TaxTMI 
TaxTMI 
2005 (10) TMI 68
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....opinion to this court: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law to uphold the penalty in regard to a sum of Rs. 10,22,770 being the amount remitted by the bank on the basis of compromise decree granted during the relevant assessment year notwithstanding the fact that the decree was satisfied in a subsequent assessment year?" At the instance of the Revenue, the Tribunal has also referred the following question for the assessment years 1983-84 to 1987-88 for opinion to this court: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law to hold that the assessee was not liable to penalty in regard to the excess claim of interest made on the basis of misunderstanding of the decree relating to the payment of interest on defaulted payments?" The brief facts of the case are as follows: The assessee is a registered firm. In 1974, it had purchased a hotel for which money had been borrowed from Citi Bank. The assessee having failed to fulfil the commitments made to the Citi Bank for repayment of the loan, a suit had been filed by the bank in the year 1978 for the recovery of the dues. On the bas....
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.... rate of 16 per cent, on the unpaid instalments of the decreed amount. For the assessment years 1984-85 and 1985-86 at the time of giving effect to the appellate orders, it had requested the Assessing Officer to include the interest wrongly claimed by it in respect of the outstanding amount of Rs. 52,07,873.15. Though the Assessing Officer had originally included the amounts as assessable for the assessment years 1984-85 and 1985-86, while giving effect to the appellate orders, he added the interest as offered by the assessee. The Commissioner of Income-tax (Admin.) exercising the powers under section 263 of the Act had set aside those orders as being erroneous and prejudicial to the interests of the Revenue. For the assessment year 1988-89, the assessee had filed the returns on the basis of the revised computation of inter est. For the assessment year 1989-90, the assessee filed the return on October 31, 1989. A sum of Rs. 16,58,101 was shown in the profit and loss account on the credit side. In the financial notes annexed to the balance-sheet in schedule K, the chartered accountant in para. 5 had mentioned that the firm had availed of loans from Citi Bank and the bank had filed a....
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....ty to 150 per cent. The assessee appealed to the Tribunal and it was claimed that it had provided interest in the books of account as according to their understanding, the compromise with the bank would get finalised only as and when the entire amount was liquidated and the security realised. It was further claimed that the bank loan had been liquidated in November, 1987, and it had voluntarily disclosed the interest and co-operated with the Department in assessing the income. It has also been pointed out that for the assessment years 1986-87 and 1987-88 since the assessments were pending it had filed revised returns offering the excess interest claimed for the assessment. It was further pointed out that for the assessment years 1983-84 to 1986-87 though the assessment stood completed, it had offered full co-operation for bringing the amount to tax immediately after the decree was satisfied. There had been a raid in the premises of the assessee. A file of the Citi Bank had been seized by the Revenue and that the copy of the decree had been filed before the Assessing Officer during the assessment proceedings for the assessment year 1986-87. These factors, according to it, would e....
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....ed the penalty. However, in respect of the wrong claim made by the assessee, the penalty at the rate of 100 per cent, has been confirmed. It would be better to refer to the findings recorded by the Tribunal which are as follows: "We have given our careful consideration to the rival contentions. In this case, the assessee had filed the original returns for the assessment years 1983-84 to 1987-88 claiming interest on the outstandings of Rs. 52,07,873 notwithstanding a compromise decree passed on April 30, 1982, as a result of which, the liability of the assessee had been reduced to Rs. 42,45,277 with a scope for further reduction to the extent of Rs. 2,85,477. It is a matter of record that the assessee had not disclosed the fact of having reached a settlement with Citi Bank either in the books of account or in the statement of accounts filed along with the returns. Nor was the copy of the decree provided to the Assessing Officer. During the course of the assessment proceedings for the assessment years 1983-84, 1984-85 and 1985-86, though there was a search on March 30, 1984, at the premises of the assessee, there is no evidence on record that the fact of compromise decree had c....
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...., one fact gets established that though the assessee had made wrong claims in the original returns for the assessment years 1983-84 to 1987-88, the information regarding the compromise decree was given by the assessee voluntarily without any detection by the Assessing Officer notwithstanding the search on March 30, 1984, at the premises of the assessee. On these facts, we are called upon to decide as to whether the assessee is guilty of having concealed the income or having furnished inaccurate particulars of income in the original returns. Section 139(1) makes it obligatory upon the assessee to furnish a return of income giving the true and full particulars of the income. Section 139(5) enables the assessee to file a revised return in case the assessee discovers any omission or any wrong statement in the original return within a specified period. For the assessment years 1983-84 to 1985-86 no such returns were filed and assessments were completed on the basis of the original returns. For these three years the assessee had made a wrong claim as under. For the assessment year 1983-84, though there was a compromise between the assessee and the Citi Bank as a result of which, the l....
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.... whether the assessee had consciously concealed the income or furnished inaccurate particulars of income at the time of filing the original returns. Once a finding is recorded that the assessee had failed to disclose the income in the original assessment consciously, the assessee would be liable to penalty notwithstanding the fact that he has later on volunteered the information and co-operated with the Department in getting the amount assessed to tax. His subsequent conduct, as already stated, would be relevant for waiver of penalty. But in so far as the assessee as per our finding had failed to disclose the true income in its original return for the assessment year 1983-84, they are liable to penalty under section 271(1)(c). We are, therefore, satisfied that the assessee is liable to penalty in respect of Rs. 10,22,770 for the assessment year 1983-84. We also do not see any justification for the assessee to have claimed interest in respect of the entire amount of Rs. 52,07,873. The said interest was not payable at all in view of the compromise decree. The assessee has itself surrendered the amount of Rs. 7,11,894 being the excess interest claimed in the original return. No doubt ....
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.... till the date of payment, the entire amount of the decree then outstanding shall become immediately, due and payable to the plaintiff and the plaintiff shall be entitled to take steps in court for the sale of the said mortgaged properties and the sale of the said properties and the mortgage decree shall then not be held in abeyance. The plaintiff shall also be entitled in that event to execute the decree personally against the defendants 1 to 5 who shall be jointly and severally liable under the decree. The penalty in respect of Rs. 98,054 is thus not justified where the benefit of doubt given to the assessee. The penalty in respect of the sum of Rs. 98,054 is accordingly deleted.' The Assessing Officer has imposed the penalty at 200 per cent. The Commissioner of Income-tax (Appeals) has directed to calculate the penalty at the rate of 150 per cent. Considering the fact that the assessee had given the information voluntarily during the assessment and the Assessing Officer had not detected any concealment during the course of the assessment proceedings for the assessment year 1986-87, the penalty at the minimum imposable would be justified. We accordingly direct the Assessing....
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....sing Officer shall recalculate the penalty at the rate of 100 per cent, after excluding a sum of Rs. 3,38,194. For the assessment years 1986-87 and 1987-88, assessments have been made by the Assessing Officer on the basis of the revised returns. The assessee had undisputedly made excess claim in the original returns. Filing of the revised return does not absolve the assessee from liability of the penalty unless the assessee establishes that there was a bona fide mistake or omission in the original return. This view is supported by the decision of the Gauhati High Court in the case of F.C. Agarwal v. CIT [1976] 102 ITR 408. In this case, it was held on the basis of material on record that the revised returns were merely the result of inadvertent mistakes or omissions. In that case, the Tribunal had come to the conclusion that the assessee had submitted inaccurate particulars of his income while riling the original return. This decision of the Gauhati High Court has been confirmed by the hon'ble Supreme Court in the case of G.C. Agarwal v. CIT [1990] 186 ITR 571. Since in this case, the assessee has failed to explain satisfactorily as to how a wrong claim was made in the origin....
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.... been knowingly concealed. The finding of the Tribunal is a finding of fact and- does not require any interference. We have given our anxious consideration to the submissions made by learned counsel for the parties and perused the order of the Tribunal and the authorities below. Section 271(1)(c) of the Act as it stood at the relevant time was as follows: "Section 271.(1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person - ... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income." By section 40 of the Finance Act, 1964, the word "deliberately" was omitted from section 271(1)(c). The provisions of section 271(1)(c) have been considered by the apex court in the case of K.C. Builders v. Asst. CIT reported in [2004] 265 ITR 562, the apex court observed as follows: "One of the amendments made to the abovementioned provisions is the omission of the word 'deliberately' from the expression 'deliberately furnished inaccurate particulars of such income'. It is implicit in the word 'concealed' that there has be....
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....984-85 and 1985-86, reference to the decree passed by the First Additional Civil Judge, Agra was not made. Even during the course of the assessment proceedings, the said decree was not brought to the notice of the assessing authority which resulted in the allowance of excess amount of the interest. Thus, though the decree was in existence before filing of the return and during the course of the assessment proceedings still higher interest had been claimed on the entire outstanding amount and the decree has not been brought to the notice of the assessing authority, amounts to consciously claiming of the excess interest and furnishing of inaccurate particulars. Subsequent disclosure of the decree and request to include excess interest wrongly claimed at the stage when the assessing authority was giving effect of the appellate order, does not make any difference. It may be a circumstance which leads the assessee to disclose the correct fact and to offer to tax excess amount of interest claimed. Subsequent offer by the assessee to tax the excess interest claimed and allowed and co-operation in the assessment proceeding would not make any difference to the act of the assessee which had ....