3) The addition of Rs. 5,28,547 was made only on the basis of an estimate of profits earned by the assessee by sale of yarn. (4) There was no justification for rejecting the assessee's plea that it had earned only Rs. 3 lakhs by sale of the licence and to estimate the profits at Rs. 5,28,547. In other words, it was submitted that the question whether or not there was any justification for the addition of Rs. 5,28,547 should have been examined on merits by the Tribunal. (5) There was no evidence to support the conclusion that the assessee had earned the profit of Rs. 5,28,547 by sale of yarn. The evidence and material on record disclose that the assessee had exported its product in the calendar year 1966 and on account of such export, it became entitled to two import licences. As stated above, one licence for Rs. 12,708 was for import of art silk yarn, tar dyes and textile chemicals while the licence for Rs. 8,402 was for import of art silk yarn. Alterations were made in both the licences by altering the amounts for which the licences were issued. The figure of Rs. 12,708 was altered to Rs. 1,12,708 in one licence, while the figure of Rs. 8,402 was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be Rs. 1,12,708 and not Rs. 12,708 which admittedly was the value of the licence when it had been issued. It would, therefore, appear that alteration in the licence was made before the alleged sale of the licence. It was further stated in the application that a revised return disclosing the aforesaid income of Rs. 3 lakhs was filed. It was thereafter in that revised return filed on March 30, 1971, an income or profit of Rs. 3 lakhs was disclosed. There is no doubt whatsoever that it was only after the inquiry by the Customs Department and the CBI and recording of the statements of various persons that the assessee decided to file the revised return. It is true that the revised return was filed after the advertisement as aforesaid was given by the CBDT and before the assessment for the year under reference was framed. However, the question is : Whether for that reason, the assessee can escape the penalty as urged on its behalf. Addition of Rs. 5,28,547 was made by the Appellate Assistant Commissioner and the Tribunal after examining various statements and the evidence on record. It was after examining the evidence on record that the Appellate Assistant Commissioner and the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit of Rs. 3 lakhs were also false inasmuch as this profit was not earned by sale of the licence as stated by the assessee. Therefore, mere filing of revised return will not absolve the assessee from liability to pay penalty for concealment of the aforesaid income or furnishing inaccurate particulars thereof. It is true that while considering the question of levy of penalty, as held by this court in D. V. Patel & Co. v. CIT [1975] 100 ITR 524, the revised return which is voluntarily filed has to be taken into consideration. However, it is not the mere fact of filing of the revised return which has to be taken into account. It is the entire conduct of the assessee right from its inception to the filing of the revised return which has to be taken into consideration. The assessee did not disclose any profit earned by it either by sale of licence or by sale of yarn in the first return which it had filed. In the revised return, what was disclosed was not true. Instead of disclosing the profit earned by it by sale of yarn, it disclosed only a part of its profit by falsely stating that it was earned by sale of licence. For the same reasons, the mere fact that the Central Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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