Radhakrishna Menon, J.
1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following questions for the opinion of this court:
' 1. Whether, on the facts and in the circumstances of the case, and on an interpretation of Section 271(1)(c) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal is right in law in cancelling the penalty levied on the assessee by the Inspecting Assistant Commissioner of Income-tax ?
2. Whether, on the facts and in the circumstances of the case, and in view of the difference in language between Section 271(1)(c) of the Income-tax Act, 1961, and Section 28(1)(c) of the Indian Income-tax Act, 1922, the Appellate Tribunal is justified in law following the decision of the Supreme Court in CIT v. Mohamed Haneef : 83ITR215(SC) , in deciding the assessee's case ?
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law and had materials before it in holdingthat penalty is not leviable on the merits of the case, since the reassessment of the assessee's income for the assessment year 1970-71 was not the result of an independent investigation by the Income-tax Officer but the result of the voluntary disclosure by the assessee itself ?
4. Whether, on the facts and in the circumstances of the case, the finding of the Appellate Tribunal that the assessment year 1970-71 should have been considered on par with the assessment years 1969-70 and 1971-72 and thus the penalty imposed for that year should have been waived, is not arbitrary and unreasonable '
2. A resume of facts necessary for considering the questions involved in the case is as shown below : The year of assessment is 1970-71, the accounting period being April 1, 1969, to March 31, 1970. For this year of assessment, the assessee had originally filed a return showing an income of Rs. 1,45,992. After enquiry, the assessing authority determined the assessable income at Rs. 1,47,700 and levied tax thereon. The assessment was subsequently reopened. In the return filed pursuant to the notice under Section 148 of the I.T. Act, 1961 (for short 'the Act'), the assessee showed not only the income which was the subject-matter of the original assessment but also an additional amount of Rs. 43,607 which, according to him, was the income omitted to be shown in the original return. The assessing authority, however, found that the escaped income liable to be assessed is Rs. 52,093 and that it is so can be seen from the reassessment order dated March 19, 1973.
3. In the course of the reassessment proceedings, the assessing authority initiated proceedings under Section 271(1)(c) of the Act as he was of the opinion that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income liable to be assessed. Inasmuch as the concealed income exceeded Rs. 25,000, the assessing authority in terms of Section 274 (as it then stood) referred the matter for further action to the IAC of Income-tax, Ernakulam Range. The IAC went into the question in detail and held that 'the disclosure was made only after the conclusion of the original assessment proceedings and, hence, there was concealment of income in these proceedings, which attracts the provisions of Section 271(1)(c)'. He accordingly, levied an amount of Rs. 50,000 as penalty. The assessee filed a second appeal before the Income-tax Appellate Tribunal, Cochin Bench, The Appellate Tribunal by its order dated January 21, 1976, reversed the order of the IAC. It held ;
' But we think penalty is not leviable on the merits of the case. We find that the assessment was the result of the voluntary disclosure by the assessee himself. We have elsewhere adverted to the proceedings in the assessment year 1972-73 which led to reassessment. A reading of theITO's notings in the order sheet will make it clear that it was not the investigation by the ITO which brought up the matter but the assessee coming forward and stating the correct state of affairs. We give below the extract of the order sheet. '
4. The appeal was accordingly allowed.
5. On the finding that the questions sought to be raised by the Revenue are not questions of law, the Appellate Tribunal dismissed the petition filed by the Revenue under Section 256(1) of the Act. The Revenue thereupon moved this court under Section 256(2) and this court by the judgment dated December 22, 1978 in O.P. No. 4 of 1977-A directed the Income-tax Appellate Tribunal to refer the questions aforesaid for the opinion of the court and that is how the Revenue is before us.
6. Referring to the finding of the Tribunal in paragraph 8 of its order (extracted above), counsel for the Revenue contended that the voluntary filing of the revised return by itself will not lead to the conclusion that the assessee never intended to conceal the income when it filed the original return. In support of his contention, he cited the decision in CIT v. Mahim : 149ITR737(Ker) of this court. We are of the view that the said decision has no application to the facts of the case on hand. In the said decision, this court was considering the question whether a revised return showing the correct income filed under Section 139(5) of the Act voluntarily would exonerate an assessee from the penal consequences envisaged under Section 271(1)(c) of the Act. Here, admittedly, the return, was filed pursuant to the notice under Section 148(1)(c) of the Act. It was not a return filed under Section 139(5) of the Act. A return filed pursuant to a notice under Section 148 cannot be treated on a par or compared with a revised return filed under Section 139(5) of the Act. For that matter it is not the case either of the assessee or of the Department that the return showing the correct income was filed under Section 139(5) of the Act. Confronted with this situation; counsel for the Revenue argued that the principles laid down in the decision aforesaid can be extended and applied even to a case where the return was filed pursuant to a notice under Section 148. At first blush this argument appears to be sound, but on a deep study of the matter, we have no hesitation to reject the same, for, a return filed pursuant to Section 148 notice could, under no circumstances, be treated as one under Section 139(5). On the other hand, the said return, in view of the provisions contained in Section 148 of the Act, at best, can be treated to be a return filed under Section 139(2) of the Act. In fact, the scheme of Section 139 indicates that by incorporating sub-s. (5) thereof, Parliament has afforded an erring assessee an opportunity to relinquish the intention, which he originally had formed, to evade tax. In short, an erring assessee in such circumstances could plead locus poenitentiae and escape the penal consequences reflected in Sub-section (1)(c) of Section 271 of the Act. Apparently this aspect of the matter had not been brought to the notice of the Division Bench.
7. Counsel for the Revenue thereupon contended that, in any event, the entire matter requires reconsideration by, the Appellate Tribunal for the reason that the Tribunal did not approach the question in a correct perspective. He submitted that the Tribunal failed to take note of the Explanation added to Section 271(1)(c) by the Finance Act, 1964. The said Explanation reads:
' Explanation.--Where the total income returned by any person is less than eighty per cent of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under Section 143 or Section 144 or Section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of Clause (c) of this sub-section. '
8. This Explanation came into force on April 1, 1964. In view of this Explanation, every case where the returned income is less than eighty per cent of the assessed income, it is presumed, fell within the mischief of Section 271(1)(c) of the Act. The assessee, however, could escape the penal consequences provided he established that the failure to show the correct income in the original return was not due to fraud or any gross or wilful neglect on his part. Until this onus is discharged, the assessee cannot escape his liability for penalty.
9. In our view, the Tribunal has not approached the case in a right perspective. The Tribunal is bound to consider the applicability of the Explanation to the case. The non-consideration of the Explanation has thus resulted in a miscarriage of justice. The findings of the Tribunal, therefore, are defective in law.
10. We have accordingly to conclude that the question referred to this court cannot be answered in view of the defective nature of the findings by the Tribunal. The decisions in CIT v. Laxmi Auto Stores : 106ITR626(Orissa) , CIT v. Prabhat Bakery : 118ITR35(Mad) and Addl. CIT v. Ram Prakash : 121ITR774(All) lend support to this view.
11. In the light of the above conclusion, we decline to answer the questions referred to us. The Tribunal should, however, re-hear the appeal and decide it in accordance with law keeping in view the observations made by us above.
12. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.