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income-tax Officer Vs. A. Natesa Udayar - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)7ITD576(Mad.)
Appellantincome-tax Officer
RespondentA. Natesa Udayar
Excerpt:
1. these are appeals filed by the revenue against the orders of the aac, cancelling the penalties imposed by the ito under section 271(1)(c) of the income-tax act, 1961 ('the act') for the three assessment years 1972-73, 1973-74 and 1974-75.2. the assessee runs a rice mill and also a groundnut oil mill. besides he carries on business in the purchase and sale of rice and paddy. he was not maintaining proper books of account from which true and correct income could be deduced. that was an admitted fact. for the assessment year 1972-73, a return was filed on 7-2-1973 disclosing an income of rs. 8,947 consisting of income from property and business in paddy, rice and groundnut. the income of rs. 13,022 from business in paddy, rice and groundnut was arrived at not on the basis of the books.....
Judgment:
1. These are appeals filed by the revenue against the orders of the AAC, cancelling the penalties imposed by the ITO under Section 271(1)(c) of the Income-tax Act, 1961 ('the Act') for the three assessment years 1972-73, 1973-74 and 1974-75.

2. The assessee runs a rice mill and also a groundnut oil mill. Besides he carries on business in the purchase and sale of rice and paddy. He was not maintaining proper books of account from which true and correct income could be deduced. That was an admitted fact. For the assessment year 1972-73, a return was filed on 7-2-1973 disclosing an income of Rs. 8,947 consisting of income from property and business in paddy, rice and groundnut. The income of Rs. 13,022 from business in paddy, rice and groundnut was arrived at not on the basis of the books maintained by the assessee but by estimating the profit on the turnover as determined for the purposes of sales tax assessment by the sales tax authorities. The assessment for this year was completed accepting the return.

3. In the same manner for the assessment year 1973-74, a return was filed showing an income of Rs. 14,240, again estimating the income on the turnover as adopted by the sales tax authorities and also estimates of the hulling receipts at Rs. 5,000. The assessment was completed for this year by adding a sum of Rs. 6,000 on agreed basis on the ground that the estimates adopted by the assessee were found to be inadequate.

Thus, the total income was determined at about Rs. 21,500.

4. For the assessment year 1974-75, the return was filed disclosing an income of Rs. 20,770 in the same manner as in the previous year and the assessment was completed by adding a further sum of Rs. 7,906, which, as seen from the penalty order, was deleted in appeal. For this year, the turnover in rice and bran was admitted at Rs. 10,15,504 and the profit adopted thereon was 2 per cent.

5. Subsequently, during the course of the assessment proceedings for the assessment year 1976-77, it was noticed that the assessee acted as an agent of Civil Supplies Corporation in that year and had done business, which was not recorded in the books of account of that year.

Further examination of the books of account showed that the assessee had a savings account with the Bank of Baroda, Dharmapuri, in which the transactions relating to the Civil Supplies Corporation were noted and they amounted to about Rs. 8 lakhs between the period 21-11-1975 to 24-3-1976. None of those transactions was recorded in the books of account maintained by the assessee. Eventually, it was found that the peak credit in the bank account was Rs. 97,506 as on 18-3-1976. The assessee was unable to offer any explanation for the source of those credits except stating that he conducted this business with the cash available with him, which was disclosed under the Voluntary Disclosure Scheme and that he was not in a position to adduce satisfactory evidence proving the credits making up the peak credit of Rs. 97,506.

However, the sum of Rs. 97,500 was offered for assessment on spread over basis in the following manner : It appears that this was the arrangement arrived at in consultation with the IAC and pursuant to that arrangement the assessee filed revised returns including the above sums for assessment. It was after completing the assessments that the ITO was of the opinion that the assessee had concealed this income when he filed the original returns of income. He initiated penalty proceedings for levy of penalty for concealment of income. In reply to the penalty notice, the assessee submitted that he used to buy paddy from villagers on credit and after despatch to the warehouses of Civil Supplies Corporation, submitted bills, received payments and disbursed the same to the agriculturists and was not in a position to prove at that point of time who were those agriculturists and from whom he got the money or the goods. Since he agreed for the spread over as a sequel to the arrangement arrived at with the IAC and in good faith and to keep up the cordiality with the department, he should not be held to be guilty of concealing the particulars of income and the penalty proceedings should be stopped.

6. The ITO did not accept the assessee's explanation. In his opinion, the assessee could not be exonerated from the guilt of concealment of income because the sum of Rs. 12,500 was offered under the head 'profits and gains of business or profession' as 'cash utilised in business offered for assessment in part' and it clearly established that the assessee had concealed the particulars of his income. The very fact that the sum of Rs. 12,000 was offered as business income in the revised return, according to the ITO, proved that the assessee concealed his income in the original assessments. Applying the rule laid down by the Madras High Court in the case of CIT v. Krishna & Co.

[1979] 120 ITR 144, he levied a penalty of Rs. 12,500 for the assessment year 1972-73. For similar reasons, he levied penalties of Rs. 13,000 for the assessment year 1973-74 and Rs. 20,000 for the assessment year 1974-75, which were equal to the income concealed.

7. Aggrieved by these penalties, appeals were filed before the AAC. The AAC, having regard to the facts of the case particularly the spread over of income permitted by the IAC, held that there was no clear finding that the income offered for assessment in these years by way of spread over representing the concealed income of the assessee from business for those years. The finding of the ITO that there was concealment of income could relate only to the assessment year 1976-77 and not for these years under appeal. The additional income offered by the assessee could not, therefore, be regarded as concealed income and on that ground he cancelled the penalties imposed by the ITO, against which the department has filed the present appeals.

8. The learned departmental representative submitted that on the facts of this case, particularly when the assessee filed returns of income admitting the additional income as his, income, no more proof is necessary to show that the assessee had concealed this income in the original returns filed and that on the authority of the Madras High Court decision in Krishna & Co.'s case (supra), the AAC should have confirmed the levy of penalties. When the assessee had offered specific sums as his income, the AAC, should not have held that the ITO had not proved that there was concealment of income and that he did not record a clear finding that there was concealment of income. The AAC had also referred to a decision of the Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 697. The submission of the learned departmental representative before us is that the decision of the Supreme Court does not apply to a case where an assessee admits an income as his income which was not disclosed in the original return. He also pointed out that through the ITO had specifically referred to the decision of the Madras High Court in the case of Krishna & Co. (supra), the AAC had totally overlooked it. His decision given in the circumstances was vitiated and should not be upheld. He strongly pleaded for the reversal of his order.

9. On the other hand, Shri K. Srinivasan, the learned counsel appearing for the assessee, submitted that what all that were argued for and on behalf of the department by the learned departmental representative related wholly to the assessment year 1976-77 in which year there was a categorical finding that there could be concealment of income and that too in a sum of Rs. 97,500. If a penalty had been levied for concealment of income of that sum for that year, the position would have been different. But on the representation of the assessee and after considering the explanation given by the assessee which was referred to in the penalty order and also by the AAC in his order, the IAC had with full knowledge of the implications permitted the assessee to spread the income over a period of years starting from the assessment year 1972-73. So, when income was returned for the assessment years 1972-73, 1973-74 and 1974-75 pursuant to the agreed scheme of spread over, how can it be said that there was concealment of income for those years and how that income could be said to be the concealed income of the assessee. That was only an additional income offered for the purpose of purchasing peace and no penalty could be imposed in respect of that income because that income could not be said to be concealed income. There cannot be even a deemed concealment in respect of that income. The department has to prove that even that additional income, offered for the assessment as a consequence of an agreement for spread over, still represented the concealed income. It is that finding that was lacking in this case which the AAC has pointed out and rightly cancelled the penalties. It is, therefore, not open to the learned departmental representative now to contend that the AAC was factually wrong in saying that the ITO did not give a categorical finding of concealment of income, nor was he correct in stating that the AAC had not referred to the decision of the Madras High Court in Krishna & Co.'s case (supra). According to Shri Srinivasan, the learned advocate for the assessee, the said decision of the Madras High Court had no application to the facts of this case because in that case there was an admission by the assessee that certain income belonging to him was his concealed income and on those facts the Madras High Court held that penalty was impos-able. In fact, that decision was followed later in the decision in Rathnam & Co. v. IAC [1980] 124 ITR 376 (Mad.) also.

But those are not the facts present here. On the contrary, the decisions of the Madras High Court in CIT v. P.M.P. Soundara Pandian & Bros. [1983] 140 ITR 385 and in CIT v. Prakasam Readymade Stores [1983] 140 ITR 601 more aptly applied to the facts of this case because in those later two decisions, the Madras High Court had categorically held that mere offer of income for the assessment does not ipso facto prove that it represented concealed income nor could it be said that there was an admission of guilt of concealment for, in such cases, offers were made more to hasten the process of assessment rather than admitting the guilt of concealment.

10. The learned departmental representative in reply pointed out that it is the Madras High Court decision in Krishna & Co.'s case (supra) that should apply and that the facts found for the offer of income of these years, if concealment of income is there in 1976-77, a fortiorari, it must be there in these assessment years because it was that accumulated income that was found to have been concealed in that year and had been agreed to be spread over for these years also.

11. In our opinion, the assessee is entitled to succeed. First and foremost there is no admission by the assessee that the income offered for assessment for these three assessment years is his concealed income. The explanation offered by the assessee for these years was not given to us on the ground that it was readily available but the reply given by the assessee was quoted by the ITO in his penalty order passed for the assessment year 1976-77, a copy of which was placed in our hands, which shows that the assessee had stated as under : The assessee was the procuring agent for the Tamil Nadu Civil Supplies Corporation for the purchase of paddy during the assessment year 1976-77 The assessee used to buy paddy from villagers on credit and after despatch to the warehouses of Civil Supplies Corporation submitted bill and received payments from the Corporation periodically in short intervals of a week. On a realisation of the moneys, the same was disbursed to the agriculturists. The assessee had been in this trade for more than two decades and his credits worthiness was so good that village farmers who were able to get in crative price for paddy were willing to wait for a week or so. Thus, though no actual cash was paid by the assessee for purchases, he could not conclusively prove this claim and, thus, agreed for the spread over of Rs. 97,500 in five assessments from 1972-73 to 1976-77 which was the peak credit.

This shows that the assessee though not actually paid cash for the purchases, he could not conclusively prove this claim and, therefore, agreed for the spread over of Rs. 97,500 in five assessments from 1972-73 to 1976-77 and earlier in the same penalty order the covering letter filed by the assessee along with the revised return was also quoted, which shows that the assessee offered the sum for assessment with a view to keep the cordiality with the department and in good faith and as per the discussions that his representative had with the IAC. There is no admission in any of these letters that when the assessee offered these sums of Rs. 12,500, Rs. 13,000 and Rs. 20,000 for these three years under appeal, he was admitting them to be the income earned by him for these years as income from business and not disclosed in the original assessments and that it amounted to concealed income. As a result of the agreement for the spread over, he was obliged to file returns for the earlier assessment years, which he did and which were regularised by issuing notices under Sections 147 and 148 of the Act. Therefore, it is not a case where the ITO had proved in a categorical way that these sums represented the concealed income of the assessee although these sums were returned subsequent to the original assessments. It has to be remembered that these sums were offered for assessment as a consequence of a sort of an arrangement reached between the department and the assessee. Secondly, the assessee never maintianed accounts and the returns were being filed by estimating the turnover on the strength of turnovers fixed by the sales tax authorities and that was being accepted by making a few additions here and there. That also shows that the assessee had no particular knowledge that these sums could be the income of those years. It is always open to the department to show that the rate of net profit estimated on the turnover fixed by the sales tax department was lower and that could have been increased. Not having done so, the department must have accepted the position that the income estimated by the assessee for these years was quite probable and correct or nearly correct. It is only when the Bank of Baroda pass book was examined and the peak credit was found and the assessee was unable to provide explanation acceptable to the department that a scheme was evolved under which the income were agreed to be spread over for assessment purposes. That does not itself show that there was concealment of income by the assessee of those sums in these years. It is this aspect that the AAC had been emphasising when he mentioned in his order that there was no categorical finding given by the ITO that these sums represented the concealed income of the assessee.

12. Now, looking into the decision of the Madras High Court in Prakasam Readymade Stores' case (supra), we will find that there also sums were offered for assessment even though the assessee contended that the loans were genuine. The offer in that case was made for a speedy end of the assessment proceedings as in this case (the assessee mentioned in his covering letter that he was agreeing for spread over in good faith and to keep cordiality). When penalty was imposed under Section 271(1)(c) and when that penalty was cancelled by the Tribunal and when the matter was taken up to the High Court at the instances of the revenue, the High Court pointed out that since the letter of the assessee did not contain any admission that the loans disclosed in the accounts were havala transaction, a finding of concealment or a finding that the cash credits represented the assessee's income could not be arrived at. The High Court laid down the rule, thus : ...The assessee's offer to let the peak credit be treated as taxable income only hastened the process of assessment. It did not furnish any evidence, by way of admission or otherwise, to the effect that the hundi loans were only havala transactions and represented the assessee's concealed income.(p. 605) Thus, a mere offer to let the peak credit to be treated as income does not furnish any evidence by way of admission, as contended for by the learned departmental representative, that it represented the assessee's concealed income except that it would only hasten the process of assessment. 13. In P.M.P. Soundara Pandian & Bros.' case (supra) also the High Court has come to a similar conclusion. In that case also there was an offer for the addition of the peak credit for the purposes of assessment. There the High Court pointed out that since either before the ITO or before the IAC, while offering the peak credit for assessment, the assessee had not confessed that the cash credits in question really represented the concealed income, the mere offer could not be taken as amounting to concealment of income and penalty levied under Section 271(1)(c). That is also a case where the assessee itself offered the peak credit for the purposes of assessment, but yet the High Court held that such an offer did not mean a confession on the part of the assessee that the cash credits in question represented the concealed income. The High Court insisted in this case that even when such an offer was made, there must be evidence in the penalty proceedings to show that the cash credits were not genuine and that they were really camouflaged or concealed income of the assessee. It is, therefore, very difficult to hold, in the light of the law laid down by the Madras High Court in the above two cases, that the mere offer of the peak credit for assessment made by the assessee on the facts of this case amounted to an admission of concealment of income.

We are, therefore, unable to subscribe to the view canvassed on behalf of the revenue.

14. In Krishna & Co.'s case (supra), which decision the ITO invoked for purpose of levy of penalty and which the learned departmental representative states that the IAC has ignored, the facts were that the books of the assessee showed certain borrowings and repayments from certain bankers. The assessee produced the discharged hundies before the ITO who, however, held that the bankers had merely lent their names for bogus havala transactions. Thereupon the assessee agreed to the addition of the peak credit as its income. On these facts, the High Court held that in a case where the assessee himself has admitted that the amount represented his own income, no further evidence would be necessary to show that it was the amount which represented his concealed income. The assessee having readily agreed to the inclusion of the amount as his income, the levy of penalty was justified.

15. Here, in the case before us, there was no finding given by the ITO, that his explanation was bogus as in the case of Krishna & Co. (supra) before the Madras High Court, that the bankers who lent their names were bogus havala transactions. That is the very important rinding of fact recorded by the ITO as a consequence of investigation made, which cornered the assessee to force himself to agree to the addition of the peak credit as its income. Here there was no such finding. The assessee offered the explanation that by reason of his standing in the market he was able to purchase paddy and rice on credit from the agriculturists, but could not prove it. The department was not able to show by any independent evidence that his explanation was bogus. Because of his inability to prove, the assessee agreed for the addition of the peak credit on a spread over basis. Therefore, the case before us is more akin to the case decided by the Madras High Court in P.M.P. Soundara Pandian & Bros.' case (supra) and Prakasam Readymade Stores' case (supra) and farther from the case decided in Krishna & Co.'s case (supra). We cannot, therefore, say that the order of the AAC is vitiated even when he had not referred to the decision of the Madras High Court in Krishna & Co.'s case (supra).

16. For the above reasons, we hold that the AAC is right in cancelling the penalties levied. We, therefore, confirm his orders and dismiss these three appeals.

1. On a careful consideration of the facts in this case, the submission of the parties and the order proposed by my learned brother, I find myself unable, with respects, to agree with him in his order.

2. Proceedings for reassessment and levy of penalty fot the years under appeal have to be read in the context of the undisputed facts found or admitted by the assessee, in the course of proceedings for assessment and levy of penalty for the assessment year 1976-77, as they are direct sequel to such facts found or admitted. The facts so found show (7) that admittedly the assessee had acted as the purchasing agent of the Tamil Nadu Civil Supplies Corporation not only during the previous year relevant to the assessment year 1976-77 but also for earlier years covered in the assessment years under appeal, as seen from his admission in his reply to the show-cause notice of penalty under Section 271(1)(c) for the year 1976-77 that he was in the trade for more than two decades and in the statement before the AAC that he was so acting during the years ; (2) that the existence of such source of income, namely, the purchasing agency of Tamil Nadu Civil Supplies Corporation was not disclosed to the department before for any of these years, much less any income therefrom was shown in the returns originally submitted ; (3) that the above facts came to light only when the ITO on going through the books of account produced for the assessment year 1976-77 discovered large number of credits relating to transactions of the said purchasing agency running to more than Rs. 8 lakhs between the period from 2141-1975 to 24-3-1976 which were found not to have been recorded in the books of account maintained ; (4) that when the assessee was asked to explain the nature of the transactions and the wherewithal after making initially some attempts to offer some explanation, finally agreed to be assessed on a sum of Rs. 97,500 said to represent peak credit as on 18-3-1976 spread over in five assessments from 1972-73 to 1976-77 and pursuant to such agreement he filed returns for these years returning the additional amount included in the assessments ; and (5) that the additional amounts were returned as income from business with the remark 'cash utilised in the business'. The order of penalty for the years under appeal shows that such returns filed by the assessee were regularised by action taken by the ITO under Section 147(a) by issue of a notice under Section 148 on the ground of under assessment by reason of the assessee's failure to disclose the true income and in response to the notice the assessee has stated that the returns already filed may be taken as sufficient compliance. It is also an undisputed fact that the books of account maintained by the assessee for disclosed business were not maintained satisfactorily, as would enable deduction therefrom of true and correct income and the profit from such business was shown by the assessee himself in the return estimating it at a percentage of the turnover.

The order of the AAC under appeal adverts to the fact that the appellant had stated that the amount utilised in paddy business were out of income earned in the earlier years and he, therefore requested the amount to be spread over during the years 1972-73 to 1976-77 as offered in the revised returns of income filed. On the aforesaid facts, according to me, the inescapable conclusion is that the assessee has clearly exposed himself to action under Section 271(1)(c) and the decision of the Madras High Court in Krishna & Co.'s case (supra) would apply and the decision relied on by the assessee are clearly distinguishable. The AAC in cancelling the penalty in this case seems to be of the view that unless the exact quantum of income found to have been earned by the assessee for the relevant years is ascertained and found to have been concealed, penalty cannot be levied on the basis of ad hoc amounts returned by the assessee. As in this case, according to him, the additional income as offered by the appellant was accepted in toto and there are no clear findings by the ITO regarding income suppressed by the appellant in these years the penalty cannot be sustained. But, according to me, on the facts stated above, where undisputedly the assessee had not disclosed the source of income representing the purchasing agency of the Tamil Nadu Civil Supplies Corporation or any income therefrom in the original assessment proceedings and on being required to explain the transactions relating to the said source discovered by the ITO in the course of proceedings for the assessment year 1976-77 agrees to get assessed on the income from the said source for all the years by spread over of certain agreed sum and, accordingly, returns additional amounts of income for these years on that basis and the department also accepts such offer, I fail to see what is further required to attract the provisions of Section 271(1)(c) and the levy of penalty thereunder. It is also to be noted from the above facts that the returns filed by the assessee were not voluntary before detection by the departmental authorities of the source of income, but only when the ITO discovered in the course of assessment proceedings for the year 1976-77 about the existence of the source. There was also no explanation offered by the assessee as to why neither the existence of the source, namely, the purchasing agency of Tamil Nadu Civil Supplies Corporation, nor any income therefrom was disclosed in these years in the original assessment proceedings. There is nothing on record to show that the assessee had reached any agreement with the IAC to absolve him of any penalty in regard to this settlement and the fact that actually penalty has been levied would show that evidently there has been no such agreement. In these circumstances, the AAC was clearly wrong in cancelling the penalties. I would, therefore, set aside his order and restore that of the ITO for all these years. 3. In the result, I allow the departmental appeals.

REFERENCE UNDER SECTION 255(4) OF THE ACT - As we are unable to agree on the question whether in this case penalty should or should not be imposed on the assessee under Section 271(1)(c) for these three assessment years under appeal, we refer the following point of difference of opinion to the President, for reference to Third Member, under Section 255(4) : Whether, on the facts and in the circumstances of the case, the assessee is guilty of concealment of income within the meaning of Section 271(1)(c), so as to be visited with penalties, as imposed? 1. These appeals have come up for hearing before me as a Third Member to resolve the difference of opinion between the two learned members phrased as under : Whether, on the facts and in the circumstances of the case, the assessee is guilty of concealment of income within the meaning of Section 271(1)(c) so as to be visited with penalties, as imposed The difference applies to all the three years under appeal as penalties had been levied by the ITO for all the three years.

2. The assessee runs a rice and groundnut oil mill. He also carries on business in the purchase and sale of paddy, rice, etc. These businesses have been carried on quite for some time. It would appear that the assessee for the years under appeal even as for the other years was not maintaining proper books of account but was returning his income from the different sources by adopting an estimate on the turnover fixed in the commodities dealt with by him as determined by the sales tax authorities. For the assessment years under appeal, the ITO completed the assessments on the basis of the above returns.

3. During the assessment proceedings for the assessment year 1976-77, the ITO, it would appear, noted for the first time that the assessee was an agent of the Civil Supplies Corporation. According to the ITO, this information was not recorded in the books of account or even intimated to the ITO. A scrutiny of the assessee's Savings Bank Account with the Bank of Baroda revealed transactions to the extent of about Rs. 8 lakhs between 21-11-1975 to 24-3-1976. These transactions were not recorded in the books of account maintained. From the entries in the bank account, the ITO worked out a peak credit of Rs. 97,506 on 18-3-1976. The assessee explained that he conducted his business with the cash available with him which was disclosed under the Voluntary Disclosure Scheme but expressed his inability to adduce satisfactory evidence for proving the credits making up the peak credit of Rs. 97,506. For the assessment year 1976-77, the assessee filed a revised return showing an extra income of Rs. 26,000. Likewise revised returns were filed for the three years under appeal so that for the five years from 1972-73 to 1976-77, the extra income shown totalled up to the peak credit of Rs. 97,506 in round figures. It would appear that this arrangement was made in consultation with the IAC. The assessee had offered a further amount in addition to the original amount assessed as income from business as 'cash utilised in business offered for assessment in part'. As the assessment had already been completed, the ITO issued a notice under Section 148 in response to which the assessee stated that the return already filed by him earlier on 16-4-1969 be taken as sufficient compliance. The ITO completed the assessment on the basis of the new income returned. Starting the penalty proceedings under Section 271(1)(c) the ITO, however, rejected the claim of the assessee that there was no concealment and levied penalties of Rs. 12,500, Rs. 13,000 and Rs. 20,000 for the assessment years 1972-73, 1973-74 and 1974-75, respectively. The charge against the assessee is best summarised by quoting the following from the order of the ITO for the assessment year 1972-73 : The facts of the case go to show that the assessee had concealed his true income for this assessment year. The very fact that the sum of Rs. 12,500 has been offered as business income in the revised return goes to show that he had concealed this income in the original assessment. Having regard to the decision of the Madras High Court in the case of CIT v. Krishna & Co. [1979] 120 ITR 144 also, penalty is clearly leviable. I levy a penalty of Rs. 12,500 and this should be paid as per demand notice.

4. On appeal, the AAC deleted the penalties levied on the ground that there was no finding by the ITO regarding the income suppressed by the assessee. According to the AAC, the finding of the ITO at best related to the subsequent assessment year, viz., 1976-77 and the additional income returned had also been accepted by the ITO in toto.

5. On an appeal being filed by the department before the Tribunal, the two learned members differed on the levy of penalty and the above quoted point of difference has been referred to me for resolution.

6. The learned departmental representative has pointed out that here was a clear case of concealment by the assessee. As pointed out by the ITO, the assessee had a source of income in the agency of the Civil Supplies Corporation and both the source as well as the income therefrom had been suppressed by the assessee for the years under appeal. It was only when the ITO took action after the investigations for the assessment year 1976-77 to tax the omitted income that the assessee came up with the revised returns. This was a clear case of admission of guilt on the part of the assessee. The mere fact that the revised income has been accepted by the ITO cannot exonerate the assessee from the charge of concealment. Taking me through the detailed statements filed by the assessee, the incongruities therein, the capital build-up explained with reference to the assessed income and the credits in the Bank of Baroda, the learned departmental representative pointed out that the assessee was systematically concealing his income from the source referred to above and it was only when the ITO discovered the same that revised returns were filed. The assessee had in fact got a substantial advantage in the spread over of the income. Merely because such an advantage was extended to him, it cannot wipe out the contumacious conduct. By filing a return of income including the omitted amounts, the assessee has accepted the fact that what was omitted was income and he deliberately omitted it. The facts of filing a revised return does not exonerate the assessee. He referred to the decision of the Madras High Court in Krishna & Co.'s case (supra). Reference was also made to the decision in Rathnam & Co.'s case (supra) especially those portions relating to the ratio in Addl.

CIT v. E. Bhoopathy [1978] 113 ITR 188 (Mad.). According to the learned departmental representative, not only was there suppression of a source and the income therefrom but also a candid admission by the assessee of the escaped income being not returned.

7. For the assessee, it is pointed out by the learned counsel that there was no concealment or suppression. The assessee was doing a regular business and the income therefrom was estimated from year to year on account of the unacceptability of the books. If at all there was a discrepancy for the assessment year 1976-77, the department after examining the details and in the light of the circumstances of the case has not charged the assessee with concealment for that year. According to the learned counsel, therefore, there was no justification for charging the assessee with concealment for an earlier year. He also referred to the manner in which the return was filed and the agreement with the income-tax authorities in pursuance to which voluntary returns were filed by the assessee. It was only after returns were filed by the assessee on his own that action was taken to regularise the assessments by issuing notice under Section 148. This itself showed the bona fides of the assessee. The addition in this case was made not because of any irregularities in the accounts or omission of income but only because the assessee's explanation for the peak credit for a subsequent year was not accepted by the ITO. It is also pointed out that the revised returns were also filed only to ward off unnecessary and long litigation with the department and to buy peace. This should not be interpreted as the basis for the levy of penalty. In the light of the above facts, according to the learned counsel, the decision in Krishna & Co.'s case (supra) has no application to the case.

8. In my opinion, there is no case for levy of penalty for any of the years under appeal. In the first place, even though much has been made of about the suppression of a source of income, non-return of a particular income, etc., by the assessee, the facts do not support this imputation. The assessee was a dealer in rice and has been assessed on the income therefrom. His books of account were not accepted. In none of the preceding orders of the ITO any detailed reference to the books obtains also. The assessee returned his income by estimating the net profit on the turnover in rice which, with modifications, was accepted by the ITO. The alleged new source is the agency of Civil Supplies Corporation. This is only an aspect of the assessee's business where along with many others the assessee sells rice and paddy to the Civil Supplies Corporation purchasing them from agriculturists. The Civil Supplies Corporation is only one of the several constituents of the assessee and is as much involved in his rice business as his other constituents. The mere fact that in respect of Civil Supplies Corporation he was an agent to supply paddy to them does not in any way make this agency a separate or new business or a new source of income.

What I want to say is that there is no factual information to show that what the assessee sold to the Civil Supplies Corporation has not been included in the estimate of rice sales which he has adopted for returning his income. No positive evidence and adverse to the assessee on this point has been brought at any stage of the proceedings in this case or even before me. It would not, therefore, be correct to say that the existence of a separate source, viz., the purchasing agency of the Civil Supplies Corporation was not disclosed nor any income therefrom was not disclosed.

9. The assessment year during which investigations seems to have been done by the ITO about certain deposits in the bank was the assessment year 1976-77. There was a peak credit of Rs. 97,500. The assessee's explanation for this was not believed. Even if, therefore, the entire amount of Rs. 97,500 had been added as income for that year, the mere fact that the assessee's explanation for the peak credit was not believed may not have been a sufficient ground for levying penalty even for that year. Be that as it may, the ITO did not add the sum of Rs. 97,500 as income of that year even after coming to the conclusion that the explanation for the source of the peak credit is not satisfactory.

What the ITO, on the contrary, did was to hold that the assessee returned certain items of income for the earlier years sensing the attempt on the part of the ITO to make an addition of Rs. 97,500. It is in this context that the ITO has held the assessee guilty of concealment by filing revised returns for the earlier years 1972-73 to 1975-76 after certain proceedings were taken by the ITO for the year 1976-77. Apart from the fact that there was no proceeding for the assessment years 1972-73 to 1974-75 pending and no action taken for that year and not even any evidence that the assessee could have any extra income over and above what he was assessed, the alleged revised returns are in law not 'revised returns' at all. A revised return can be filed under the law before an assessment is made if there is a mistake, omission, etc., after the assessment is completed, the assessee has no right to file a revised return. If at all he has filed an alleged revised return, it can at best be regarded as an intimation to the ITO on his own accord by the assessee of some extra amount he wants to be assessed. If the assessee has not returned that income in even this alleged 'revised return', he would not have committed a fault on that score. In the present case, after the assessee indicated for the assessment years under appeal, for which no action was pending, that he would like to be assessed on certain extra income, the ITO started the reassessment proceedings by issuing notice under Section 148. Making use of the same returns, the returned income was assessed.

It would not be proper, therefore, as a matter of fact to say that for these years the assessee did not suo moto come up for an assessment.

10. The orders below and the other details produced before me clearly indicate that the assessee filed these returns as part of a scheme of discussions he had with the IAC. His contention before the original bench of the Tribunal and before me also is that these returns were filed and these items of income were offered for assessment 'to purchase peace and to ward off any accusation as to suppression of income'. The learned counsel has pointed out that for these years certainly there was no suppression of income and if the authorities had not advised the assessee to spread over the deficient amount in the manner the returns were filed, the assessee would not have done so. In effect the learned counsel's argument, which I find difficult to reject, is that the extra amounts were offered for assessment not because the assessee felt them to be his income but because the authorities advised him to do so. This being so, it would not be correct to say that the assessee offered for assessment income which he knew to be income and which he had suppressed. This is apparently the only basis on which the ITO has levied the penalties, as would be clear from the portion of his order quoted above. The ITO states that 'the very fact that the sum of Rs. 12,500 has been offered as business income in the revised return goes to show that he had concealed this income in the original assessment'. Neither factually nor as a matter of law can this statement be accepted. On a point of law the ITO has referred to the decision of the Madras High Court in the case of Krishna & Co.'s (supra). In my view, this decision does not apply to the present case at all. The facts of the present case, as pointed out above, involve assessment of three preceding years 1972-73 to 1974-75 for which no action was pending and as to which, according to the ITO, the investigations done by him for the assessment year 1976-77 were the basis. In Krishna & Co.'s case (supra) the entire matter related to the same assessment year. It would not, therefore, be correct to say that the assessee should be even legally regarded as having offered as business income any amount earlier concealed.

11. I, therefore, agree with the learned Accountant Member that the penalties levied should be cancelled not only on the purely factual ground of no suppression of income for the years under appeal but also on the legal imputation that the ratio of the decision in Krishna & Co.'s case (supra) being not applicable, the assessee should be exonerated from any charge of contumacious conduct.

12. The files will now go back to the original bench which heard the case for disposal, according to law.


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