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J.P. Sharma and Sons Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Civil Income-tax Reference No. 8 of 1973
Judge
Reported in[1985]151ITR333(Raj); 1984()WLN47
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantJ.P. Sharma and Sons
RespondentCommissioner of Income-tax
Appellant Advocate S.K. Kakkar, Adv.
Respondent Advocate J.P. Joshi, Adv.
Cases ReferredColquhoun v. Brooks
Excerpt:
income tax act, 1922 - section 4--income may accrue without actual receipt--income accrued to assessee as soon as work of loading and unloading goods--actual payment not received--held, it did not affect accrual of income.;the income may accrue to the assessee without the actual receipt of the same. if the assessee acquired a right to receive the income, the same can be said to have accrued to him, though it may be actually received by him later on. the basic concept appears to be that the assessee must have acquired a right to receive the income, there must be a debt owed to him by some body.;the income had accrued to the assessee firm as soon as the work of supplying labourers for loading and unloading goods was performed by the assessee firm and the bills in respect thereof were.....dwarka prasad, j. 1. this reference has been made to this court by the income-tax appellate tribunal, jaipur bench, whereby the following questions of law arising out of the order of the income-tax appellate tribunal, delhi bench 'c', dated september 30, 1970, have been referred to this court for its opinion :'1. whether, having regard to the fact that there were disputes and litigation pending between the assessee and the railway authorities regarding the amounts payable to him and having regard to the fact that these disputes were settled by arbitration and the amount payable determined in 1963, long after the close of the accounting year, the assessee could be held to be guilty of concealment of income in respect of such amounts when he filed his original return in december, 1961 ?2......
Judgment:

Dwarka Prasad, J.

1. This reference has been made to this court by the Income-tax Appellate Tribunal, Jaipur Bench, whereby the following questions of law arising out of the order of the Income-tax Appellate Tribunal, Delhi Bench 'C', dated September 30, 1970, have been referred to this court for its opinion :

'1. Whether, having regard to the fact that there were disputes and litigation pending between the assessee and the Railway authorities regarding the amounts payable to him and having regard to the fact that these disputes were settled by arbitration and the amount payable determined in 1963, long after the close of the accounting year, the assessee could be held to be guilty of concealment of income in respect of such amounts when he filed his original return in December, 1961 ?

2. Whether the levy of the impugned penalty under Section 271(1)(c) was justified ?'

2. The assessee-firm was a railway contractor providing labour to the Northern Railway for performing the work of loading and unloading of goods from wagons at 23 railway stations. A contract or agreement was entered into on April 3, 1957, and according to the terms of the contract, the assessee-firm was required to provide able-bodied adult male labourers to perform the work of loading and unloading of wagons at 23 railway stations. In respect of the assessment year 1959-60, pertaining to the period from April 1, 1958, to March 31, 1959, the assessee-firm filed a return of its income on December 30, 1961, showing a loss of Rs. 26,276. The assessee claimed receipts to the extent of Rs. 1,62,851 while it claimed expenses of Rs. 1,90,982. In the course of the assessment proceedings, the ITO sought information from the assessee-firm regarding details of the station-wise bills submitted to the railway. The assessee took time to furnish the requisite details and stated before the ITO that its books of account were with the counsel at Delhi in connection with the arbitration proceedings arising out of a suit filed by it against the railway in respect of its claim.

3. On November 27, 1963, the assessee-firm filed a revised return showing an income of Rs. 81,365 in place of the loss declared in the original return. In the revised return, the assessee-firm included receipts of further bills from the railway amounting to Rs. 1,52,297 which were not included in the earlier return. The ITO assessed the income of the assessee-firm for the assessment year 1959-60 by his order dated March 10, 1964, on the basis of the revised return at Rs. 1,66,656 after adding cash credits entries to the extent of Rs. 40,000. The ITO also observed in his order dated March 10, 1964, that the assessee-firm had concealed the particulars of its income in the original return, by omitting to disclose the true particulars of the bills payable to the assessee-firm from the Northern Railway. In the opinion of the ITO, the concealment of income on the part of the assessee-firm amounted to deliberate withholding of true particulars thereof and attracted imposition of penalty under Section 271(1)(c) of the I.T. Act, 1961 (hereinafter called 'the Act'). But as the minimum penalty imposable under Section 271(1)(c) in the case was likely to exceed Rs. 1,000, the ITO referred the case to the IAC, Jaipur, as required under the provisions of Sub-section (2) of Section 274 of the Act.

4. The Income-tax Appellate Tribunal, Delhi Bench C, on appeal, set aside the addition of Rs. 40,000 on account of unexplained cash credits and accepted the appeal preferred by the assessee-firm by its order dated August 30, 1968. The IAC by his order dated March 8, 1966, agreed with the ITO that the assessee-firm had deliberately concealed the particulars of its income in the original return filed by it and that the filing of the revised return did not mitigate the offence committed by the assessee-firm. He, therefore, imposed a penalty of Rs. 53,000 upon the assessee-firm under Section 271(1)(c) of the Act. The Income-tax Appellate Tribunal agreed with the IAC so far as the question of liability of the assessee-firm for levy of penalty under Section 271(1)(c) of the Act was concerned. However, the Tribunal reduced the quantum of penalty imposed upon the assessee-firm by the IAC.

5. On the request of the assessee-firm, the Income-tax Appellate Tribunal, Jaipur Bench, referred the aforesaid two questions to this court for its opinion by its order dated August 29, 1972.

6. It appears that the assessee-firm had put forward a further claim in the sum of Rs. 1,52,297 against the Northern Railway for which bills have already been submitted by the assessee-firm, but payment thereof had not been made by the Railway. The assessee-firm also claimed some amount from the Railway which was alleged to have been unauthorisedly deducted from the bills of the assessee. The assessee-firm then instituted a suit against the Union of India and the Northern Railway in the Court of District Judge, Bikaner, on September 21, 1959, for recovery of a sum of Rs. 3,17,728.81. At the instance of the Union of India, the dispute between the parties was referred for arbitration to the General Manager, Northern Railway, or his nominee as the sole arbitrator. The arbitrator gave his award on February 12, 1963, according to which the assessee-firm was entitled to a sum of Rs. 4,26,828.90 from the railway administration including interest. The learned District Judge, Bikaner, rejected the objections advanced by the railway administration in respect of the award and passed a decree on October 28, 1963, in terms of the award given by the arbitrator, for a sum of Rs. 4,26,828.90 in favour of the assessee-firm and against the Union of India. The assessee's case is that a copy of the decree passed by the learned District Judge was made available to it only on November 26, 1963, and, thereafter, it filed a revised return before the ITO on the very next day, including therein the receipt of further bills amounting to Rs. 1,52,297.

7. Thus, the case of the assessee is that there was no concealment of income on its part, as disputes were going on between the assessee and the railway administration regarding the amount payable by the Northern Rail-way in respect of the bills of the assessee-firm and as litigation was pending between them in that matter, which was subsequently referred to arbitration and, ultimately, the civil court passed a decree accepting the award of the arbitrator. According to the assessee, the revised return was filed by it immediately on the receipt of the copy of the decree passed by the learned District Judge and so the assessee-firm could not be held liable for concealment of income and penalty under Section 271(1)(c) could not be imposed. On the other hand, the case of the Revenue is that the assessee did not disclose the total amount of the bills submitted by it to the Northern Railway, but in the course of the assessment proceedings, the ITO sought detailed information regarding the income accruing to the assessee-firm, according to the terms of the agreement with the railway, and directed the assessee-firm to file a statement regarding station-wise total bills submitted during the year by it to the railway. It was argued on behalf of the Revenue that the original return filed by the assessee-firm showed a loss of Rs. 26,276 and the ITO considered that the expenses debited to the profit and loss account by the assessee were disproportionately high as compared to the receipts shown which led him to make a detailed enquiry in the matter. It was also submitted that the original return did not give an indication that the assessee-firm was entitled to receive some more payments from the Northern Railway and if a detailed enquiry had not been made by the ITO, there would have been a gross under-assessment. Thus, it is alleged that the assessee-firm deliberately concealed the particulars of its income and knowingly omitted to make a mention of some of the bills payable to the assessee-firm from the Northern Railway for the work done during the year, which ought to have been included in its total income, as the assessee-firm kept its accounts on accrual basis. The reply on behalf of the assessee-firm is that the entire amount of bills was to be received by the assessee-firm from the Central Government and there could not have been concealment of any part of income received or receivable from the Government, and the assessee-firm did not include in the original return the disputed items, as the railway administration had made unauthorised deductions from the bills submitted by the assessee-firm and had even withheld payment of verified bills and some bills had not even been passed by the concerned station masters. A further submission on behalf of the assessee-firm is that the bona fides of the assessee appeared from the fact that the assessee filed a revised return of its income on the very next day after receiving a copy of the decree passed by the learned District Judge, Bikaner, and that the ITO was fully informed of the fact that litigation was pending between the assessee-firm and the railway administration and that the dispute has been referred to the Senior Deputy General Manager,Northern Railway, Baroda House, New Delhi, as the sole arbitrator. The ITO gave several adjournments for almost a year, with the knowledge that the dispute between the parties was referred to an arbitrator and the award was awaited and, thereafter, the revised return was filed as soon as the award was made a rule of the court. Learned counsel for the assessee also argued that in the revised return, the assessee disclosed not only further receipts on the basis of the bills of Rs. 1,52,297 debited to the Northern Railway, but also claimed additional expenditure which was not claimed in the original return and that the expenditure so claimed was also allowed by the ITO, and as such the conduct of the assessee-firm was bona fide.

8. At one stage, the learned counsel for the assessee argued that the income in respect of the disputed bills had not 'accrued' to the assessee-firm at the time when the original return was filed and as such it was not required to be shown in the return of the income of the assessee-firm. However, this contention of the learned counsel for the assessee cannot be accepted. Section 4 of the Indian I.T. Act, 1922, with which we are concerned in the present case, provided that income-tax was chargeable in respect of income, profits and gains from whatever source derived, which are received by or on behalf of the assessee or accrues or arises to the assessee during the chargeable accounting period. Thus, tax is chargeable on the total income of an assessee during the previous year which has been paid or received either actually or constructively. The word 'accrue' is synonymous with the word 'arise' and is used in the sense of springing or growing up, by way of addition or increase or accession or advantage. The words 'accrue' and 'arise' have been used in contradistinction with the word 'receive' and indicate a right to receive.

9. The income may accrue to the assessee without the actual receipt of the same. If the assessee acquired a right to receive the income, the same can be said to have accrued to him, though it may be actually received by him later on. The basic concept appears to be that the assessee must have acquired a right to receive the income, and there must be a debt owed to him by somebody.

10. Their Lordships of the Supreme Court in E.D. Sassoon and Company Ltd. v. CIT : [1954]26ITR27(SC) quoted with approval the following observations of Lord Justice Fry in Colquhoun v. Brooks [1888] 21 QBD 52; [1889] 14 AC 493

' In the first place, I would observe that the tax is in respect of 'profits or gains arising or accruing'. I cannot read those words as meaning 'received by'. If the enactment were limited to profits and gains ' received by ' the person to be charged, that limitation would apply as much to all Her Majesty's subjects as to foreigners residing in this country. The resultwould be that no income-tax would be payable upon profits which accrued but which were not actually received, although profits might have been earned in the kingdom and might have accrued in the kingdom. I think, therefore, that the words ' arising or accruing ' are general words descriptive of a right to receive profits.'

11. Similar view was also expressed by Shah J., speaking for their Lordships of the Supreme Court in CIT v. Ashokbhai Chimanbhai : [1965]56ITR42(SC) wherein it was observed as under (p. 45) :

'Under the Income-tax Act, income is taxable when it accrues, arises or is received, or when it is by fiction deemed to accrue, arise or is deemed to be received. Receipt is not the only test of chargeability to tax ; if income accrues or arises it may become liable to tax. For the purpose of this case, it is unnecessary to dilate upon the distinction between income 'accruing' and 'arising'. But there is no doubt that the two words are used to contra-distinguish the word 'receive'. Income is said to be received when it reaches the assessee : when the right to receive the income becomes vested in the assessee, it is said to accrue or arise.'

12. Thus, income can be said to be received when it reaches the assessee, but it can be said to have 'accrued' or 'arisen', when the right to receive the said income becomes vested in the assessee. Income becomes taxable on the basis of accrual when the right of the assessee to the income accrues or arises. En the case of income relating to payment of labour charges for loading and unloading goods from the wagons according to the terms of the contract, the right to receive such income accrues or arises as soon as the work is completed and a bill is submitted in respect thereof by the contractor to the railway. The right to receive the said income becomes established on the submission of the bill by the contractor and postponement of actual payment of the amount does not affect the accrual of such income. In the present case, the income had accrued to the assessee-firm as soon as the work of supplying labourers for loading and unloading goods was performed by the assessee-firm and the bills in respect thereof were submitted by it to the railway, and merely because the payment was not actually made by the railway did not affect the accrual of the income, so far as the assessee-firm was concerned. It may be that the actual payment of some bills was delayed and the assesee-firm had to file a suit and obtain a decree from a civil court in order to receive the income, but it is difficult to hold that the said income had not 'accrued' to the assessee-firm as soon as the work was completed and the bills were submitted to the railway claiming payment in accordance with the terms of the contract.

13. Section 28(1)(c) of the Act of 1922 authorised a person to furnish a revised return of his income at any time before the assessment is completed, if he discovers any omission or wrong statement therein. The case of the assessee-firm is that having discovered the omission or incorrect statement in its original return, it proceeded to file a revised return in an honest and bona fide belief of correcting the incorrect statement. Although mere filing of a revised return may not absolve the assessee from the liability of imposition of penalty, yet the case of the assessee-firm is that the revised return was voluntary and was filed without any concealment having been detected by the ITO. It is no doubt true that the suit was filed by the assessee-firm in the court of District Judge, Bikaner, on September 21, 1959, in which the amount relating to unpaid bills from April, 1957, to August, 1958, was claimed together with interest on the outstanding amount. The claim made by the assessee-firm in the civil suit included the amount which according to the assessee represented unauthorised deductions made by the railway from the bills submitted by the assessee-firm, as also amounts representing the payment of verified bills, which were withheld by the railway and 10% amount deducted from the bills according to the terms of the contract as well as the amounts of bills which were not passed by the station masters. The contention advanced on behalf of the assessee-firm is that as unauthorised deductions were made and payment of the verified bills was withheld by the railway administration, doubts were raised about the accrual of the said income and that omission in respect thereof was made in the original return filed by the assessee-firm, on account of the unauthorised deductions made from its bills by the railway. It was submitted that the assessee-firm did not deliberately furnish incorrect particulars of its income but the promptness with which the revised return was filed soon after obtaining a copy of the decree manifested the honest and bona fide conduct on the part of the assessee. It was urged that the penalty proceedings are quasi-criminal in nature and a criminal intention must be established before imposition of penalty.

14. In Badshah Prasad v. CIT : [1981]127ITR601(Patna) it was held that mere filing of a revised return did not automatically absolve an assessee from levy of penalty under Section 271(1)(c) of the Act of 1961. But the question whether penalty can be imposed in spite of furnishing a revised return has to be determined on the facts and circumstances of each case. It was observed in the aforesaid case that if there was material to hold that the filing of a revised return was only a camouflage to overcome an omission deliberately made in the original return, penalty for concealment of income could be imposed, but if the filing of the revised return was an honest and bona fide act on the part of the assessee and if the earlier omission wasinadvertent and without due knowledge of the actual state of affairs, penalty could not be imposed under Section 271(1)(c) of the Act.

15. The crux of the matter appears to be that if after examining the return and the accounts of the assessee in the course of the assessment proceedings, the ITO discovers an omission or wrong statement made by the assessee and, thereafter, a revised return is filed, then the assessee cannot be absolved of the liability for imposition of penalty under Section 271(1)(c), but if the assessee himself voluntarily files a revised return before the order of assessment is made, after he has himself discovered an omission or wrong statement in the original return, then in such a case, penalty for concealment of particulars of income or for furnishing inaccurate particulars of such income, as contemplated under Clause (c) of Sub-section (1) of Section 271, cannot be attracted.

16. In CIT v. Anwar Ali : [1970]76ITR696(SC) it was firmly laid down, by their Lordships of the Supreme Court that proceedings under Section 28(1)(c) of the Act of 1922, which provision corresponds to Section 271(1)(c) of the Act of 1961, relating to imposition of penalty, are penal in nature and it is for the Department to establish that the assessee was guilty of concealment of particulars of income. Their Lordships held that an order imposing penalty is the result of quasi-criminal proceedings. The gist of the offence under Section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden was on the Department to establish that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. The mere fact that the explanation of the assessee is false does not necessarily give rise to an inference of concealment of income or deliberate furnishing of inaccurate particulars.

17. In CIT v. N.A. Mohamed Haneef : [1972]83ITR215(SC) their Lordships of the Supreme Court, following the decision in Anwar Ali's case : [1970]76ITR696(SC) held that if there was no basis for coming to a firm conclusion that the assessee deliberately supplied wrong particulars, penalty could not be imposed upon the assessee.

18. In CIT v. Khoday Eswarsa and Sons : [1972]83ITR369(SC) their Lordships of the Supreme Court observed as under (p. 376):

'...one of the principal objects in enacting Section 28 is to provide a deterrent against recurrence of default on the part of the assessee and that Section 28 is penal in the sense that its consequences are intended to be an effective deterrent which would put a stop to the practices which the legislature considers to be against the public interest,...penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the department must have before it, before levying penalty, cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt the original assessment proceedings for computing the tax may be a good item of evidence in the penalty proceedings, but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment.'

19. In CIT v. Ramdas Pharmacy : [1970]77ITR276(Mad) it was observed that mere filing of a revised return will not expatiate the contumacious conduct on the part of the assessee in not disclosing the true income in the original return. However, it is not possible to ignore the fact that the assessee had filed a second return as a matter of no consequence. Their Lordships of the Madras High Court observed that all the facts and circumstances commencing with the filing of the original return and ending with the assessment are relevant for considering the assessee's liability for penalty under Section 28(1)(c) of the Act of 1922 and the filing of the original return alone could not be considered in isolation without reference to the assessee's conduct subsequent thereto. In the aforesaid case also, after the original return was filed, the ITO on a preliminary investigation on the assessee's return, sought an explanation about certain items standing to the credit of the three individual partners and at that stage the assessee-firm filed a revised return. The Tribunal held that there was no deliberate concealment of income on the part of the assessee. The Tribunal took the view that, as the assessee- has made a true disclosure of its income in the revised return before the assessment was completed, the assessee could not be said to have deliberately concealed the true income. Their Lordships of the Madras High Court held that the explanation offered by the assessee for not disclosing a part of its income in the first return is possible of acceptance and in the face of such acceptable explanation, a deliberate intention on the part of the assessee-firm to conceal the income cannot be inferred.

20. In Ayyasami Nadar and Bros. v. CIT : [1956]30ITR565(Mad) the Madras High Court expressed the view that the concealment or the deliberate furnishing of inaccurate particulars can take place at the time of making the original return as well as at the time of filing the return in compliance with a notice under Section 34 and if the discovery takes place during ' any proceedings under the Act', it can be said that income hasbeen concealed or inaccurate particulars of income were deliberately furnished. If the concealment or deliberate omission to furnish true particulars is made at any stage of the proceedings under the Act, the jurisdiction to initiate penalty proceedings arises with respect to the default, or contumacious conduct in the initial assessment proceedings or in the subsequent proceedings for escaped income.

21. In Dayabhai Girdharbhai v. CIT : [1957]32ITR677(Bom) their Lordships of the Bombay High Court held that where the omission to include an item of income in the original return was deliberate, the result of such deliberate omission could not be got rid of merely by filing a revised return and the assessee may be subjected to a penalty for the omission in the original return, notwithstanding the fact that the return has been subsequently corrected. It was held that the entire question was as to whether the omission in the original return was deliberate or bona fide and the learned judges of the Bombay High Court observed as under in the aforesaid case (p. 680) :

' Now, it is perfectly true that every assessee has the right under Section 22, Sub-section (3), to submit a revised return if he discovers any omission or wrong statement in his original return before the assessment is made. But the omission or wrong statement may be accidental or deliberate. Where it is accidental, no result may ensue by reason of the omission ; but where the omission is deliberate, the results of such deliberate omission cannot be got rid of merely by filing a revised return. If the omission is deliberate, then in respect of the original return, the provisions of Section 28(1)(c) apply, because that Sub-section provides that the Income-tax Officer, if he is satisfied that the assessee ' has concealed the particulars of his income or deliberately furnished inaccurate particulars of his income', he may be subjected to a penalty. Therefore, where the concealment is not an accidental omission, but is a deliberate concealment, penalty is attracted notwithstanding the fact that the return has been subsequently corrected.'

22. In D.V. Patel & Co. v. CIT : [1975]100ITR524(Guj) their Lordships of the Gujarat High Court observed as under (p. 530):

'......it was not possible to construe the original return in isolationwithout reference to the assessee's conduct subsequent to the filing-of the original return and that all the facts and circumstances commencing with the filing of the original return and ending with the assessment may be taken as relevant for considering the assessee's liability for penalty under Section 28(1)(c). The Tribunal has not thought fit to attach any significance or importance to the filing of the revised return and merely proceeded on the fact that there was no explanation by the assesseefor not making a return of the income he has earned from the profit under Section 41(2).'

23. In the aforesaid case, their Lordships of the Gujarat High Court held that the Tribunal did not address itself to the important question whether the revised return was made by the assessee of its own volition before concealment was detected in the course of the assessment proceedings and that the Tribunal had also failed to decide the question whether on a consideration of the entire conduct of the assessee right from the inception to the filing of revised return, the burden lying on the assessee was discharged having regard to the preponderance of probabilities.

24. In the case of Taiyabji Lukmanji v. CIT : [1981]131ITR643(Guj) the assessee filed a revised return in pursuance of an advertisement published by the Central Board of Direct Taxes, but the income-tax authorities imposed penalty under Section 271(1)(c) on the ground of concealment of income in the original return. Their Lordships of the Gujarat High Court held that the Tribunal ought to have considered the question as regards the legality and propriety of levying penalty under Section 271(1)(c) of the Act, in the light of the instructions given by the Central Board of Direct Taxes in the advertisement.

25. In Qammar-Ud-din & Sons v. CIT : [1981]129ITR703(Delhi) the assessee had voluntarily filed a revised return along with the profit and loss account showing higher income. The income-tax authorities on the basis of the decision of the Madras High Court in Ramdas Pharmacy's case : [1970]77ITR276(Mad) imposed penalty upon the assessee. It was held by the Delhi High Court that although normally it would be a question of fact as to whether an assessee was guilty of fraud or negligence, yet, on account of certain handicaps, it was not possible for the assessee to set out correct income in its original return. But before the ITO investigated the matter or discovered anything wrong with the assessee's accounts or return, the assessee himself voluntarily came forward with a correct profit and loss account which was accepted by the ITO, then in all probability it did not appear that the failure to return the correct income arose from fraud or gross or wilful neglect. It was held that merely because the assessee was called upon to produce evidence by the ITO to enable him to verify the correctness of the return did not show that the subsequent disclosure of correct income was not made voluntarily by the assessee.

26. In the present case also, except for the fact that the ITO had called for certain particulars from the assessee regarding the bills sent by it to the railway, there is nothing on the record to indicate that the ITO had carried out any investigations or that he had discovered the under-statement of income made by the assessee. There is no doubt that the original return filed by the assessee was not correct but before the Department discovered anything wrong with the return, the assessee came forward with a true disclosure. Such conduct on the part of the assessee is very relevant to the question of imposition of penalty and the failure to take the same into consideration has vitiated the conclusion arrived at by the Tribunal. Although there is an obligation under the I.T. Act upon every assessee filing a return of its income to disclose the true income and that obligation must be discharged scrupulously and sincerely, yet before any penalty could be imposed upon an assessee, as held by their Lordships of the Supreme Court in Anwar Ali's case, the contumacious conduct on the part of the assessee must be established and it must appear from the material placed on record and from the circumstances of the case that the assessee deliberately failed to return the correct income or furnished inaccurate particulars in the first instance. In the present case, as observed above, the assessee had filed a suit even before the filing of the original return and the suit was pending wherein the assessee's right to the amount in question was being litigated. The Tribunal came to the conclusion that but for the insistence on the part of the ITO that the assessee should file information regarding station-wise total bills submitted during the year and bills which remained un-submitted, the revised return declaring correct income would not have seen the light of the day. On that basis, the Tribunal came to the conclusion that there was a deliberate intention on the part of the assessee of concealing its true income, when it filed its original return. However, in the present case, the ITO had merely called upon the assessee to produce particulars of accounts and had not at that stage made any investigation nor had he discovered the alleged omission in the original return. The subsequent conduct that for almost one year, after the ITO was informed by the assessee-firm that the dispute between it and the Northern Railway was pending before the arbitrator, the ITO postponed the hearing and awaited the result of the arbitration proceedings and even after the award was passed, no further proceedings were taken in the matter of assessment until the objections filed by the railway to the award were rejected and a decree in terms of the award was passed by the learned District Judge. The ITO accepted the revised return and calculated the tax payable by the assessee-firm on the basis of the revised return. It may be observed that the finding of the Tribunal is based solely on one circumstance that the revised return was filed by the assessee after the ITO had called upon the assessee-firm to furnish certain information. The entire conduct of the assessee from the inception, i.e., from the date of filing of the original return until the conclusion of the assessment proceedings, should have been taken into consideration, including the fact that the revised return was filed voluntarily by the assessee-firm without the ITO having had any occasion to discover the alleged concealment in the original return. The entirety of facts including the existence of a dispute between the assessee-firm and the railway administration, which led to the litigation between them, the subsequent arbitration proceedings, as also the fact that objections were filed by the railway administration against the award passed by the arbitrator, which were ultimately rejected by the learned District Judge, and the award was made a rule of the court and a decree was passed on the basis thereof, ought to have been taken into consideration by the Tribunal before arriving at the finding that the assessee was guilty of concealment of its income, in respect of the amounts which it disclosed in the revised return, although the same were omitted in the original return. From the entire conduct of the assessee-firm, it does not appear that the revised return was filed by it only as a camouflage to overcome a deliberate omission on its part while filing the original return. A revised return can only be filed when there is an omission or a wrong statement in the original return and the same is discovered, but the question is as to by whom the omission or error in the original return should be discovered If such omission or wrong statement is discovered by the assessee himself and a revised return is filed voluntarily in consequence of such discovery, before the ITO discovers such omission or error in the original return, then the assessee cannot be held guilty of contumacious conduct of deliberately furnishing incorrect particulars or of deliberate concealment of true income. It may be pointed out that mere non-disclosure of true particulars of income or furnishing inaccurate particulars is not sufficient to attract the penalty provisions contained in Section 271(1)(c) of the Act, but in order that penalty may be imposed, there should be conscious concealment of particulars or inaccurate particulars must have been furnished deliberately by the assessee. If the ITO, as a result of investigation made by him during the assessment proceedings, discovers that inaccurate particulars have been supplied by the assessee or there is an omission to supply the correct particulars on his part and the revised return is filed by the assessee after such a discovery is made by the ITO, then, of course, in such circumstances, the filing of the revised return cannot remove the effect of contumacious conduct on the part of the assessee while filing the original return and penalty is leviable in such a case. However, as observed by their Lordships of the Madras High Court in Ramdas Pharmacy's case : [1970]77ITR276(Mad) the entirety of circumstances must be taken into consideration and the conduct of the assessee from the inception to the conclusion of the assessment proceedings must be viewed, in order to find out whether a criminal intention of conscious concealment of true particulars of income or deliberately furnishing inaccurate particulars by the assessee has been established. It was pointed out by the Tribunal that the arbitration proceedings were concluded and the award was delivered on February 12, 1963, yet the revised return was filed on November 27, 1963. The question of delay in filing the revised return is not very material in the present case inasmuch as the ITO does not appear to have taken any further proceedings in the assessment matter until the passing of the decree and the filing of the revised return, after he was informed by the assessee that the books of accounts were lying with the advocate at Delhi in connection with the arbitration proceedings, which were likely to be finalised soon. The relevant question is as to what was the intention of the assessee at the time of filing of the original return and if the assessee honestly and bona fide kept the ITO informed about the dispute between the assessee-firm and the Northern Railway, and the litigation between them and arbitration proceedings which took place in the course of that litigation, then, there is no reason to hold that the assessee was guilty of deliberate concealment of income at the time of filing of the original return.

27. In view of the aforesaid considerations, our answer to the first question is in the negative and against the Revenue. In our view, the filing of the revised return by the assessee-firm before the ITO proceeded further with the investigation in the course of assessment proceedings was an honest and bona fide act on its part and the assessee-firm could not be held to be guilty of conscious concealment of income while filing the original return in December, 1961. In that view of the matter, the second question is also answered in the negative, as we hold that the levy of penalty under Section 271(1)(c) was not justified in the facts and circumstances of the case.


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