ORDER
K.R. Dixit, Judicial Member
1. This is a case of imposition of penalty for concealment of income.
2. The assessee disclosed certain additional income in a revised return saying that this was in order to buy peace and in the very next assessment year this additional sum was found credited in the accounts of the partners. It is for this reason that the Income-tax Officer invoking the provisions of Explanation 2 to Section 271(1)(c) imposed a penalty. The CIT (Appeals) has sustained it. Therefore, the assessee is in appeal.
3. For the sake of completeness the facts are stated in greater detail as follows : The assessee filed its return on 28-4-1984 disclosing income of Rs. 2,74.510. The Income-tax Officer wrote to the assessee asking it to attend on 4-9-1984 and to file copies of accounts of certain creditors and again on 26-9-1984 the Income-tax Officer wrote to the assessee pointing out credits totaling to Rs. 3,30,000 and asking the assessee to furnish evidence to prove the source of the said credits from the concerned parties. The assessee replied on 6-10-1984 stating that the purchases from M/s. P.K. Padmanabhan & Sons were genuine. The Income-tax Officer wrote another letter dated 27-10-1984 regarding the source of the above credits. Thereafter, on 19-11-1984 the Income-tax Officer wrote another letter proposing to treat the aforesaid credits as income of the assessee under Section 68. The Income-tax Officer also informed the assessee that he had issued summons to one of the creditors at the address given by the assessee and the same had been returned unserved. The assessee filed a letter dated 21-12-1984 wherein, inter alia, it stated as follows :
There are certain cash credits in the accounts of certain persons and the full address of the loan creditors was furnished to you. Confirmatory letters were also filed for such loans.
In order to purchase peace, we are offering a round sum of Rs. 2,50,000 to the income already returned and we request you to complete the assessment as per the revised return filed.
The assessee then filed a return dated 28-12-1984. Subsequently, in the course of the assessment for the assessment year 1984-85 the Income-tax Officer found, as stated above in the brief statement, that the accounts of the partners were credited with a total sum of Rs. 2,50,000 in proportion to their profit sharing ratio along with a narration that these credits represented additional income offered for assessment in the assessment year 1983-84. The assessee in its letter to the Income-tax Officer dated 21-12-1985, inter alia, stated as follows :
We have specifically stated that the credits relate to income offered for 1983-84 assessment, which income was returned by us and accepted by the ITO.
The assessee filed a reply dated 12-2-1986 to the Income-tax Officer’s notice under Section 274 read with Section 271, but it filed no reply to the Income-tax Officer’s letter dated 18-2-1986. In this letter, the Income-tax Officer asked the assessee specifically to explain the credits in the partners’ account in the subsequent assessment year and that Explanation 2 to Section 271(1)(c) was applicable to the assessee’s case. The CIT (Appeals) has confirmed this penalty, stating as follows :
Concealment of income and furnishing of inaccurate particulars has taken place in the return of income filed by the assessee on 28th April, 1984. It is not possible to accept the contention of the learned representative that the revised return filed on 22-12-1984 was filed voluntarily and in order to purchase peace. Explanation 2 to Section 271(1)(c) of the Income-tax Act squarely applies to the facts of this case as the assessee had credited the accounts of the partners with the sum of Rs. 2,50,000 in the subsequent year.
4. Before us, the learned representative of the assessee submitted that it was not enough for the department to rely on Explanation 2 but it was also necessary for them to show that the assessee had actually concealed the income in the relevant assessment year. He also argued that it was necessary for the department to prove that concealment had taken place in the earlier assessment year and that penalty could have been levied in that year. He also relied upon the following decisions :
(i) CIT v. Anwar Ali [1970] 76 ITR 696 (SO) ;
(ii) CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC) ; and
(iii) Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC).
5. On the other hand, the learned departmental representative replied that the revised return was not voluntarily filed but was prompted by the Income-tax Officer’s questioning. He relied upon the said Explanation 2 and emphasised that this was a clear case where the assessee had concealed the income because in the very next year the assessee had brought that amount in the books as the capital of the partners.
6. The simple fact in this case is, as stated at the outset, that a sum as large as Rs. 2,50,000, was found credited to the capital account of the partners in the very next year. After the revised return for the earlier year was filed this sum was claimed as not belonging to the assessee. The question that arises is where this sum came from ? The obvious conclusion must be that the revised return whereby this sum was offered for taxation did not state the truth as claimed by the assessee. The clear inference is that it was the income of the assessee in the assessment year 1983-84 and that a false statement was made by the assessee to the department that this sum may be “treated as the income of the assessee” only in order to buy peace. The audacity of the assessee is seen from its letter dated 21-12-1985 in which it had stated that the revised return was accepted by the Income-tax Officer implying that the Income-tax Officer having accepted [that return could not now initiate penalty proceedings. Thus, the entire move of the assessee was to file a revised return disclosing a higher income so that if the Income-tax Officer accepts the same that additional amount could be brought in the books of the company without any penal liability for concealment. This cannot be accepted. With regard to the submission of the assessee’s representative that penalty could have been levied in the earlier assessment year, it is all too plain that but for the fact that the assessee filed a false revised return claiming in substance that the amount was not its income, ‘but could be treated as such only to buy peace’, penalty would have been imposed in that year. Furthermore, the Explanation is intended to get over this difficulty. Regarding the argument that something more is necessary than merely the Explanation, what more is required than the glaring fact that in the very next , year such a large sum as Rs. 2,50,000 has been found credited in the partners’ accounts ? The cases relied upon by the learned representative are not applicable since they were decided before the introduction of the aforesaid Explanation. The assessee had raised the plea of limitation, but the learned CIT (Appeals) has effectively dealt with it. It was the assessee’s contention in the grounds of appeal that the penalty proceedings were initiated only on 31-12-1985, but the CIT (Appeals) has stated that they were initiated at the time of passing the assessment order on 28-12-1984. This has not been denied by the assessee’s representative.
7. In the result, we confirm the order of the CIT (Appeals) and reject this appeal.