Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty under s. 271 (1)(c) ?

Counsel Appeared

B.K. Rawat, for the Revenue : B.L. Nema, for the Assessee

N.D. OJHA, C.J.:

On a direction being issued by this Court under s. 256(2) of the IT Act, 1961 (hereinafter referred to as ” the Act “), the Tribunal, Jabalpur, has referred the following question of law to this Court for its opinion :

” Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty under s. 271 (1)(c) ? “

2. The facts in a nutshell, necessary for answering the aforesaid question, may be stated here. The reference pertains to the year 1969-70. The assessee who is a lady doctor filed a return on December 8, 1969. Subsequently, on March 6, 1971, she filed a revised return. The ITO, while making the assessment, initiated proceedings for imposition of penalty for concealment of income and called upon the assessee to show cause why penalty should not be levied.

3. In reply to the show-cause notice, the assessee filed a reply, a copy whereof has been attached along with the statement of the case. In the said reply, it was, inter alia, stated that she was not aware of the fact that she had recovered the amounts shown in the revised return from reimbursement of medical practice. According to her, it so happened that most of the employees who got themselves medically examined did not pay the amount later. In fact, it was assured that the amount would be paid only when that was reimbursed. It was also stated by her that she was assessed to tax for the first time and was not aware of the provisions of law casting upon her the obligation to file a return in the prescribed manner. The explanation submitted by the assessee, however, did not find favour with the ITO and he levied a penalty of Rs. 13,400.

4. On appeal, the order of the ITO was upheld. On further appeal filed by the assessee, however, the Tribunal cancelled the penalty. The Tribunal took the view that the revised return which had been filed by the assessee contained a voluntary disclosure of income and there was nothing to indicate that by the time the revised return was filed by her, concealment of income had been detected. On the finding that the revised return was a bona fide one, the Tribunal further took the view that if the income disclosed in the revised return was taken into consideration, the Explanation under s. 271(1)(c) of the Act was not attracted and, consequently, the burden to prove that the concealment was deliberate, did not shift to the assessee and it was for the Department to establish deliberate concealment. The Tribunal further found that on the material on record, the Department had failed to establish the necessary ingredients about the imposition of penalty.

5. An application was thereafter made by the CIT before the Tribunal under s. 256(1) of the Act for referring five questions to this Court for its opinion. On that application, being dismissed, the Department made an application to this Court under s. 256(2) of the Act and the question mentioned above has been referred by the Tribunal on the direction of this Court.

6. It has been urged by learned counsel for the Department that the Tribunal committed an error of law in taking the view that the assessee was entitled to file a revised return. In this connection, reliance was placed by learned counsel for the Department on the provisions of s. 139(5) of the Act and it was urged that the use of the word ” discovers ” in that section connotes discovery of some omission or wrong statement in the return of which the assessee was not aware at the time of filing the original return and that it would not cover a case where 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 s. 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. In support of this, learned counsel for the Department placed reliance on the decision of the Allahabad High Court in Amjad Ali Nazir Ali vs. CIT 1976 CTR (All) 217 : (1977) 110 ITR 419. It is true that the proposition of law urged by learned counsel for the Department has been laid down in that case. It would, however, be seen that an exception has also been carved out. It has been held in this connection that the position would, however, be different where the omission or the wrong statement in the return is not deliberate. In such cases, where the assessee discovers any wrong statement, the Act permits the filing of the revised return. The discovery of the omission or wrong statement may be by the assessee himself or may come to the knowledge of the assessee during the assessment proceedings, even at the pointing out by the ITO provided that the assessee was unaware of the omission or the wrong statement at the time of the filing of the original return. It was, contended that where the omission or wrong statement is pointed out by the ITO and a revised return filed thereafter, no advantage can be taken of the revised return by the assessee. The learned judges were not impressed by this argument and held that all that s. 139(5) postulates is that the assessee must discover the omission or wrong statement in the first return. It does not state the sources on the basis of which the discovery is made by the assessee.

7. In the instant case, as seen above, the case of the assessee was that she was not aware of the income which she had disclosed in the revised return. This case of the assessee seems to have been accepted by the Tribunal and the finding recorded by it in this behalf that it was not a case of deliberate concealment is essentially a finding of fact. As already pointed out above, in the instant case, the Tribunal has gone a step further and recorded a finding that there was no material to indicate that by the time the revised return was filed, the concealment had been detected by the ITO. That again is a finding of fact.

8. In this connection, we may point out that reliance was placed on the following footnote in the revised return, before the Tribunal : ” The figure of medical reimbursement is shown approximately. Hence, the correct figures may be taken as per record in the possession of the IT Department.”

9. It was urged that the footnote indicated that the correct figure of medical reimbursement according to the assessee herself was already in the possession of the IT Department and that it was proof of the fact that when the revised return was filed, the concealment had been detected.

10. The same submission has been made before us also by learned counsel for the Department. Suffice it to say, so far as this submission is concerned, that it is not obviously a case where the aforesaid submission may have been ignored by the Tribunal. On the other hand, the footnote was specifically taken into consideration by the Tribunal and notwithstanding the facts stated in the said footnote, the Tribunal came to the conclusion on the facts of the instant case that the concealment has not been established to have been detected by the time the revised return was filed. In this view of the matter, the finding of the Tribunal on this point also is apparently a finding of fact based on appraisal of evidence. On this finding, the case clearly fell within the exception pointed out in the case of Amjad Ali (supra).

Learned counsel for the Department then placed reliance on a Division Bench decision of this Court in Sulemanji Ganibhai vs. CIT (1979) 8 CTR (MP) 11 : (1980) 121 ITR 373, wherein it was held that the duty to disclose particulars of his income arises at the time when the assessee furnishes the return under s. 139(1) and if the assessee, in filing his return, conceals the particulars of his income or furnishes inaccurate particulars, he incurs the levy of penalty under s. 271(1)(c). The provision dealing with the revised return under s. 139(5) of the Act says that if any person having furnished a return under sub-s. (1) or sub-s. (2) discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made. This Court has also, we may point out, carved out an exception similar to the exception carved out by the Allahabad High Court in Amjad Ali’s case (supra). In the case of Sulemanji (supra) also, it has been held that a revised return can be filed only when the assessee discovers any omission or wrong statement in the return earlier filed by him. The omission or wrong statement which entitles the assessee to file a revised return must be one which is discovered later, i.e., which is unintentional and which occurs because of some mistake of which the assessee is not aware.

Learned counsel for the Department then placed reliance on Banaras Chemical Factory vs. CIT (1977) 108 ITR 96 (All). That was a case where a search was carried out in the business premises of the assessee which was a partnership firm and during the course of search, certain books of accounts and other documents were seized from which it transpired that the assessee had been carrying on business on a large scale which was never entered in the account books produced before the Department. The assessee when confronted with this situation, by a written application dated October 4, 1966, made a voluntary disclosure of concealment of Rs. 6 lakhs. Obviously, that was a case where voluntary disclosure was made after the concealment had already been detected.

Reliance was also placed by learned counsel for the Department on H. V. Venugopal Chettiar vs. CIT (1985) 153 ITR 376 (Mad). Here the assessment proceedings under the IT Act had already been completed. However, in proceedings under the WT Act, certain material was detected which indicated concealment of income. Thereafter, the ITO issued notice under s. 148 of the Act for reopening the assessment for the three assessment years. Before such notice could be served on the assessee, the assessee filed returns purporting to be revised returns. It would thus be seen that in this case also the revised returns were filed only after the concealment had already been detected in the proceedings under the WT Act and did not stand on the same footing where a revised voluntary return is filed before the concealment is detected on the ground that an inadvertent error had crept in while filing the original return.

Reliance was also placed by learned counsel for the Department on CIT vs. P. B. Shah & Co. (Pvt.) Ltd. (1978) 113 ITR 587 (Cal) for the proposition that where in the statement of the case it had been stated that the assessee was willing to have the same treated as its undisclosed income, then in penalty proceedings, the Department had no further duty to show that that sum was the assessee’s concealed income. Apparently a fact admitted by one party need not be proved by the other party.

In the instant case, there was no admission made by the assessee that she had concealed any income in the sense as contemplated by s. 271(1)(c) of the Act. On the other hand, as seen above, her case in filing the revised return was that she was unaware of the correct position earlier. In such cases, therefore, the crucial question is whether the filing of the revised return was bona fide and had been made prior to the detection of concealment or it was made only after the concealment had already been detected. A similar question squarely arose before the Division Bench of this Court, although in proceedings under the M. P. General Sales Tax Act, 1958, in CST vs. Thakur Savedekar and Co. (1981) 48 STC 293 (MP). It was held that where the assessee filed voluntarily a revised return before finalisation of assessment showing additional turnover and the Board of Revenue found from the material on record that the assessee had not concealed its turnover or had not filed a false return with dishonest intention, the imposition of penalty on the assessee under s. 43 of the M. P. General Sales Tax Act, 1958, for concealment of turnover would not be justified. In the instant case also, as we have already pointed out earlier, the Tribunal had recorded a finding from the material on record that the assessee had not concealed her turnover, nor had she filed a false return with dishonest intention.

In view of the foregoing discussion, our answer to the question referred to us is that on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty under s. 271(1)(c) of the Act. In other words, the question is answered in the affirmative, in favour of the assessee and against the Department. In the circumstances of the case, however, there shall be no order as to costs.

[Citation : 171 ITR 144]