Commissioner of Income Tax vs U.P. State Handloom Corporation

We have heard both sides.

The following questions are being sought to be called as a reference by way of this application.

Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal was legally justified in dismissing the Departmental appeal and confirming the order of the Commissioner of Income Tax (Appeals) cancelling the penalty u/s 271(1)(c) of Rs. 23,65,000 even when the assessee was new one and it has not made compliance to fulfil the legal obligation by furnishing the return of income u/s 139(1) of the Income Tax Act, 1961, and also it has deliberately did not comply with the notice issued u/s 139(2) to file the return of income ?

Whether, on the facts and in the circumstances of the case, if any Explanation to Section 271(1)(c) has not been invoked and concealment penalty has been imposed on substantive provisions of the section, penalty so imposed will be legally sustainable ?

The Tribunal has held as follows in paragraph 5 of the order dated December 18, 1996.

We have heard the rival contentions. The assessment order has noted that for the assessment year 1983-84, the assessee had shown income of Rs. 35,80,620 in its return. The learned Departmental representative did not dispute that the assessee was assessed the tax for several assessment years before the assessment year 1984-85. We, therefore, agree with the Commissioner of Income Tax (Appeals) that Explanation 3 below Section 271(1)(c) does not apply to the present case. It applies only to a person, who has not previously been assessed under the Act. We also agree on the basis of the case law relied upon by the Commissioner of Income Tax (Appeals) that mere failure to file a return of income does not amount to concealment of income or particulars of income. Concealment is an act of commission, whereas failure to file a return is an act of omission. The two are not the same. We, therefore, confirm the order of the Commissioner of Income Tax (Appeals) cancelling the penalty.

On the above reasoning we fail to see how penalty could possibly be imposed. It is not possible to hold that the non-filing of return by a previously assessed assessee amounts to concealment. Thus, the first question sought to be called is frivolous.

So far as the second question is concerned, we have not been shown under which other substantive provision of the Income Tax Act, penalty can be imposed for concealment when the non-filing of return by an assessee who had been assessed for several assessment years prior to the assessment year in question, that is, 1984-85 would amount to concealment, as Explanation 3 to Section 271(1)(c) rules out such a case. Therefore, the second question also does not arise.

Application is dismissed.