N.K. Saini, A.M. - (1.) THIS appeal is filed by the revenue against the order of the Commissioner (Appeals), dated 13-5-1994, relating to assessment year 1990-91.
(2.) The revenue has raised following grounds in this appeal : "1. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in cancelling the impugned penalty of Rs. 43,489 levied by the assessing officer under section 271(1)(c) of the Income Tax Act, 1961, for concealment of income ignoring the fact that the return of income was revised after the impounding of books under section 131(3) of the Income Tax Act, 1961. 2. It is prayed that the order of the learned Commissioner (Appeals) may be vacated and that of the assessing officer be restored. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed of." 3. The relevant facts of the case appearing from the orders of the authorities below are that the assessee filed return of income on 3-9-1990, declaring total income of Rs. 52,290. Subsequently, the case was selected for scrutiny. Thereafter, the assessee filed revised/voluntarily return and disclosed an income of Rs. 1,42,378 which was assessed at the same figure. Penalty proceedings under section 271(1)(c) on the basis of original return were also initiated. A show-cause notice was also issued and in response to that the assessee submitted as under : "We beg to submit that the assessee had not concealed anything in the return of income. It was due to the acts of omission by the accountant for which the assessee has already suffered a lot. However, he was prompt to file the revised return with an enhanced figure of income and bore the brunt of tax interest under sections 234B+234C. The whole tax including interest has been deposited before the filing the voluntary return." The assessing officer was not satisfied with the contentions of the assessee and imposed a penalty of Rs. 43,489. In this regard, observations of the assessing officer mentioned at para 3 of the order under section 271 (1)(c) are reproduced below: "3. It was during regular assessment proceedings that when the assessee produced books of account like ledger, cash books on 25-2-1991, that my predecessor noticed gross discrepancies in his books of account and impounded books of account and immediately on 26-2-1991, issued detailed letter to the assessee highlighting therein discrepancies which were noticed by him. The assessing officer had examined the cash book and he had found that excess cash was introduced on numerous occasions right from 5-4-1989 to 10-2-1990. Accordingly, books of account were impounded by him on this score. It was, thereafter that the assessee was compelled to recast its trading profit and loss account and change the figures of purchases, sales, gross profit and net profit. The assessee himself admitted that particulars of income were not correctly furnished by him in two returns of income filed originally on 3-9-1990, and revised on 9-1-1991, and it was after lapse of 11 months the assessee was ready to enhance its profit from 42,090 to Rs. 1,42,378. This means an addition of Rs. 90,288 is on the basis of books of accounts impounded in this case and it is thus clearly established that whatever books of account the assessee produced at the initial stage of assessments did not exactly tally with the two returns of income filed earlier. The argument of the assessee in its reply that mistake was due to the acts of omission and commission by the accountant, it cannot take advantage of any such plea as it was his duty to check the particular of income before filing the return. In the second revised return of income the true income was declared only after prior detection of the department. This adequately confirms that a conscious attempt was made to conceal the real income and its true particulars. Under the circumstances, the penalty was clearly exigible. It is thus established that income to the extent of Rs. 90,299 had escaped assessment. Resultantly, holding the assessee in default under section 271(1)(c), I impose a penalty of Rs. 43,489."
(3.) IN the first appeal, the learned counsel of the assessee argued that no penalty was imposable under section 271(1)(c) of the INcome Tax Act as there was no default to conceal the particulars of income or furnish inaccurate particulars of income. The return was revised before the completion of the assessment and the revised return had been found to be correct. The submissions of the assessee were following : "IN the instant case, assessee has revised his return of income as some entries regarding purchases/sales had not been recorded originally. The assessee has engaged a part-time accountant and on having found the discrepancies the assessee on his own revised the return voluntarily and have shown substantial increase in its (i) sales from Rs. 15,91,960 to Rs. 23,35,742 and (ii) profit from Rs. 52,290 to Rs. 1,42,378 and have also deposited the tax due thereon along with interest, etc. and have shown correct picture and have been cooperative with the department in completing the assessment of correct picture/income. After having filed the revised return the assessing officer has accepted the same and has proceeded to complete the assessment on the basis of revised return. And furthermore assessment has been made on the basis of revised return itself. The reason for revising the return had been fully explained to the then assessing officer and he had verified the same. The return filed was much before the assessment, and the profit and loss account statement filed subsequently showed correct income, the subsequent conduct of the assessee was within the permissible limits of law, and noway it established mens rea for concealment of income. Various, High Courts have held the similar view, that penalty for concealment of income cannot be levied where the assessee has filed revised return before assessment, though after having served notice from the department regarding assessment. 1. Qummar-Ud-Din & Sons v. CIT (1981) 129 ITR 703 (Del); 2. CIT v. Ahmed Tea Co. (P) Ltd. (1978) 113 ITR 64 (Gau); and 3. CIT v. P.T. Antont & Sons (1985) 151 ITR 34 (Ker). Furthermore, on similar facts penalty under section 271(1)(c) has been deleted by your office in the case of M/s Abrol INdustries, assessment year 1990-91 vide order dated 2-12-1993.";