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S.R. Arulprakasam Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1985)11ITD752(Mad.)
AppellantS.R. Arulprakasam
Respondentincome-tax Officer
Excerpt:
1. the ito levied, in the first assessment itself, earlier two being loss and nil, a concealment penalty of rs. 2,17,910, being one and a half times the tax avoided. the commissioner (appeals), following the tribunal order which reduced the quantum assessed and to which one of us, the judicial member was a party, reduced it to the minimum at or about rs. 82,000. this appeal is for complete deletion.2. the assessee, an individual, is a film distributor. he furnished on 11-10-1977 a return of income with necessary annexures and statements for rs. 1,03,740. then on 14-3-1978, there was an income-tax raid in his house. then in april 1978, he filed a revised return disclosing an income of rs. 2,36,248 together with a cl with copies to the assistant director of inspection (adi) and the iac......
Judgment:
1. The ITO levied, in the first assessment itself, earlier two being loss and nil, a concealment penalty of Rs. 2,17,910, being one and a half times the tax avoided. The Commissioner (Appeals), following the Tribunal order which reduced the quantum assessed and to which one of us, the Judicial Member was a party, reduced it to the minimum at or about Rs. 82,000. This appeal is for complete deletion.

2. The assessee, an individual, is a film distributor. He furnished on 11-10-1977 a return of income with necessary annexures and statements for Rs. 1,03,740. Then on 14-3-1978, there was an income-tax raid in his house. Then in April 1978, he filed a revised return disclosing an income of Rs. 2,36,248 together with a CL with copies to the Assistant Director of Inspection (ADI) and the IAC. The computation was, as explained in the said CL, a simple addition of Rs. 1,32,500 to the returned income of Rs. 1,03,740. The ITO made more additions. The Commissioner (Appeals) confirmed those. But the Tribunal determined the income computed as per . the revised return. Reference has been rejected. There is no departmental appeal to restore the penalty imposed by the ITO. That means that the Tribunal's order in the assessment matter has been accepted by the department at least for the purpose of penalty proceedings.

3. The Madras High Court has held in CIT v. Ramdas Pharmacy [1970] 77 ITR 276 that all the facts and circumstances commencing with the filing of the original return and ending with the assessment, is relevant for deciding the question of concealment. CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602 (Mad.) has not made any deviation. If in that case, the answer was against the assessee, it was principally because of concealment even in the revised return and perhaps for the further reason that the revised return did not satisfy the requirements of Section 139(5) of the Income-tax Act, 1961 ('the Act') like discovery of omission or wrong statement in the original return. This is a case where the revised return was accepted by the Tribunal as true and correct. The submission of the department is that it was not voluntarily furnished but only after the search. But all that are not material. In Ramdas Pharmacy's case (supra) also, the revised return was furnished only after the ITO found out discrepancies and materials for concealment. In J.K.A. Subramania Chettiar's case (supra) also, it has been stated that the fact that the particulars are furnished before any detection was made by the department or not, is foreign to find the question of concealment. The enquiry in a concealment case, in the light of these two judgments and the position that there can be concealment even in cases of no return, is to find out whether the income assessed has been disclosed by the assessee before the assessment was framed or, in other words, any part of such income has not been disclosed by the assessee before such assessment. In this case, the income determined by the Tribunal is Rs. 2,36,240. That has been disclosed in the revised return. In this case, the revised return also satisfies all the requirements of Section 139(5). The reasons given in the covering letter for the omission and wrong statement in the original returns are quite convincing and acceptable. It is a possible explanation. It is interesting to note that the Commissioner (Appeals) himself in penalty appeal states that it must be paid to the credit of the appellant that the suppression of realisation was correctly worked out by him at Rs. 1,10,256 as against Rs. 85,698 worked out by the ADI. So, the possibility of an error, when it happened even to the ADI in the initial computation or receipt, cannot be ruled out. The revised return and the additional income offered for the assessment is, as found by the Tribunal, only to make up for the omission of receipts in the first return. The reference to the three acts of accounts only clouds the issue. The case of concealment has to be viewed only in the light of the facts found by the Tribunal, which, as stated earlier, has become final at least for the purpose of penalty. So, such matters of more than one account and the like become irrelevant. The appeal allowed. The penalty cancelled.

1. I have carefully gone through the order of my learned brother, but I am unable to persuade myself to agree with his reasons and conclusion.

Hence, I am recording my order of dissent. The case of the assessee and, also the view of my learned brother, is that the revised return satisfied completely the requirements of Section 139(5) and inasmuch as the income as per the revised return has been accepted by the Tribunal, there is no concealment of income and, hence, the levy of penalty is not called for. In my humble opinion, this is rather oversimplification of the issue involved. The question involved is whether there was concealment of income in the original return of income filed and whether the revised return filed subsequently, was voluntary in nature, so as to exonerate the assessee from the contumacious conduct in not disclosing the true income in the original return. The Madras High Court has observed in the case of Ramdas Pharmacy {supra), it is not as if the revised return filed was of no consequence at all, while considering the liability for penalty for concealment of income under Section 271(l)(c) of the Act, but all the facts and circumstances commencing with the filing of the original return and ending with the assessment may be taken as relevant for the consideration of the assessee's liability for penalty. Therefore, it is essential to take into consideration the facts of this case.

2. The assessee is a distributor of films. On 11-10-1977, he filed the original return admitting income of Rs. 1,03,740. On 12-3-1978, he celebrated his daughter's marriage. On 14-3-1978, there was raid by the Intelligence Wing of the Income-tax Department, in which cash and triplicate sets of books of account were Seized. On 17-3-1978, the ADI has sent an interim report to the Commissioner, wherein the suppressed receipts from film distribution business were shown at Rs. 85,698. He has also made enquiries with the assessee to explain the discrepancies in receipts in films business, and the expenses in the trading account and the profit and loss account, as the receipts shown were found less than the receipts as per the seized document No. 16, based on statements of gross realisation sent by exhibitors and the expenses claimed in the trading and profit and loss accounts were found inflated compared to the expenses recorded in seized documents. The assessee in his letter, dated 28-4-1978, addressed to the Commissioner, offered explanation regarding the discrepancies pointed out by the ADI He has also filed a revised return on 28-4-1978, showing total income of Rs. 2,36,240 resulting in an addition of Rs. 1,32,500. It is relevant to extract the relevant portion of the aforesaid letter to appreciate the background of the case : As I was busy in finding a new residential house for myself from December 1976 and haying purchased one in August 1977, and as I was also busy settling the marriage of my daughter from November 1977, which celebrated on 12-3-1978, I could not also bestow any attention to the maintenance of the accounts nor I had any knowledge of verifying the correctness of the accounts written by my part time accountant.

In view of the above-mentioned circumstances, / request the Commissioner of Income-tax to kindly allow me the normal expenses on publicities and the other Hems.

My attention is also drawn to certain cash credits to the tune of Rs. 1,44,500 in the statements filed along with my return on 11-10-1977 for the assessment year 1977-78. Irrespective of the merits of these credits, as I am unable to immediately explain fully for the actual expenses incurred by me, I am willing to offer the peak of the credits, viz., Rs. 1,32,500, to be merged with the amount that has to be explained by me towards the omission in realisation and unexplainable expenses.

From the above extract, it is clear that the assessee prayed to the Commissioner for allowances of normal expenses of publicity and other expenses as he had no knowledge of verifying the accounts written up by his part time accountant. It is also clear that the assessee was willing to offer the peak credit of Rs. 1,32,500 for which a reference has been made to the assessee to be merged with the omission in film realisation account and unexplainable expenses. Thus, he has offered the peak credit as additional income in the revised return in order to account for the suppressed receipts in films business and inflated expenses in trading and profit and loss accounts. In other words, the peak credit of Rs. 1,32,500 actually represented the suppressed receipts and inflated expenditure in trading and profit and loss accounts. This fact is abundantly clear from the assessee's letter, dated 28-4-1978, accompanying the revised return inasmuch as the assessee has not shown the actual extent of omission of receipts in films account and the extent of inflation of expenses. Therefore, it is only after discovery of omission of receipt and inflation of expenses, the assessee filed the revised return offering the peak credit as additional income in order to cover up the suppression of receipts in the films account and inflation of expenses in trading and profit and loss account. It is only the representative in his letter addressed to the ITO dated 10-10-1979, who worked out the actual differences in the receipts at Rs. 1,10,255.59, which was offered to be substituted for the figure of Rs. 85,698 detected by the ADI. He has also explained that if the correct additional receipts and loan of Rs. 55,000, for which confirmation letters were available, were taken into account, the assessee could have explained the inflated expenses claimed in the trading and profit and loss account and the necessity of bringing in cash credits, would have been avoided. He, therefore, requested that the ITO, to accept the offer of Rs. 1,32,500 as sufficient to cover the omissions. Thus, it is crystal clear that, admittedly, the additional profit offered in the revised return represents the suppressed receipts from film business and inflated expenses. The assessee filed waiver petition under Section 273A of the Act. In this context, it is no longer necessary for the ITO to discharge the onus of proving concealment. The ITO completed the assessment on 15-11-1979, determining the total income at Rs. 3,23,840.

3. In this background, it is to be seen whether the revised return filed by the assessee on 28-4-1978, was bonafide and genuine and whether it satisfies the requirements of Section 139(5). From the facts of the case stated above, the revised return is the echo of the enquiry made by the ADI (Intelligence) based on the seized documents.

Admittedly, there were three sets of books maintained for the same accounting year relevant for the assessment year 1977-78 though, of course, not for the sake of fun of it. Regarding the revised return, the Allahabad High Court in the case of Amjad AH Nazir AH v. CIT [1977] 110 ITR 419, has observed as under : Held, that it is apparent from the language of Section 139(5) that a revised return can be filed only when a person discovers any omission or any wrong statement therein. The use of the word 'discovers' connotes discovery of some omission or wrong statement in the return, of which the assessee was not aware at the time of filing of the original return. It cannot cover a case where the 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 Section 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. Such a revised return cannot supplant the original return and, for the purposes of penalty, it will be only the original return that will have to be looked into. The position would, however, be different where the omission or the wrong statement in the return was not deliberate. .

. .

The Madras High Court has observed as follows in the case of J.K.A.Subramania Chettiar (supra) : . . . The word 'omission' occurring in Section 139(5) connotes an unintentional act. Equally, the words 'wrong statement' will not take in 'a statement known to be false to the person who made the statement'. However, the word 'discovers' occurring in Section 139(5) will make it clear that only at the time of discovery a person who had furnished a return finds out that an inadvertent omission or unintended wrong statement had crept in the return filed by him. If a person who furnished the return was aware of the falsity of the statement and the incorrectness of the particulars of income even at the time when he filed the original return, there was no question of that person subsequently discovering the existence of the omission or creeping in of the wrong statement in the return already filed by him. Therefore, Section 139(5) will apply only to cases of 'omission or wrong statements' and not to cases of 'concealment or false statements'.

Thus, the authorities cited aboye clearly show that Section 139(5) will not be satisfied if there was concealment or false statement in the original return filed and if a case does not fall under Section 139(5), the fact that the revised return was filed before any investigation was started by the income-tax department will be of no consequence. In the case of the assessee, the facts stated above clearly show that the revised return was filed only after the department investigated the seized material and called for clarification from the assessee. The order of the Commissioner (Appeals) confirmed this fact. It is of no credit to the assessee to have maintained three sets of accounts for the relevant accounting year and offered additional income in the revised return to cover up the suppressed receipts from the film distribution business and inflation of expenses in the trading and profit and loss account. The assessee was pinned down with material evidence seized during the raid and it was only a matter of actual cross-verification and tallying of figures in the seized documents with the statements filed along with the original return, which resulted in admission of additional receipts at Rs. 1,10,256, instead of Rs. 85,698 detected by the ADI (Intelligence) in a preliminary verification.

Therefore, no credit need to be given to the assessee on this account.

4. In the quantum proceedings, the Tribunal was not able to link the three sets of accounts seized during the raid with the past year's accounts or latter year's accounts as they contained different figures.

The Tribunal also decided the issue regarding the inflation of expenses on the basis of reasonableness of the claims compared to the claims made in the latter assessment year 1978-79 and allowed the entire claim of the expenses and, thus, deleted the additions made by the ITO. In other words, the Tribunal sustained the income returned by the assessee as per the revised return. Be that as it may, in my humble opinion, the assessee has intentionally and deliberately concealed the income or furnished inaccurate particulars of income in the original return filed and has offered additional income in the revised income only after the department has investigated the matter and detected concealment of receipts. Therefore, it was not a simple case of omission or any wrong statement, which was sought to be corrected in the revised return and, thus, the conditions prescribed for filing of revised returns were not at all satisfied. Therefore, on the facts and in the circumstances of the case, the penalty for concealment of income in the original return is quite warranted and, in this view of the matter, the order passed by the Commissioner (Appeals) is to be upheld and the appeal filed by the assessee deserves to be dismissed.

5. In the result, the penalty imposed by the Commissioner (Appeals) is upheld and the appeal filed by the assessee is dismissed.

REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Whereas, we are unable to agree on the issue involved in this appeal, we refer the following question to the President for reference to a Third Member under Section 255(4) of the Act : Whether, the penalty is imposable under Section 271(l)(c) of the Income-tax Act, 1961 1. This matter came before me as Third Member to resolve the difference of opinion that arose between my learned brothers, who heard this appeal originally. The point of difference as formulated by my learned brothers, is : Whether, the penalty is imposable under Section 271(l)(c) of the Income-tax Act, 1961 It is to resolve this difference that the President has nominated me as the Third Member.

2. I have heard the parties at great length and perused the records, which included the original assessment order passed by the ITO as well as the order passed by the Tribunal in the original appeal on quantum.

3. The brief facts are : The assessee, an individual, carrying on the business of film distribution, furnished his return of income on 11-10-1977, admitting an income of Rs. 1,03,740 for the assessment year 1977-78 for which the relevant previous year ended on 31-3-1977.

Sometime on 12-3-1978, the assessee performed his daughter's marriage.

Shortly thereafter, i.e., on 14-3-1978, the Income-tax Department raided the house of the assessee where certain documents, more importantly, three sets of accounts, which were conveniently described as SD 13, SD 10 and SD 8, were found. A comparison of the items of expenditure and income between the one shown in SD 13 and the profit and loss account filed before the ITO along with the return on 11-10-1977, showned various discrepancies, which were referred to copiously in the order of the Tribunal on quantum appeal. The difference of expenditure shown by SD 13 and by the profit and loss account, was Rs. 1,06,451 under various heads. The profit and loss account showed this amount in excess over the amount shown in SD 13.

Similarly, there was also a difference in the receipts. The receipts were shown in the profit and loss account, less by Rs. 1,10,256. There was also an excess claim of Rs. 21,652 under the head 'Publicity'.

Besides, there were certain unexplained cash credits. The department, therefore, concluded that the assessee had not shown the proper income.

4. In the meantime, on 28-4-1978, the assessee filed a revised return admitting an income of Rs. 2,36,248 that is more by Rs. 1,32,500 shown in the original return. After the receipt of the revised return disclosing the income of Rs. 2,36,248, the ITO made the assessment on a total income of Rs. 3,29,464 arrived at in the following manner :Gross profit as per trading account 2,97,627Less : Difference in opening stock of pictures as per 1976-77 assessment order 17,956 2,79,670"(i) Suppression of realisation from pictures 1,10,256(ii) One-fourth of car maintenance expenditure one-fourth of Rs. 3,988 997(iii) Inflation of publicity expenses 21,652(iv) Interest claimed on the spurious credits 5,575 4,18,150 against the assessee's claim of Rs. 1,93,883 83,517 Add: Audit fees discussed above 300 Correct depreciation on car after disallowing one-fourth as relating to personal use 2,362 Depreciation on fan 210 Depreciation on furniture 274 Depreciation on cycle 116 86,779 3,31,371Less : loss of assessment year 1975-76 adjusted 1,907Business income 3,29,464 5. On appeal, eventually, before the Tribunal, the income was determined at Rs. 2,34,233, which was slightly less than the income admitted in the revised return. Jhe income determined by the Tribunal was in the following manner :Gross profit as per trading account 2,97,6271976-77 assessment order 17955Balance 2,79,670 account with depriciation 1,93883Balance: net profit 1,03740Add: income offered 1,32,500 adjusted 1,907Balance: bussiness offered 2,34,233 6. Thus, the addition that stood the test of appeal was the income offered in the revised return of Rs. 1,32,500.

7. For concealment of income, the ITO issued a notice to which the asses-see replied that he could not ascertain the income correctly arid faithfully because of the inexperience of the accountant as well as unfaithfulness. He also seems to have stated that he was busy with his daughter's marriage and he could not attend properly to the maintenance of accounts in the sense of ascertaining proper income. It was also pleaded that it was immediately after the search that had taken place that the assessee came forward with the filing of a revised return admitting an income of Rs. 1,32,500 and that was a genuine omission.

Since the assessment had proceeded from the income disclosed in the revised return and, eventually, accepted by the Tribunal, it should be held that there was no concealment of income. This point was not put before the ITO in this manner, but there were indications to show that this Could be the intention. All the reasons were rejected by the ITO and he held that the assessee had wilfully and deliberately falsified his accounts and when he filed a revised return, the assessee must be held to have admitted the guilt of concealment of income. He levied a penalty of Rs. 2,17,910, which was one and a half times the tax sought to be evaded.

8. When the matter came on appeal before the Commissioner (Appeals), the Commissioner (Appeals) justified the levy of penalty by pointing out that it was the seizure of books in the raid, the prompt scrutiny of the same within a month from the seizure of books by the department, which actuated the assessee to rush with a revised return of income and the admission by the assessee's representative in the first instance about the discrepancies in the figures. He, however, varied the amount of penalty by pointing out that it should be minimum because the assessee co-operated with the department immediately after the search.

By the time the Commissioner (Appeals) passed his order, the order of the Tribunal in quantum appeal was available. It was keeping that order in view that the Commissioner (Appeals) gave this direction.

9. When the matter came on appeal before the Tribunal, the learned Judicial Member took the view that penalty was not leviable. His reasoning was that, when the revised return filed by the assessee was, eventually, accepted by the Tribunal as true and correct, it must be held that there was no concealment of income. According to him, that the filing of the revised return was only after the search and the assessee was cornered by the department, was not material. He sought to draw support for his view from the decision of the Madras High Court in Ramdas Pharmacy's case (supra), and, according to him, the other decision of the Madras High Court in J.K.A. Subramania Chettiar's case (supra), did not make any deviation, although the learned Accountant Member was of a different opinion. According to him, the latter decision of the Madras High Court in J.K.A. Subramania Chettiar's case (supra) made all the difference. Quoting extensively from the latter decision of the Madras High Court, the learned Accountant Member held that a revised return can be considered as valid for the purpose of penalty, only when it was filed after discovery of an omission or wrong statement in the return originally filed and not to cover concealment of income. In this case, the revised return having been filed after the search and after thorough examination of the accounts by the , department, it could not be said that the assessee, in the original return filed, made some honest omission without his knowledge or discovered a wrong statement again without knowledge. The Judicial Member gave a categorical finding in his order that the revised return filed, satisfied the requirements of Section 139(5), to which the learned Accountant Member could not subscribe. I may also add that the learned Accountant Member drew support for his view from the decision of the Allahabad High Court in the case of Amjad Ali Nazir Ali (supra) that a revised return could be filed only when a person discovers any omission or wrong statement made in the original return. The use of the word 'discovers' connotes discovery of some omission or wrong statement in the return, of which the assessee was not aware at the time of filing of the original return and it could not cover a case, where the omission or wrong statement contained in the first return was deliberate. The Allahabad High Court held in this case that where an assessee had 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 Section 139(5) 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. The learned Accountant Member laid great stress on this aspect of the matter and held that penalty was leviable. Thus, there was a difference of opinion between my learned brothers, which is referred to me for my opinion.

10. After carefully considering the surrounding facts, the background of filing the revised return and the law enunciated on the subject as to the validity of levy of penalty when a revised return was filed, it appeared to me that it is very difficult in this case to say that the assessee's contention that he was not aware of what contained in the other books maintained, whether at his instance or not, is acceptable.

It is primarily for the assessee to explain why he maintained three sets of account books, and he cannot be allowed to take advantage of the inability of the department to decipher the accounts maintained by him. The meaning and purpose of accounts maintained by an assessee primarily is known to him and it was his duty to explain to the department as to why he maintained the accounts. No one would agree that the assessee would seek just for the sake of fun of it to maintain three sets of accounts. If it is endeavored by the Tribunal and by the department to find out the purpose in vain, it does not mean that the assessee is absolved of his responsibility to explain the purpose of maintaining three sets of accounts. The chart referred to above shows, how the expenses were sought to be inflated in the profit and loss account filed before the department and how the receipts were sought to be suppressed. At least, there should be an explanation as to why the expenditures were inflated. If the assessee subscribes his signature to the return of income, he is supposed to have known the facts. It is not open to him to say that the accountant maintains something and he blindly signsit. Nor can he take refuge under the plea that he was busy constructing a house elsewhere and performing the marriage of his daughter. The daughter's marriage took place long after the accounting period came to a close. Neither in the order of the Tribunal nor before the department, at any stage, was there any attempt to reconcile the figures shown in the SD 13 set of accounts and in the profit and loss account. There was a wide variation between the receipts shown by the documents seized and the receipts admitted in the profit and loss account. There is also the further fact that there were cash credits amounting to Rs. 1,44,500 in the books. Along with the revised return, the assessee filed a covering yetter wherein he stated that the Commissioner would be pleased to allow him the normal expenses on publicity and other items, meaning thereby that the expenses claimed in the profit and loss account were not true and real ; therefore, incorrect and false. Similarly, he said in that letter that there were cash credits of Rs. 1,44,500 in the statements filed along with the return on 11-10-1977 and irrespective of the merits of those credits, he was willing to offer the peak of the credits of Rs. 1,32,500 to be merged with the amount that has to be explained by him towards the omission in realisation and unexplainable expenses. This is what the assessee had stated : My attention is also drawn to certain cash credits to the tune of Rs. 1,44,500 in the statements filed along with my return on 11-10-1977 for the assessment year 1977-78. Irrespective of the merits of these credits, as I am unable to immediately explain fully for the actual expenses incurred by me, I am willing to offer the peak of the credits, viz., Rs. 1,32,500, to be merged with the amount that has to be explained by me towards the omission in realisation and unexplainable expenses.

This shows that the assessee offered the peak of the credits of Rs. 1,32,500 out of Rs. 1,44,500 cash credits shown in the accounts to cover (i) omission in the realisation and (ii) inflation in unexplainable expenses. Thus, the offer of Rs. 1,32,500 by way of income amounted to an admission that there was omission regarding realisation in full and inflation of expenses and the cash credits were none other than that income brought to the accounts by way of cash credits. This, in my opinion, amounted to a clear admission on the part of the assessee that there was furnishing of inaccurate particulars in the original return. Now the question is, whether that is deliberate, intentional, with a design or out of innocence or without knowledge.

From the way the case has proceeded from the time the return was filed on 11-10-1977 till the revised return came to be filed and the other attendant circumstances, I am unable to subsribe to the view that the assessee was not aware of the fact that the return filed originally did not disclose the correct income. There is no explanation as to why there was omission of Rs. 1,10,000 in receipts and about Rs. l,06;000 by way of inflation in expenditure. For the purpose of finding out whether the assessee knew at the time when he filed the original return that he was not disclosing the correct income, it is not very much material as to how the sum of Rs. 1,32,500 was made up of or out of which chunk of the unexplained income, this has come about. The cash credits in the accounts might have been made use of to cover the omission or inflation of unexplained expenses as happened in this case, but that does not mean that the assessee was not aware of the fact that the cash credits of Rs. 1,44,500, in the accounts, did not really represent loans but represented the concealed income brought into the accounts in the guise of loans and this fact, the assessee admitted only when he was confronted with the seized accounts as a result of the raid. But for the raid, the assessee would not have come forward with the revised return. Therefore, merely because the income shown in the revised return was accepted by the Tribunal, it does not mean that the assessee satisfied the requirements of Section 139(5) and the revised return filed was a valid return. When I say valid, I do not mean valid for making assessment, but for the purpose of levy of penalty exonerating the assessee from the charge of concealment of income. I had occasion to go through the decisions of the Madras High Court, referred to by my learned brothers, and the other decisions. The view appears to be unanimous that Section 139(5) can be made use of only to rectify an honest omission or a wrong statement discovered in the original return filed and that cannot be made use of to cover concealment of income. The Madras High Court has pointed out that the meaning of the word 'omission' occurring in Section 139(5) connotes an unintentional act. I cannot say in this case that the assessee had no intention of concealing his income when he filed the original return.

The words 'wrong statement' have also been explained by stating that it would not take in 'a statement known to be false to the person who made the statement'. As I have endeavoured earlier, on the facts of this case, I find it very difficult to say that the assessee did not know at the time when he filed the return originally that it was not true. The Madras High Court then said : . . . If a person who furnished the return was aware of the falsity of the statement and the incorrectness of the particulars of income even at the time when he filed the original return, there was no question of that person subsequently discovering the existence of the omission or creeping in of the wrong statement in the return already filed by him. Therefore, Section 139(5) will apply only to cases of 'omission or wrong statements' and not to cases of 'concealment or false statements'.

This is the law enunciated by the Madras High Court, which we have to apply to the facts of this case. The Kerala High Court in the case of CIT v. Haji P. Mohammed [1981] 132 ITR 623 has also expressed an identical view. After referring to the facts in that case, the Kerala High Court held : . . . Since at the time of filing the original return the assessee must be taken to have been aware of his having received the amount from the E.E., but had nevertheless omitted to disclose the receipt in the original return, the second return filed by the assessee cannot be regarded as a 'revised return' filed under Section 139(5) of the Act, because there was no discovery by the assessee of any omission or wrong statement having been made by him by inadvertence in the original return. Therefore, the assessee was guilty of concealment of income under Section 271 (l)(c) and the levy of penalty was valid.

The Kerala High Court has followed the Madras High Court decision in J.K.A. Subramania Chettiar's case (supra), referred to above, and also relied on an earlier decision of the Gauhati High Court in the case of F.C. Agarwal v. CIT [1976] 102 ITR 408. The Allahabad High Court in the case of Addl. CIT v. Radhey Shyam [1980] 123 ITR 125 has also come to the same conclusion. The Allahabad High Court has also pointed out here that the word 'omission' connotes an unintentional act or neglect to perform what the law requires, and the words 'wrong statement' should include within its scope a statement which is not false to the knowledge of the person making it, and the word 'discovers' will take within its ambit that which was hidden, concealed or unknown. The benefit of Section 139(5) cannot be claimed by a person who has filed the first return knowing it to be false.

11. I do not wish to quote the authorities on this subject because it appears to be settled law that for Section 139(5) to apply, the omission must be quite unintentional and the wrong statement must include a statement which was not false to the knowledge of the person making it and the assessee must have discovered it and it must be lying hidden or unknown to him. The facts of this case do not show that the assessee was unaware of the wrong statement made in the original return. Therefore, the benefit extended by Section 139(5) is not available to the assessee.

12. The controversy between my learned brothers ultimately turned out to be whether the protection offered by Section 139(5) is available to the assessee or not. Since the protection of Section 139(5) is available only for honest omission and wrong statement in the return originally filed by an assessee and that was not the case here, the benefit of Section 139(5) is not available to the assessee. It cannot, therefore, be said that the assessee is exonerated from the charge of concealment of income. The explanations offered are far from satisfactory.

13. For the above reasons, I am unable to agree with the conclusion of the learned Judicial Member that the revised return filed in this case satisfied all the requirements of Section 139(5), all because the income disclosed in the revised return was accepted by the Tribunal, eventually. There may be no concealment of income in the revised return but compared with the original return, there was concealment of income in the original return which came to surface only as a consequence of the raid and the comparison that was sought to be made by the department and the cross-verifications that began after the raid. I, therefore, agree with the view expressed by the learned Accountant Member and hold that the assessee is guilty of concealment of income in the original return and that the order passed by the Commissioner (Appeals), upholding the levy of minimum penalty, could be upheld.14. The matter will now go before the regular Bench for disposing of the appeal in accordance with the view of the majority.


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