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TMI Blog1979 (10) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and that the penalty was validly imposed ? " This is how these two references are before us. M/s. Qammar-ud-din and Sons (hereinafter referred as " the assessee ")is a registered firm consisting of three partners. For the assessment year 1965-66, it filed a return of income on October 20, 1965, declaring an income of Rs. 35,000.In para. 7 of the return it was stated that the income was: " as per the statement of account attached herewith ". No such statement of account was, however, attached. On November 29, 1965, a notice under s. 143(2) of the Act was issued. Again, on December 9, 1966, another notice under s. 143(2) was issued fixing the case for hearing on December 22, 1966. It appears that, in the meanwhile, on some date (which is not known) the firm had filed before the ITO a profit and loss account pertaining to the above year. On looking into this account, the ITO found that the net profit of the firm was Rs. 83,790 as against Rs. 35,000 returned by the assessee. He, therefore, called upon the assessee to file a revised return along with an explanation. On December 24, 1966, the assessee filed a revised return showing an income of Rs. 83,790. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, in the circumstances, the imposition of a penalty was not justified. To start with, there is no doubt that the return filed by the assessee on October 20, 1965, did not have any factual basis. The obligation of filing of a return is a solemn and important one and should not be undertaken in a lighthearted and careless manner. It may be that, in some circumstances, an assessee may have to estimate its income, but if so, such estimate should have some basis therefor. An assessee cannot escape its responsibility or escape penal action merely by filing a return showing an estimated income but without there being any real basis for that income. In the present case, the return filed on October 20, 1965, was stated to be based on a statement of account. But it is quite clear that there was no such statement in existence at that time. Having regard to the fact that the income returned has not been accepted but has been assessed at Rs. 89,642 and having regard to the Explanation introduced to s. 271(1)(c) in 1964, the deeming provisions come into operation and we have to start with the presumption that the assessee had concealed particulars of the income or furnished inaccurate par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered anything wrong with the assessee's accounts or return the assessee itself came forward with a correct profit and loss account (which has been also subsequently accepted with only slight adjustments) if, on December 22, 1966, when the cage had been fixed for hearing by the ITO, the assessee had filed a voluntary return on its own, then, in all probability, no penalty proceedings would have been initiated against the assessee. But though no revised return as such was filed, the assessee did give the ITO an information regarding the correct income voluntarily. We think that these facts show that the failure to return the correct income in the first instance did not arise from fraud or gross or wilful neglect. In this context, it should be appreciated that the onus cast on an assessee by this section is to prove a negative and all that is possible for him to do is to indicate certain circumstances on the basis of which the absence of fraud or gross or wilful neglect can be reasonably inferred. We find that the Tribunal has based its conclusion essentially on the ground that the return filed on October 20, 1965, was not shown to have had any basis. In regard to the subsequent ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, was a valid return. The second question is answered in the negative and in favour of the assessee. We, however, make no order as to costs. D. R. KHANNA J.-I am inclined to concur with the conclusions arrived at by my learned brother. As observed by my lord, the obligation of filing a return is a solemn and important one and should not be taken in a lighthearted and careless manner. The prescribed return form too enjoins verification of the correctness of the income and the particulars furnished. In the present case, the narration of the facts by the Tribunal had brought out how the assessee had without any basis filed the original return disclosing an income of Rs. 35,000. In this return, it was mentioned that a statement of account was attached therewith. This tends to show that the assertion made later by the assessee that accounts were not complete, was not correct. What has happened to that statement of account is not known. Whether it was lost in the I.T. office or done away with, or was erroneously so stated, while in reality no such statement was filed, is difficult to say. In the last eventuality, in case the assessee wanted to negative the presumption created by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of the notice under s. 143(2) of the Act. As to when that profit and loss account had been prepared was still not clarified. In case it had been prepared before the second notice under s. 143(2) of the Act, it has remained unexplained why the assessee did not hasten to file the revised return on its basis instead of waiting for the ITO to require it to do so. This revised return was itself an admission on its part of the incorrectness of the original return. A profit and loss account can only be a supplement to the return. It is corroborative and a sort of evidence supporting the version of income disclosed in the return. It, however, cannot in any circumstance take the place of the return itself, nor can be attached to it a greater sanctity than to the return. Section 271(1)(c) of the Act, when it provides for penalty, refers to the concealment or suppression effected in the return. At the same time there can be cases of bona fide errors where some mistakes by inadvertence creep into the returns although the profit and loss accounts stand already attached with the returns or are filed before the assessments are taken up. No mens rea in such cases need essentially be imput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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