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TMI Blog1984 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ailway contractor providing labour to the Northern Railway for performing the work of loading and unloading of goods from wagons at 23 railway stations. A contract or agreement was entered into on April 3, 1957, and according to the terms of the contract, the assessee-firm was required to provide able-bodied adult male labourers to perform the work of loading and unloading of wagons at 23 railway stations. In respect of the assessment year 1959-60, pertaining to the period from April 1, 1958, to March 31, 1959, the assessee-firm filed a return of its income on December 30, 1961, showing a loss of Rs. 26,276. The assessee claimed receipts to the extent of Rs. 1,62,851 while it claimed expenses of Rs. 1,90,982. In the course of the assessment proceedings, the ITO sought information from the assessee-firm regarding details of the station-wise bills submitted to the railway. The assessee took time to furnish the requisite details and stated before the ITO that its books of account were with the counsel at Delhi in connection with the arbitration proceedings arising out of a suit filed by it against the railway in respect of its claim. On November 27, 1963, the assessee-firm filed a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 297 against the Northern Railway for which bills have already been submitted by the assessee-firm, but payment thereof had not been made by the Railway. The assessee-firm also claimed some amount from the Railway which was alleged to have been unauthorisedly deducted from the bills of the assessee. The assessee-firm then instituted a suit against the Union of India and the Northern Railway in the Court of District judge, Bikaner, on September 21, 1959, for recovery of a sum of Rs. 3,17,728.81. At the instance of the Union of India, the dispute between the parties was referred for arbitration to the General Manager, Northern Railway, or his nominee as the sole arbitrator. The arbitrator gave his award on February 12, 1963, according to which the assessee-firm was entitled to a sum of Rs. 4,26,828.90 from the railway administration including interest. The learned District Judge, Bikaner, rejected the objections advanced by the railway administration in respect of the award and passed a decree on October 28, 1963, in terms of the award given by the arbitrator, for a sum of Rs. 4,26,828.90 in favour of the assessee-firm and against the Union of India. The assessee's case is that a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-firm kept its accounts on accrual basis. The reply on behalf of the assessee-firm is that the entire amount of bills was to be received by the assessee-firm from the Central Government and there could not have been concealment of any part of income received or receivable from the Government, and the assessee-firm did not include in the original return the disputed items, as the railway administration had made unauthorised deductions from the bills submitted by the assessee-firm and had even withheld payment of verified bills and some bills bad not even been passed by the concerned station masters. A further submission on behalf of the assessee-firm is that the bona fides of the assessee appeared from the fact that the assessee filed a revised return of its income on the very next day after receiving a copy of the decree passed by the learned District judge, Bikaner, and that the ITO was fully informed of the fact that litigation was pending between the assessee-firm and the railway administration and that the dispute has been referred to the Senior Deputy General Manager, Northern Railway, Baroda House, New Delhi, as the sole arbitrator. The ITO gave several adjournments for almo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first place, I would observe that the tax is in respect of 'profits or gains arising or accruing'. I cannot read those words as meaning 'received by'. If the enactment were limited to profits and gains 'received by the person to be charged, that limitation would apply as much to all Her Majesty's subjects as to foreigners residing in this country. The result would be that no income-tax would be payable upon profits which accrued but which were not actually received, although profits might have been earned in the kingdom and might have accrued in the kingdom. I think, therefore, that the words 'arising or accruing' are general words descriptive of a right to receive profits." Similar view was also expressed by Shah J., speaking for their Lordships of the Supreme Court in CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42 (SC), wherein it was observed as under (p. 45): "Under the Income-tax Act, income is taxable when it accrues, arises or is received, or when it is by fiction deemed to accrue, arise or is deemed to be received. Receipt is not the only test of chargeability to tax ; if income accrues or arises it may become liable to tax. For the purpose of this case, it is unnecessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh mere filing of a revised return may not absolve the assessee from the liability of imposition of penalty, yet the case of the assessee-firm is that the revised return was voluntary and was filed without any concealment having been detected by the ITO. It is no doubt true that the suit was filed by the assessee-firm in the court of District judge, Bikaner, on September 21, 1959, in which the amount relating to unpaid bills from April, 1957, to August, 1958, was claimed together with interest on the outstanding amount. The claim made by the assessee-firm in the civil suit included the amount which according to the assessee represented unauthorised deductions made by the railway from the bills submitted by the assessee firm, as also amounts representing the payment of verified bills, which were withheld by the railway and 10% amount deducted from the bills according to the terms of the contract as well as the amounts of bills which were not passed by the station masters. The contention advanced on behalf of the assessee-firm is that as unauthorised deductions were made and payment of the verified bills was withheld by the railway administration, doubts were raised about the accrua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act of 1922, which provision corresponds to s. 271(1)(c) of the Act of 1961, relating to imposition of penalty, are penal in nature and it is for the Department to establish that the assessee was guilty of concealment of particulars of income. Their Lordships held that an order imposing penalty is the result of quasi-criminal proceedings. The gist of the offence under s. 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden was on the Department to establish that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. The mere fact that the explanation of the assessee is false does not necessarily give rise to an inference of concealment of income or deliberate furnishing of inaccurate particulars. In CIT v. N. A. Mohamed Haneef [1972] 83 ITR 215 (SC), their Lordships of the Supreme Court, following the decision in Anwar Ali's case [1970] 76 ITR 696 (SC), held that if there was no basis for coming to a firm conclusion that the assessee deliberately supplied wrong particulars, penalty could not be imposed upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the assessee. The Tribunal took the view that, as the assessee has made a true disclosure of its income in the revised return before the assessment was completed, the assessee could not be said to have deliberately concealed the true income. Their Lordships of the Madras High Court held that the explanation offered by the assessee for not disclosing a part of its income in the first return is possible of acceptance and in the face of such acceptable explanation, a deliberate intention on the part of the assessee-firm to conceal the income cannot be inferred. In Ayyasami Nadar and Bros. v. CIT [1956] 30 ITR 565 (Mad), the Madras High Court expressed the view that the concealment or the deliberate furnishing of inaccurate particulars can take place at the time of making the original return as well as at the time of filing the return in compliance with a notice under a. 34 and if the discovery takes place during " any proceedings under the Act ", it can be said that income has been concealed or inaccurate particulars of income were deliberately furnished. If the concealment or deliberate omission to furnish true particulars is made at any stage of the proceedings under the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for penalty under section 28(1)(c). The Tribunal has not thought fit to attach any significance or importance to the filing of the revised return and merely proceeded on the fact that there was no explanation by the assesses for not making a return of the income he has earned from the profit under section 41(2). " In the aforesaid case, their Lordships of the Gujarat High Court held that the Tribunal did not address itself to the important question whether the revised return was made by the assessee of its own volition before concealment was detected in the course of the assessment proceedings and that the Tribunal had also failed to decide the question whether on a consideration of the entire conduct of the assessee right from the inception to the filing of revised return, the burden lying on the assessee was discharged having regard to the preponderance of probabilities. In the case of Taiyabji Lukmanji v. CIT [1981] 131 ITR 643 (Guj), the assessee filed a revised return in pursuance of an advertisement published by the Central Board of Direct Taxes, but the income-tax authorities imposed penalty under section 271 (1)(c) on the ground of concealment of income in the origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberately failed to return the correct income or furnished inaccurate particulars in the first instance. In the present case, as observed above, the assessee had filed a suit even before the filing of the original return and the suit was pending wherein the assessee's right to the amount in question was being litigated. The Tribunal came to the conclusion that but for the insistence on the part of the ITO that the assessee should file information regarding station-wise total bills submitted during the year and bills which remained unsubmitted, the revised return declaring correct income would not have seen the light of the day. On that basis, the Tribunal came to the conclusion that there was a deliberate intention on the part of the assessee of concealing its true income, when it filed its original return. However, in the present case, the ITO bad merely called upon the assessee to produce particulars of accounts and had not at that stage made any investigation nor had he discovered the alleged omission in the original return. The subsequent conduct that for almost one year, after the ITO was informed by the assessee-firm that the dispute between it and the Northern Railway wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of such discovery, before the ITO discovers such omission or error in the original return, then the assessee cannot be held guilty of contumacious conduct of deliberately furnishing incorrect particulars or of deliberate concealment of true income. It may be pointed out that mere non-disclosure of true particulars of income or furnishing inaccurate particulars is not sufficient to attract the penalty provisions contained in s. 271(1)(c) of the Act, but in order that penalty may be imposed, there should be conscious concealment of particulars or inaccurate particulars must have been furnished deliberately by the assessee. If the ITO, as a result of investigation made by him during the assessment proceedings, discovers that inaccurate particulars have been supplied by the assessee or there is an omission to supply the correct particulars on his part and the revised return is filed by the assessee after such a discovery is made by the ITO, then, of course, in such circumstances, the filing of the revised return cannot remove the effect of contumacious conduct on the part of the assessee while filing the original return and penalty is leviable in such a case. However, as observed b ..... 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