P.K. Balasubramanyan, C.J. - (1.) THE Tribunal, Patna, has referred the following question to this Court under S. 256(1) of the IT Act : "Whether an the facts and in the circumstances of the case, the imposition of penalty under S. 271 (1)(c) of the IT Act amounting to Rs. 2,20,000 was legal and valid?"
(2.) DURING the course of the assessment for the asst. yr. 1985-86, the AO noticed that a sum of Rs. 2,96,575 was shown by the assessee as an amount due to sundry creditors, but that the said amount was not an amount payable by the assessee, but the said amount was one which was already received by the assessee and credited to its bank account, though, the certificate for deduction of tax at source had not been received. The assessee had earlier filed a revised return continuing to show the sum of Rs. 2,96,575 as due to sundry creditors. After the aspect was highlighted by the AO, the assessee filed yet another revised return accepting the receipt of the sum of Rs. 2,96,575 as having been received on 27th July, 1984. The assessee did not account for the other receipt totalling Rs. 46,464 which also formed part of the gross receipt of the assessee. Ultimately, the AO completed the assessment adding a sum of Rs. 2,96,575 and a sum of Rs. 46,464 as the income of the assessee. The said assessment became final, the assessee not having appealed against it. The AO initiated penalty proceedings under section Rs. 3,43,239. The assessee resisted the penalty proceedings by submitting that he had included the sum of Rs. 2,96,575 as income in his revised return and the AO had completed the assessment accepting that position and no occasion for the imposition of penalty based on that addition existed in the case. The sum of Rs. 46,464 could not be brought into account by the assessee due to non-receipt of the certificate of the tax deducted at source and the assessee had not concealed that income wilfully. The AO held that the assessee had declared the income in the revised return only after the detection of the same by the AO and in that situation, penalty was liable to be imposed on the assessee under S. 271(1)(c) of the Act. The penalty of Rs. 2,20,000 was imposed. The assessee appealed before the CIT(A). The assessee contended that he intended to account for the amount on 'completed projected basis' since he had undertaken a new project of erection of sulphuric acid plant in the year 1983. Accordingly, the receipt of Rs. 4,44,815 during the calendar year 1983 and Rs. 2,96,575 during the calendar year 1984 had been shown in the 'sundry creditors' account instead of being credited to the receipt account. In the year 1985, the project was completed and the entire receipt of Rs. 9,55,653 including the amounts received earlier, had been duly shown as income for the asst. yr. 1986-87. Thus, the amount of Rs. 2,96,575 was not included in the return for the asst. yr. 1985-86. But since, the AO questioned the entry, the assessee had offered the amount for taxation during the relevant accounting year itself in the revised return in order to avoid any controversy. As regards the sum of Rs. 46,464 it was sought to be explained that the assessee received only an advance for the work against the running bills. In the meantime, TDS certificate had not been received and it alone could have reflected the details of the recoveries. Failure to include the amount in the return could not be attributed to any effort at concealment of the income. The books of account of the assessee had been audited and all the amounts received finally had been accounted for in the books. The CIT(A) accepted these contentions of the assessee and verified the PandL a/c for the asst. yr. 1986-87 and accepted the case that the total receipt had been accounted for in that year. Hence, it could not be said that the assessee had made any attempt at concealing its income or receipt. Similarly, the omission to include Rs. 46,464 was attributable to non-receipt of TDS certificate during the year. Hence, the imposition of penalty under S. 271(1)(c) of the Act was justified. Hence, he allowed the appeal and set aside the order imposing the penalty. The Department appealed to the Tribunal. The Tribunal held that the assessee did not offer an explanation at the assessment stage and this is a case to which Expln. 1(A) to S. 271(1) was attracted and the explanation offered at the stage of penalty proceedings was not bona fide and that projected completion method was not being followed and that all materials enabling the computation of total income of the assessee were not disclosed at the assessment stage. Even if any justification could be found for disclosing the profit on project completion basis under certain circumstances, there was no justification for showing actual receipts as outstanding liabilities due to sundry creditors. As regards the sum of Rs. 46,464, the TDS certificates were obtained by the assessee ever as per his books of account on 18th Sept., 1985 and though the assessee filed a second revised return on 10th Oct., 1985, the amount was not disclosed. The assessee could have clearly included this income when he filed the second revised return. There was no justification in omitting this amount in the revised return filed on 10th Oct., 1985 and consequently, the imposition of penalty was justified. The CIT(A) was in error in interfering with the order of the AO. Thus, the Tribunal reversed the decision of the CIT(A) and restored the order of the AO imposing penalty.
(3.) THE assessee sought a reference of five questions in his application under S. 256(1) of the IT Act, filed before the Tribunal, which decided that the question that really arose for decision was the one that has been quoted above by us in the beginning which, in effect, is an omnibus question covering all the aspects sought to be raised by the assessee. Learned counsel for the assessee contended that the assessee had shown in its second revised return the sum of Rs. 2,96,575 as the receipt of income and the AO had completed the assessment based on that return. It could not, therefore, be said that there was any concealment of income by he assessee, or the furnishing of inaccurate particulars by the assessee justifying the imposition of penalty under S. 271(1)(c) of the Act. As regards the sum of Rs. 46,464 the counsel tried to reiterate the contention of the assessee that the TDS certificate had not been received at the relevant time and that is the reason for not disclosing the amount even in the second revised return of the assessee. But this contention could not be successfully pursued by the learned counsel in view of the fact that TDS certificate had been received on 18th Sept., 1985 even as per the written submissions made on behalf of the assessee before the Tribunal, the second revised return was filed only on 10th Oct., 1985 and even in that return, receipt of this amount was not disclosed. As regards, the sum of Rs. 2,96,575, learned counsel submitted that the CIT(A) had made the correct approach to the question and has rightly accepted the contention of the assessee. It was not as if the assessee had not disclosed this amount. He had included it in the return, though no doubt, it was shown as the amount due to sundry creditors. But the assessee himself had revised the return accepting that the said sum was received during the relevant accounting year in its second revised return and in that situation, the imposition of penalty was not justified. There was no mens rea and there was no concealment of any material particulars by the assessee and it could not also be said that he had furnished inaccurate particulars in the return. Counsel relied on the decision in CIT vs. Suresh Chandra Mittal (2000) 158 CTR (MP) 26 : (2000) 241 ITR 124 (MP) in support. In that decision, the Madhya Pradesh High Court held that once a revised assessment was regularized by the Revenue and once the AO had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and come out of vexation litigation could be treated as bona fide on the facts and in the circumstances of that case and hence, the Tribunal was justified in cancelling the penalty levied by the AO and affirmed by the CIT (A). The appeal against the decision of the Madhya Pradesh High Court at the instance of the Department was rejected by the Supreme Court with the following statement : "We have read the order of the High Court and the statement of case. Given the facts and circumstances, we do not think that any interference with the order of the High Court is called for." CIT vs. Suresh Chandra Mittal (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC).;