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TMI Blog1991 (11) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the previous years ended on 31-3-1984 and 31-3-1985 respectively. 4. For the first year 1984-85, the assessee filed its return of income on 13-9-1984 declaring a loss of Rs. 58,254. Subsequently, it filed a revised return on 26-3-1987 according to which the loss declared amounted to Rs. 58,054. Later on 12-2-1988, the assessee filed another revised return declaring a total income of Rs. 3,51,446. This return was accepted by the Income-tax Officer and the assessment was completed on 15-2-1988 under section 143(3) of the Act determining the assessee's total income at Rs. 3,51,450 in round figures. 5. For the next assessment year 1985-86, the assessee filed its return of income on 31-7-1985 declaring a loss of Rs. 1,16,442. Subsequently, it filed a revised return on 16-2-1988 in which it admitted a total income of Rs. 3,78,658. This return as accepted by the Income-tax Officer and the assessment was completed on the same day under section 143(3) of the Act determining the assessee's total income at Rs. 3,78,660 in round figures. 6. While completing the assessments, the Income-tax Officer initiated penal action for alleged concealment of income under section 271(1)(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words the learned Departmental Representative argued that the filing of the revised returns by the assessee resulted in an automatic admission on the part of the appellant that it had concealed the particulars of its income and, therefore, it was liable to penalty under section 271(1)(c) of the Act. We are unable to accept any of these arguments put forward by the learned counsel on both sides, for the simple reason that they seek to over simplify the issues involved in these appeals. It can hardly be disputed that the findings in the assessment orders would certainly be good evidence on which the department is entitled to rely in support of levy of penalty, though the said findings are not conclusive for purposes of levy of penalty. It is always open to the assessee to show in the course of the penalty proceedings that the amount added to its income, did not represent any concealed income and that no penalty is leviable. In Sir Shadilal Sugar General Mills Ltd. v. CIT [1987] 168 ITR 705 at page 713, Their Lordships of the Supreme Court held as follows : " We find that the assessee admitted that these were the incomes of the assessee but that was not an admission that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove anything further in justification of the penalty levied by the Income-tax Officer and that, therefore, the penalties should be upheld. 10. We quote below Explanation 1 together with its proviso to section 271(1)(c) of the Income-tax Act, 1961 as it stood during the two assessment years 1984-85 and 1985-86 :-- " Explanation 1 : Where in respect of any facts material to the computation of the total income of any person under this Act,-- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss in the manner you have asked for. " The above passage would show that these two years are the first and second years of the business of the company, that on account of the enquiries made by the Assessing Officer regarding the genuineness of the shareholdings subscribed by the public, the value of the shares of the company crashed and the assessee was faced with great financial difficulty in raising borrowed capital for the purpose of carrying on its business activities as contemplated in the Memorandum and Articles of Association. It was in these circumstances the assessee had come forward with an offer of additional amounts in its revised returns as set out below in the two letters :-- " Computation for 1984-85 : Business loss as per return (--) Rs. 58,054.00 Addition as discussed above Rs. 3,56,000.00 Share loss as discussed Rs. 48,500.00 Other expenditure Rs. 5,000.00 ------------------------------- Rs. 3,51,446.00 " ------------------------------- " Computation for 1985-86 : Business loss as per return (--) Rs. 1,16,442.00 Addition as discussed above Rs. 3,49,500.00 Share loss as discussed Rs. 1,40,600.00 Other expenditure Rs. 5,000.00 ------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to agree with this submission of the revenue. As pointed out by the Supreme Court in the case of CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14, the Tribunal has to bear in mind the relevant principles of law and has also to judge the facts on record. We may point out that none of the facts mentioned above, viz., the letters dated 8th February, 1988 written by the assessee to the Assessing Officer, the filing of revised returns on 12-2-1988 and 16-2-1988 and the acceptance of those revised returns on 16-2-1988 are disputed by the Revenue. On the contrary, a perusal of the assessment orders for these two years supports the assessee's case as more probable and true. In the assessment order for 1984-85, the Assessing Officer states as follows : " Another revised return of income was filed on 12-2-1988 admitting enhanced income voluntarily. The income voluntarily offered represents a part of share capital with request that no penalty prosecution or penalty proceedings of any nature could be initiated. " [Emphasis supplied] The assessment order for the next assessment year 1985-86 shows the following position :-- " A revised return of income was filed on 16-2-1988 admitting enh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as follows : " It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. " In our view, the ratio of this decision of the Delhi High Court fully supports the case of the appellant against the assessment of the amount subscribed to the share capital of the company. It is no doubt true that it is not now open at this stage to the appellant to object to the assessment of this amount as it had itself offered the same as its income by filing revised returns. At the same time, it cannot be disputed that it is always open to the assessee to point out that the amount so offered cannot be treated as its co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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