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 assessment year 1959-60, pertaining to the period from April 1, 1954 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 assessment proceedings, the Income-tax Officer 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 Income-tax Officer that its books of accounts 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.
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 Income-tax Officer assessed the income of the assessee firm for the assessment year 1956-60 by his order dated March 10, 1964, on the basis of the revised return, at Rs. 1,66,956/- after adding cash credits entries to the extent of Rs. 40,000/ -. The Income-tax Officer 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 Income-tax Officer, the concealment of income on the part of the assessee firm amounted to deliberate with holding of true particulars thereof and attracted imposition of penalty under section 271 (1) (c) of the Income-tax Act, 1961 (herein after called "the Act" ). But as the minimum penalty impose-able under section 271 (1) (c) in the case was likely to exceed Rs. 1,000/, the Income-tax Officer referred the case to the Inspecting Assistant Commissioner of Income-tax, Jaipur, as required under the provisions of sub-section (2) of section 274 of the Act.
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 Inspecting Assistant Commissioner of Income-tax by his order dated March 8, 1966 agreed with the Income-tax Officer 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 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 Inspecting Assistant Commissioner of Income-tax, 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 Appellate Assistant Commissioner.
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.
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 him only on November 26, 1963 and thereafter it filed a revised return before the Income-tax Officer on the very next day, including therein the receipt of further bills amounting to Rs. 1,52,297/ -.
(3.)THUS, the case of the assessee is that there was no concealment of income on his part, as disputes were going on between the assessee and the railway administration regarding the amount payable by the Northern Railway 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 Income-tax Officer 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 Income-tax Officer 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 the detailed enquiry would not have been made by the Income-tax Officer, 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 assesses firm is that the entire amount of b I s 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 Income-tax Officer 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 Income-tax Officer 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 Income-tax Officer, as such the conduct of the assessee firm was bona fide.
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 in come of the assessee firm. However, this contention of the learned counsel for the assessee cannot be accepted. Section 4 of the Indian Income-tax 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 be-half 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.
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.