M/S. Rani & Co v. The Asst. Commissioner Of Income-Tax, Circle I(1), Erode

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28/04/2004 CORAM THE HONOURABLE MR. JUSTICE A.S. VENKATACHALAMOORTHYANDTHE HONOURABLE MR. JUSTICE P.K. MISRA T.C.No.286 of 2001and T.C. Nos. 287 to 293 of 2001 M/s. Ravi & Co.,No.77, Sathy Road,Erode � 638 003. .. Appellant in T.C.Nos.286,287,288,291 & 292 of 2001 M/s. Rani & Co.,No.77, Sathy Road,Erode � 638 003. .. Appellant in T.C.Nos.289,290 & 293 of 2001 -Vs- The Asst. Commissioner ofIncome-tax,Circle I(1), Erode. .. Respondent in all cases Tax Case Appeals arising out of ITA Nos.1576 to 1583/Mds/1994 dated12.4.2000 at the instance of the Appellant. For Appellant : Mr.N. Quadir Hoseyn For Respondent : Mr.K. SubramanianSenior Standing Counsel(Tax) :J U D G M E N T P.K. MISRA, J Appellants are partnership concerns deriving income as dealer intimber and tiles. The dispute relates to assessment years 1986-87 to 1991-92. The appellants had initially filed return for the different assessmentyears showing certain income. Subsequently, in course of the assessmentproceedings for the assessment years 1991-92 along with notice under Section143(2) of the Income Tax Act (hereinafter referred to as �the Act�), theAssessing Officer had issued questionnaire calling for certain details. Replywas filed on 2-3-1992. Thereafter the appellants filed revised returns for the assessment years 1986-87 to 1991-92 and paid tax accordingly. TheAssistant Commissioner of Income Tax while accepting the income declared inthe revised returns, initiated penalty proceedings under Section 271(1)(c) ofthe Act. The appellants filed reply dated 27.4.1993 submitting that theadditional income had been disclosed voluntarily to get benefit under Section273A of the Act as per the budget speech in 1991-92. However, the AssistantCommissioner of Income Tax passed orders imposing penalty holding that therevised returns had not been filed voluntarily and there had been concealmentof credits which were sought to be disclosed in the revised returns. On theappeals filed by the appellants, the Commissioner of Income Tax (Appeals) by aconsolidated order dated 7.4.1994 allowed the appeals and cancelled thepenalty levied on a finding that the revised returns have been filedvoluntarily, by following the decision of the Supreme Court in 168 ITR 705(SIR SHADILAL SUGAR AND GENERAL MILLS LTD. v. COMMISSIONER OF INCOME-TAX).The aforesaid order was challenged by the Department by filing appeal beforethe Appellate Tribunal. The Tribunal by order dated 12.4.2000, allowed theappeals filed by the Department by coming to the conclusion that theadditional income offered in the revised returns were disclosed only after theDepartment had taken steps and as such, such disclosure was not voluntary.The present appeals have been filed by the assessee challenging such order ofthe Tribunal. 2. The assessee has sought to raise the following questions of law :-� 1. Whether on the facts and in the circumstances of the case, theTribunal was justified in holding that there was concealment warranting levyof penalty under Section 271(1)(c)? 2. Whether on the facts and in the circumstances of the case, theTribunal was justified in concluding that the returns were not filedvoluntarily and hence there was concealment of the amounts offered by theassessee in the revised returns ? 3. Section 271(1)(c) of the Act as applicable on the relevantdate is to the following effect :- � 271. (1) If the Income-tax Officer or the Appellate AssistantCommissioner, in the course of any proceedings under this Act, is satisfiedthat any person- . . . (c) has concealed the particulars of his income or furnishedin accurate particulars of such income, he may direct that such person shall pay by way of penalty, - . . . (iii) in the cases referred to in clause (c), in addition toany tax payable by him, a sum which shall not be less than, but which shallnot exceed twice, the amount of tax sought to be evaded by reason of theconcealment of particulars of his income or the furnishing of inaccurateparticulars of such income: 3. Section 271(1)(c) of the Act as applicable on the relevantdate is to the following effect :- � 271. (1) If the Income-tax Officer or the Appellate AssistantCommissioner, in the course of any proceedings under this Act, is satisfiedthat any person- . . . (c) has concealed the particulars of his income or furnishedin accurate particulars of such income, he may direct that such person shall pay by way of penalty, - . . . (iii) in the cases referred to in clause (c), in addition toany tax payable by him, a sum which shall not be less than, but which shallnot exceed twice, the amount of tax sought to be evaded by reason of theconcealment of particulars of his income or the furnishing of inaccurateparticulars of such income: Provided that, if in a case falling under clause (c), the amount of income (as determined by the Income-tax Officer on assessment) in respect ofwhich the particulars have been concealed or inaccurate particulars have beenfurnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officershall not issue any direction for payment by way of penalty without theprevious approval of the Inspecting Assistant Commissioner : Explanation 1.- Where in respect of any facts material to thecomputation of the total income of any person under this Act, - (A) such person fails to offer an explanation or offers on explanationwhich is found by the Income-tax Officer or the Appellate AssistantCommissioner to be false, or (B) such person offers an explanation which he is not able tosubstantiate, then, the amount added or disallowed in computing the total income ofsuch person as a result thereof shall, for the purposes of clause (c) of thissub-section, be deemed to represent the income in respect of which particularshave been concealed : Provided that nothing contained in this Explanation shall apply to acase referred to in clause (B) in respect of any amount added or disallowed asa result of the rejection of any explanation offered by such person, if suchexplanation is bona fide and all the facts relating to the same and materialto the computation of his total income have been disclosed by him.� 4. The Commissioner Income Tax (Appeals) while quashing the order of the Assistant Commissioner had primarily relied upon the decision ofthe Supreme Court reported in 168 ITR 705 (cited supra). It has been observedin the subsequent Supreme Court decision reported in 251 ITR 99 (K.P. MADHUSUDHANAN v. COMMISSIONER OF INCOME-TAX) that by virtue of theExplanation to Section 271, which was added after the aforesaid decision wasrendered, the view taken in 168 ITR 705 was no longer applicable. 5. In the present case, the Tribunal has come to a conclusion that much before the revised returns were filed by the appellants, thequestionnaire had been issued by the Income-Tax Officer calling for certaindetails and the appellants filed the revised returns only when they werecornered. In other words, the Tribunal found that the revised returns had notbeen filed voluntarily in a bonafide manner, but with a view to escape fromthe consequences of not filing a proper return. 6. After considering the materials on record, we do not find anything substantial in nature to come to a different conclusion. As a matterof fact, in the reply to the notice under Section 271(1)(c), the appellantsdid not offer any credible explanation indicating the reasons for which theamount had not been disclosed in the original returns. 7. For the aforesaid reasons, we do not find any force in the contentions raised by the appellants. 8. In the result, all the questions are answered against theassessee. dpk To The Asst. Commissioner ofIncome-tax, Circle I(1), Erode. �