This is reference under Section 66(1) of the Income-tax Act referring the following question for the opinion of this Court :- "Whether if an assessee submits a revised return under Section 22(3) of the Indian Income-tax Act or seeks permission to revise this return as originally filed after the assessees dishonesty has come to the notice of the Income-tax Officer, a penalty under Section 28(1)(c) can be imposed." The facts are :- The assessee deals in purchase and sale of land and owns property. He did not submit a return in spite of service of notice under Section 22(2) of the Act. On a notice under Section (22)(4) being served on him, he submitted a return on February 24, 1948, for the assessment year 1947-48 in which he disclosed sales of plots and fields to the extent of Rs. 59,222 but instead of returning the actual profit that he made on these sales he returned a loss under the head "business." The Income-tax Officer, not being satisfied with this obviously incorrect return, issued a notice under Section 23(3) calling upon the assessee to prove the cost price of the land sold and fixed the case for March 11, 1948. On that date the assessee filed a statement giving an account of the cost of acquisition and sale proceeds of the various items. That account disclosed a net profit of Rs. 23,010 instead of a net loss of Rs. 5,192-8-9 shown by him in his return. No explanation was offered how he arrived at the profits at the flat rate of 5 per cent. The only ground for not returning the actual profits as disclosed in the statement was that the sales were not fully effected.
2. At the adjourned hearing on the March 23, 1948, the assessee made an application purporting to be under Section 22(3) of the Act seeking permission to revise the return. In this application, it was said that the return prepared hurriedly and filed on the February 24, 1948, as the Income-tax Officer declined to grant time, that a profit of Rs. 2,793-8-0 on the sales of two plots remained to be shown in a hurry and that the profit should be ascertained in the next year as all the sales were not effected. It was contended that if the book profits were to be taxed, the book profits of Rs. 23,010 were offered for assessment. It is also stated in the application that the offered was under the bona fide impression that the profits arising from the purchase and sale of fields were not at all taxable.
3. The Appellate Tribunal did not accept this plea of bona fide impression which could not be true in view of th fact that the assessee had returned income at a flat rate of 5 per cent. Although it is not stated in the application or the statement dated March 11, 1948, it was urged before the Appellate Assistant Commissioner that the true profits were not returned as the books were not ready. This contention was however not pressed before the Tribunal. Thus on the facts found by the Appellate Tribunal the submission of incorrect return was intentional and the return was sought to be corrected when the dishonesty was noticed by the Income-tax Officer.
"If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal in the course of any proceedings under this Act, is satisfied that any person has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty......in addition to any tax payable by him, a sum not exceeding one and a half times the amount of income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income." This section is attracted if there is a finding that th assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars of such income. The learned counsel for the assessee contends that there is no such finding. He drew our attention to the orders of the Income-tax authorities. The Income-tax Officer says : "His previous record shows that his system of account is mercantile.
Had he valued his stock as he has done now it would have disclosed his real profit. I, therefore, hold that he has deliberately concealed his income by keeping the account incomplete......." "He supressed his true income but finding that th concealment was discovered he himself offered it for tax later on. Evidently, the return filed was not an honest return and the petitioner was fully aware of it at the time of making it. It was therefor a deliberate attempt on his part to defraud the Government of its rightful dues." 5. In the Appellate Tribunal, there was a difference of opinion between the President and th Accountant Member. According to the latter, Section 28(1) is not attracted if a revised return disclosing true profits is filed before the order of assessment is passed, or at any rate, before a notice under Section 28(1)(c) is ordered. The Accountant Member did not find that the assessee did not conceal particulars of his income or did not deliberately furnish inaccurate particulars of such income when he made the return. The finding of he Tribunal indicates that the facts required by Section 28(1)(c) are established.
On a perusal of the opinion of these two officers, it appears that the only question that was argued before them was a question of law as referred to this Court for opinion. In view of the difference of opinion, the case was referred to the Judicial Member under Section 5A(7) of the Act to decide "Whether on the facts of the case, Provisions of Sections 28(1)(c) are attracted." "The Income-tax Officer on March 11, 1948, found that the assessee had deliberately furnished false particulars of his income. As it was found by the Income-tax Officer during the course of these proceedings that the assessee had deliberately furnished inaccurate particulars of his income, penalty under Section 28(1)(c) was attracted. The mere fact that the assessee applied for permission to revise the return does not prevent the application of the provisions of Section 28(1)(c)." As a matter of fact, a revised return as such has not been furnished.
The learned counsel for the assessee contends that the statement made on March 23, 1948, must be deemed to be a revised return.
"If any person has not furnished a return within the time allowed by or under sub-section (1) or sub-section (2), or having furnished a return either of those sub-sections, discovers any opinion or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made." Under Rule 19 of the Indian Income-tax Rules, 1922, made by the Board of Inland Revenue in exercise of the powers conferred by Section 59 of the Act, the return under Section 22 shall be made in the form prescribed and shall be verified in the manner prescribed therein. That verification requires a declaration that the return is correct and complete and that the amounts of total income and total world income and other particulars shown are truly stated and that no other income accrued or arose or was received by the assessee during the account year and that the had during the said year no other source of income.
The statement filed on March 23, 1948, does not obviously comply with those requirements. Part IV of the return provides for furnishing particulars of income from business to be disclosed in the manner stated therein. As the assessee had followed the mercantile system of accounting he had to disclose the figure of profit of loss as appearing in his books of account, increased or decreased by the several items specified in that part. Nothing of the kind was done by the assessee.
Where a return made is not in the prescribed form, or is not signed and verified as required by the prescribed form, it is an invalid return and can be ignored by the Income-tax Officer who can thereupon make an assessment under Section 23(4) of the Act. In Rajya Sayyid Mohammed Mehdi v. Commissioner of Income-tax, C.P. and U.P., it was held that a return signed by a general agent who was not specially empowered to sign the return was no return in law. In Special Manager, Court of Wards, Narsingdas v. Commissioner of Income-tax, U.P., it was held that a memo of appeal which required a signature and verification of the appellant personally was invalid if it was signed and verified by an appellant personally was invalid if it was signed and verified by an agent of the appellant. In Gopaldas Parshottamdas v. Commissioner of Income-tax, C.P. and U.P., the assessee had filed an incorrect return.
During the course of the proceedings he sent a letter to the Income-tax Officer informing that due to some in sunder standing an item of income was omitted from the return and that it may be treated as income. It was held that this letter did not amount to a revised return. The application dated March 23, 1948, cannot therefore be treated as a revised return. There is no provision in the Income-tax Act to seek permission to revise a return. It is a right of the assessee to submit such return. The application dated March 23, 1948, has therefore to be ignored for this purpose.
7. Our answer therefore is that where an assessee seeks permission to revise the return as originally filed after the assessees dishonesty has come to the notice of the Income-tax Officer a penalty under Section 28(1)(c) can be imposed. It is not necessary to consider the hypothetical case of an assessee who submits a revised return and the application of the decision in Commissioner of Income-tax, C.P. and U.P. v. Badridas Ramrai and Attorney-General v. Midland Bank Executor and Trustee Company, Limited, as Marshs Executor relied on by the learned counsel for the Commissioner and challenged by the other side.
The High Court cannot be called upon to answer hypothetical questions which do not arise on the facts of the case.
8. The assessee fails and must pay the costs of this reference including the costs of paper book. Counsels fee Rs. 100. A copy of this judgment be sent to the Appellate Tribunal in accordance with Section 66(5) of the Act.