Nandlal Kanaiyalal vs Commissioner of Income Tax

G.T. Nanavati, J.—For the year 1967-68, the assessee filed his return of income of December 23, 1968. The income disclosed was Rs.

10,951. For the subsequent two years, the assessee filed his returns on October 10, 1969, and September 30, 1970, respectively. On December

23, 1969, the Income Tax Department had carried out a raid at the place of the father of the assessee and seized certain documents. on May 18,

1971, a notice was given to the assessee u/s 143(2) of the Income Tax Act, 1961. Thereafter, that is on July 21, 1971, the assessee filed a revised

return of his income disclosing that his income was Rs. 26,611. The Income Tax Officer, on verification of the books of account of the assessee,

found that the assessee had not given details of the amounts received as brokerage and in the absence of vouchers or receipts, the correctness of

the amounts received was not verifiable. He, therefore, made a maximum addition of Rs. 2,000 and determined the income of the assessee at Rs.

28,611. While passing the order of assessment, the Income Tax Officer also directed that a notice be issued to the assessee u/s 274 for penalty u/s

271(1)(c) of the Act inasmuch as the assessee had furnished inaccurate particulars of his income. In the proceedings initiated u/s 271(1)(c), the

Income Tax Officer held that the assessee''s intention at the time of filing the original return was ""not that of innocence"" and that the assessee had

deliberately understated his income as could be seen from his subsequent admission that his real income was Rs. 26,611. The Income Tax Officer

also held the Explanation to section 271(1)(c) was also attracted and that the assessee failed to discharge the burden which arose as a result of the

deeming fiction created by the Explanation. For coming to the conclusion that the original return filed by the assessee was not voluntary and bona

fide, the Income Tax Officer relied upon four circumstances : (i) the assessee had filed a copy of his capital account along with the return of income

for the assessment years 1969-70 and 1970-71 also and that would mean that till September 30, 1970, he had not discovered the mistake and

that was not believable; (ii) in the previous year, the assessee had received brokerage of Rs. 12,997, whereas for the relevant year, he had

disclosed brokerage of Rs. 7,864 only; (iii) the revised return was filed after the raid at the residential as well as business premises of his father on

December 23, 1969, and that indicated that it was filed under an apprehension of ""deeper probe in his financial affairs"" by the Department; and (iv)

the assessee had filed the revised return after he had received the notice u/s 143(2) of the Act. The Income Tax Officer levied a maximum penalty

of Rs. 31,320. This order of penalty was challenged by the assessee by filing an appeal before the Appellate Assistant Commissioner but without

any success. The second appeal to the Tribunal also met with the same fate. Thereupon, the assessee moved the Tribunal to refer the following

four questions to this court on the ground that they arose out of the order of the Tribunal :

(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the levy of penalty u/s 271(1)(c) of

the Income Tax Act; 1961 ?

(2) Whether the finding of the Tribunal that the revised return was not voluntary is supported by any evidence or material on record ?

(3) If the answer to the second question is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal was justified in

concluding that the Revenue has discharged the burden of proof in the said proceedings ?

(4) Whether the finding of the Tribunal as to the confirmation of the penalty is reasonable and arrived at after considering all relevant documents

and evidence on the record and the same is sustainable in law ?

The Tribunal refused to refer question No. 2 on the ground that the answer to that question was self-evident. As regards question No. 3, the

Tribunal observed that it did not arise from its order. It refused to refer question No. 4 on the ground that its attention was not invited to any

documentary evidence on record which was not considered by the Tribunal. Thus, the Tribunal refused to refer questions Nos. 2, 3 and 4 to this

court. Question No. 1 was reframed by the Tribunal and it has been referred to this court. It reads as under :

Whether, on the facts and in the circumstances of the case, the order levying the penalty of Rs. 15,660 u/s 271(1)(c) of the Act can be sustained

?

It may be stated that even though the Tribunal refused to refer questions Nos. 2 to 4 to this court, the assessee had not moved this court u/s

256(2) of the Act and, therefore, we are required to answer question No. 1 only bearing in mind that the Tribunal has refused to refer questions

Nos. 2 to 4 to this court. Not only that, but question No. 1, that is, the question referred to us, will have to be answered in the context of the

findings recorded by the Tribunal and which findings are now no longer open to challenge.

As stated earlier, the Tribunal has recorded a finding that ""it cannot be said that the revised return in such circumstances was filed by the

assessee of his own accord and sweet will"". Thus, are revised return filed by the assessee has not been treated as a voluntary return, meaning

thereby that it was not a revised return filed bona fide on discovery of any mistake. The Tribunal has in terms recorded a finding that there was no

scope for any mistake being committed. This finding has been recorded after appreciating the relevant circumstances. Therefore, being a finding of

fact, it will have to be accepted by this court.

For that reason, in order to decide whether the Explanation to section 271(1)(c) became applicable or not, we will have to consider the original

return. Obviously, the difference between the income returned and the income assessed was more than 20 per cent, and, therefore, it was for the

assessee to explain and prove that failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. The only

explanation which the assessee gave while submitting his revised return and while replying to the show-cause notice was that his was through

mistake that such brokerage commission receipts were left out to be shown in the previous return. How that mistake occurred and how it came to

his notice remained unexplained. In fact, no attempt whatsoever was made by the assessee to show that it was really a case of mistake which was

subsequently noticed by him. In fact, the making up of accounts for the subsequent years including the balance-sheet and the corrections which

were made with respect to cash on hand are indicative of the fact that this was not a case of mistake but that it was a case of deliberate

concealment. If this discrepancy in the account is considered along with the fact that there was a raid by the Income Tax Department at the

business as well as residential premises of the father of the assessee and the assessee himself was given notice u/s 143(2), it cannot be said that the

view taken by the Tribunal is unreasonable or that it was not justified in confirming the penalty levied upon the assessee. The assessee having failed

to discharge the burden arising as a result of the Explanation to section 271(1)(c), the authorities were right in levying penalty upon the assessee

and the Tribunal was equally justified in confirming the same.

We, therefore, answer the question in the affirmative, that is, against the assessee and in favour of the Revenue. Reference is disposed of

accordingly. No order as to costs.