ORDER
Shri I. S. Nigam, Accountant Member
1. This is an appeal filed by the revenue against the order of the AAC, Allahabad Range, Allahabad, cancelling the penalty under section 271(1) (c) imposed by the ITO.
2. The assessee is a HUF. There was a search of the assessee’s residential and business premises on 27-8-1974 in the course of which certain materials were seized. We were given to understand that on the basis of the material seized at the time of the search an order under section 132(5) was passed by the ITO. For the assessment year 1975-76, under consideration here, the assessee in the Annexure to Part III of the return – “Sums not included in the total income and claimed as not taxable”-disclosed number of items, investments, etc., which, according to the assessee, could not be treated as its income and were not liable to tax. Here it would be necessary to point out that this included investments in potatoes put in the cold storage and investments in the business of fertilisers, etc., as appearing in the Gutka (small red book). The ITO in the course of assessment proceedings held that the unexplained investment on potatoes put in the cold storage amounted to Rs. 5,050, while the unexplained investment in the business as appearing in the Gutka, amounted to Rs. 11,500. There was an other addition of Rs. 10,000 for unexplained investment in the acquisition of gold jewellery kept in the locker in the name of Bechanlal and Amar Nath. In respect of these three items the ITO was satisfied that the particulars of income had been concealed or inaccurate particulars had been furnished. The ITO, therefore, in the course of the assessment proceedings initiated action for penalty under section 271(1) (c). Not satisfied with explanation of the assessee, the ITO imposed a penalty of Rs. 14,437 under section 271(1) (c). The AAC, in appeal, however, held that since all the items, which formed the subject-matter of the charge of concealment of income and/or furnishing inaccurate particulars thereof were disclosed by the assessee in part III of the return, there was no question of any concealment of income and/or furnishing of inaccurate particulars thereof. He, therefore, cancelled the penalty under section 271(1) (c) imposed by the ITO. Aggrieved by this order of the AAC, the revenue has come up in the present appeal before us.
3. The learned departmental representative, Shri Prasad, submitted to us that the mere showing of the items in Part III of the return does not absolve the assessee of the charge of concealment of income and/or furnishing inaccurate particulars thereof. Elaborating on his argument, Shri Prasad submitted that the disclosure in Part III of the return followed the detection of materials in the course of the search of the assessee’s business and residential premises on 27-8-1974 and the consequent order of the ITO under section 132(5) and, therefore, what was disclosed by the assessee was not bona fide. He, therefore, vehemently argued before us that the penalty under section 271(1) (c) was perfectly justified and was wrongly cancelled by the AAC.
4. On the other hand, the assessee’s learned counsel. Shri Dhawan, at the outset filed before us a copy of the order of the AAC in the appeal against the assessment order where the addition of Rs. 10,000 on account of unexplained investment in the acquisition of jewellery kept in the locker in the names of Shri Bechanlal and Shri Amar Nath was deleted. He, therefore submitted that the question of the charge of concealment of income or furnishing of inaccurate particulars thereof in respect of this item of Rs. 10,000 simply does not arise. Coming to the other two items that is, unexplained investment in the business of fertilisers, etc., as appearing in the Gutka and unexplained investment in potatoes kept in the cold storage, Shri Dhawan submitted that both of these investments were disclosed in Part III of the return. Our attention was invited to the prescribed form of notice under section 139(2) of the Act where in paragraph 2 the assessee was advised to furnish in the prescribed portion of the return particular of amounts which, according to the assessee, were not its income and if the assessee did so, the assessee will be considered not to have concealed the income in respect of those items even if in the assessment those items were held liable to tax. Shri Dhawan was simply bitter that on the one hand the revenue authorities were advising the assessee to come out with whatever were the disputed items in respect of which there can be any controversy, whether they constitute assessee’s income liable to tax or not, with the promise that in case those items were disclosed in Part III of the return, no charge of concealment of income in respect of those items will be made against the assessee and, on the other hand, the ITO not only going back on that promise but the department coming up in appeal against the action of the AAC in implementing the promise. He, therefore, vehemently argued before us that no case of penalty under section 271(1) (c) on the facts and circumstances of the present case was made out and the penalty under section 271(1) (c) imposed by the ITO was rightly cancelled by the AAC.
5. We have carefully considered the rival submissions. It is not under dispute that the addition of Rs. 10,000 for unexplained investment in gold jewellery kept in the locket in the names of Shri Bechanlal and Shri Amar Nath was deleted in appeal by the AAC. The question of any penalty under section 271(1) (c) in respect of this addition, therefore, simply does not arise. It is not under dispute that both the investments in fertilisers, etc., as appearing in the Gutka seized in the search and seizure, and the investment in potatoes, kept in the cold storage, were disclosed in the Annexure to Part iii of the return of income. There can be no dispute that the earliest point of time, when the assessee can disclose his income for any particular assessment year, that is, the point of time when the charge of concealment of income and/or furnishing inaccurate particulars thereof can be made against the assessee is when the assessee files his return of income. What happened, therefore, earlier to the filing of the return of income is immaterial for the purpose of deciding whether the assessee was guilty of the charge of concealment of income and/or furnishing inaccurate particulars thereof. In the return of income in Part III thereof, the assessee had disclosed the investment in the business of fertilisers, etc., as appearing in the Gutka with the remark that the business belonged to Shri Sheochand Keshari and Shri Amar Nath and the investment in 351 bags of potatoes kept in the cold storage, the break up of which was given as 140 bags belonging to Shri Bechanlal, 118 bags belonging to Shri Ram Lakhan and 93 bags belonging to Shri Amar Nath. If this explanation of the assessee, which it will be necessary here to repeat, was given along with the return, that is, at the earliest point of time, was not accepted by the ITO and additions were made by the ITO for unexplained investment in the business of fertilisers, etc., as appearing in the Gutka, and unexplained investment in potatoes kept in the cold storage, we fail to understand how in respect of these items it can be said that the assessee has concealed the particulars of income or furnished inaccurate particulars thereof. It might perhaps not be out of place to mention here that paragraph 2 of the notice under sections 139(2) and 133 reads as follows :
“You are advised to furnish in the relevant portion of the prescribed form full particulars of any income which you may consider not liable to tax in your hands. If you do so, you will not be considered to have concealed that income even if in your assessment it is held to be liable to tax.”
We are really surprised that the department on the one hand assures the assessee that if he discloses the particulars in the prescribed portion of the return of those items which, according to the assessee, are not liable to tax, the assessee will not be considered to have concealed those items from the particulars of income even if in the assessment of those items are ultimately held to be liable to tax and at the same time, the ITO charges the assessee with concealment of income and/or furnishing inaccurate particulars thereof in respect of those items. We are further surprised that even where the AAC cancels the penalty on the ground that the items having been disclosed in Part III of the return, in view of the assurance given by paragraph 2 of the notice under section 139(2) and 133, no charge of concealment of income and/or furnishing of inaccurate particulars thereof can lie, the revenue considers it necessary to come up in appeal against the order of the AAC. We have, therefore, not the least hesitation in coming to the conclusion that, on the facts and in the circumstances of the case, there was no question of any penalty under section 271(1) (c), the penalty imposed by the ITO was unjustified and this penalty was rightly cancelled by the AAC. The order of the AAC, therefore, in our view, was perfectly justified and did not call for any interference.
6. The appeal is dismissed.