- (1.) : Bengal Iron Galvanising Works, the assessee, is a partnership firm registered under the IT Act, 1961. For the asst. yr. 1963- 64, the relevant accounting year ending on March 31, 1963, the assessee filed its return of income on November 8, 1963. Subsequently, on December 31, 1965, the assessee made a voluntary disclosure in which amounts credited in the accounts of the assessee as loans from different parties were disclosed to be the income of the assessee. Rupees 2,94,000 was stated to be the peak credit in the relevant assessment year. Rupees 19,782 was also shown in the accounts of the assessee as interest paid to the alleged creditors on the said loans. Such interest was also disclosed to be the income of the assessee in the said assessment year.
(2.) THE ITO issued a notice to the assessee under s. 143(2) of the IT Act, 1961, on September 29, 1967, and a hearing was fixed on November 16, 1967. In making the assessment, the ITO took into account the amount of peak credit in the accounts of the assessee prior to April, 1, 1962, and the balance of the peak credit as disclosed, viz., Rs. 1,73,000 was added back as the income of the assessee. THE amount of Rs. 19,782 shown to be the interest paid on the said loans was also added back to the total income of the assessee. THE assessment was made accordingly and the ITO initiated penalty proceedings under s. 27 l(1)(c) of the IT Act, 1961, which were referred to the IAC. The assessee did not appear in the penalty proceedings before the IAC. On the facts, the IAC held that the assessee had concealed the particulars of its income and had furnished inaccurate particulars thereof inasmuch as the assessee did not disclose in its return the income disclosed under the disclosure scheme. He held further that the assessee had also furnished inaccurate particulars of his income in its return by claiming deduction of interest on fictitious loans. It was noted that the assessee did not appear in the proceedings and did not file any objection against the imposition of penalty. The IAC held that the provisions of s. 271(1)(c) were attracted to the case and imposed a penalty of Rs. 1,27,810. Being aggrieved, the assessee preferred an appeal from the order of the IAC to the Tribunal. It was contended on behalf of the assessee before the Tribunal that the assessee had made a voluntary disclosure on December 31, 1965, subsequent to the filing of its return but before any enquiry or investigation had been initiated by the Revenue. It was submitted further that, in the circumstances, the provisions of s. 271(1)(c) of the It Act, 1961, were not attracted and the penalty imposed should be cancelled.
(3.) IT was contended on behalf of the Revenue before the Tribunal that in the return filed on November 8, 1963, the assessee had not shown the amounts of the said loans as its income and had also claimed deduction of interest paid thereon wrongly. IT was submitted that the assessee did not file any revised return and merely because the assessee had made a disclosure which was ultimately rejected, the assessee was not entitled to contend that s. 271(1)(c) of the IT Act was not applicable. The Tribunal found that after the filing of its return, the assessee had made a full disclosure on December 31, 1965, voluntarily, before the ITO took any steps in the assessment of the assessee. The first step taken by the ITO was the issue of the notice under s. 143(2) on September 29, 1967, but by that time the assessee had already made a full disclosure. The Tribunal held that disclosure might have been rejected by the CIT eventually, but in making the assessment, the ITO did not bring to tax any amount in excess of what had been disclosed by the assessee.;