ORDER
B.L. Chhibber, Accountant Member
1. This appeal by the assessee is directed against the order of the CIT (Appeals), Surat confirming penalty of Rs. 70,000 under Section 271(l)(c).
2. The assessee, an individual, derived share income from two registered firms, viz., M/s. Motiram Roopchand and M/s. United Jari Industries. He was also director of M/s. Laxmi Oil Extraction Pvt. Ltd. and was getting remuneration from the said company. The assessee filed return of income on28-6-1975 declaring only the share income from the firm M/s. Motiram Roopchand and salary income of Rs. 9,000 from the said company. He did not declare the share income from the firm M/s. United Jari Industries and the remuneration from M/s. Laxmi Oil Extraction Pvt. Ltd. On 1-3-1978, the ITO, Central Circle 1, Jaipur who then had jurisdiction over the case pointed out this lapse to the assessee. The assessee admitted the lapse and offered the share income from M/s. United Jari Industries and remuneration derived from M/s. Laxmi Oil Extraction Pvt. Ltd. for assessment.
3. During the course of assessment proceedings, the learned ITO in addition to the above two amounts offered by the assessee added a further sum of Rs. 11,380 on account of low withdrawals for household expenses. The ITO initiated penalty proceedings under Section 271(l)(c). In response to the show-cause notice, it was submitted before the ITO that the share income from M/s. United Jari Industries and remuneration from M/s. Laxmi Oil Extraction Pvt. Ltd. had not shown in the return through inadvertence and that the addition on account of low withdrawals for household expenses was based on estimate and hence no penalty was leviable. Rejecting the contentions the learned ITO levied the impugned penalty.
4. On appeal, the CIT (Appeals) confirmed the action of the learned ITO observing inter alia as under :
From the facts narrated above, it is clear that the assessee failed to disclose his income from partnership share profits, although it was a fact that he was an active partner. Similarly, the assessee failed to disclose remuneration received by him from M/s. Laxmi Oil & Extraction Mills Pvt. Ltd. of which he was a director. What this shows? It is clear that – assessee consciously concealed substantial income (Rs. 40,126 as share profits from M/s. United Jari Industries and Rs. 18,000 as director’s remuneration from the above Ltd. Co.). With a view to devoid the revenue from due amount of tax which otherwise would have become payable on filing of the return of income and correct income had been declared. Thus, it is clear that mens rea was present in the conduct of the assessee. As held by the Gujarat High Court in case of I.M. Patel& Co. (107 ITR 214) the penalty is leviable whose mens rea is present in the conduct of the assessee in concealing income and furnishing inaccurate particulars of such income. The totality of circumstances also point to the concealment of income by the assessee. A person who was an active partner in the firm cannot ignore that he was not aware of the income accruing to him from the said partnership business. Similarly, a person, who was a director of the Ltd. Company could not say that he was not aware of remuneration he was receiving from the said company as a director. Thus the totality of circumstances point to the fact that the assessee concealed income with a view to devoid the revenue from due amount of tax payable on the correct income, if returned.
As held by the Supreme Court in case of Anwar Ali (76 ITR 696), the penalty is leviable.
Not only, even the difference in the returned income and assessed income is more than 20 per cent and Explanation to 271(l)(c) is attracted.
5. Shri K.C. Patel, the learned Advocate appearing for the assessee submitted that the levy of penalty was not justified. According to the learned counsel it was a bona fide omission on the part of the assessee in not declaring the share income from M/s. United Jari Industries and remuneration from M/s. Laxmi Oil Extraction Pvt. Ltd. He submitted that as soon as the assessee came to know of this omission he filed a revised return on 30-12-1977 before the ITO , Surat. In support of this contention he has drawn our attention to the receipt issued by the ITO, Surat placed at page 20 of the paper book. The learned counsel submitted that there was no detection by the department and hence keeping in view the totality of circumstances the levy of penalty was not justified. The learned counsel further submitted that no penalty was leviable in respect of the addition of Rs. 11,380 on account of low withdrawals for household expenses as the same was made on estimate basis. In support of his contention, the learned counsel relied upon D.V. Patel & Co. v. CIT [1975] 100 ITR 524 (Guj.), CIT v. K.Mahiml 1984] 149 ITR 737 (Ker.), CIT v. S.P.Bhatt[ 1974] 97 ITR 440 (Guj.), CIT v. Vinaychand Harilal [1979] 120 ITR 752 (Guj.), KM. Bhatiav. CIT [1992] 193 ITR 379 (Guj.), Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC), CWT v. RamniklalD. Mehta[ 1982] 136 ITR 729 (Ori.) and Chhotalal Vashram v. ITO [1984] 19 TTJ (Ahd.) 287.
6. Shri S.K. Tyagi, the learned Sr. D.R. submitted that there was a deliberate attempt on the part of the assessee to conceal the income by not declaring the share income from M/s. United Jari Industries and remuneration from M/s. Laxmi Oil Extraction Pvt. Ltd. He further submitted that the lapse of not declaring the above income was brought to the notice of the assessee by the ITO as per letter dated 1-3-1978 and the assessee offered the aforesaid income for assessment only after detection. The learned Sr. DR. further submitted that it was not the case of the assessee before the Assessing Officer or before the LAC during the course of 144A proceedings that a revised return was filed and that too at Surat whereas the assessee was being assessed at Jaipur. The plea that a revised return was filed was taken up only before the CIT (Appeals) who has taken note of the same in para 12 of his order and has held that the revised return was of no avail as the assessee had no alternative but to include the concealed income in the revised return as this omission was pointed out by the ITO. According to the learned Sr. D.R. levy of penalty is fully justified in view of the facts and circumstances of the case.
7. We have considered the rival submissions in the light of judgments cited before us and also perused the facts on record. From the facts it is noted that after the ITO pointed out the omission, the assessee admitted that he had share income from M/s. United Jari Industries to the tune of Rs. 40,126 and also earned director’s remuneration from M/s. Laxmi Oil Extraction Pvt. Ltd. to the tune of Rs. 18,000. The contention of the learned counsel of the assessee that these amounts were surrendered for taxation before detection is untenable. It was never pointed but before the ITO or before the IAC during the 144 proceedings that a revised return was filed at Surat. On the other hand on 13-3-1978, the assessee wrote a letter to the ITO (page 38 of the paper book) which reads as follows :
From perusal of our record we find that the above assessee is residing at Surat and has the income from following sources :
1. Share income from M/s. United
Jari Industries Rs. 40,126
2. Share income from Motiram
Roopchand Rs. 19,378
3. Fees/salary from M/s. Laxmi
Oil Extraction Mills (P.) Ltd. Rs. 18,000
4. Fees/salary from M/s. Motiram
Roopchand Rs. 9,900
Rs. 27,900
Less: Standard deduction Rs. 3,500 Rs. 24,400
Rs. 83,904
The return in respect of all the sources mentioned above already have appeared to be submitted at Surat. It will take sometime to getting the return signed and completed. We have no objection if the assessment is framed on the figures mentioned above.
From the contents of the above letter it is evident that the assessee was not sure whether he filed a revised return at Surat. It is not understood that when the assessee was regularly being assessed at Jaipur what necessitated the assessee to file a revised return with ITO, Surat who did not have jurisdiction over the case of the assessee. The evidence by way of acknowledgement receipt from the ITO, Surat filed by the learned counsel (appearing at page 20 of the paper book) is apparently inconsistent with subsequent conduct of the assessee. Had the assessee filed a revised return he would have categorically mentioned it before the ITO during the assessment proceedings and would have also stated this fact before the IAC during the course of 144B proceedings. Even if we admit that a revised return was filed by the assessee, from the facts it is evident that it was filed after the omission was brought to the notice of the assessee, i.e., after detection of concealment by the ITO. In this case, the ITO had made certain enquiries through his Inspector about the. sources of income of the assessee and it was only after such enquiries that the assessee filed the revised return. The submission of the revised return may, in given case, be voluntary, but such a voluntary filing by itself does not lead to the conclusion that there was no intention on the part of the assessee to conceal his income when he filed the original return. That depends upon the facts and circumstances which throw light on the mental process of the assessee at the time of the submission of his original return. A subsequent conduct may be one of the factors, which could be duly taken note of in the process of that difficult decision. However, mere filing of a revised return by the assessee at any time prior to the department cornering the assessee in relation to a particular concealed income, would not be sufficient to exonerate the assessee from the penal consequences. The mere fact that investigation by the department is afoot, though nothing tangible had come into the possession of the department at any particular point of time, may induce a dishonest assessee to submit a revised return. Such an exercise will not absolve him of the consequences flowing from an act which on his part had already been completed, namely, the concealment of income or the particulars thereof. The principles In relation to the question of concealment vis-a-vis a revised return by assessee have been discussed in number of decisions. A Full Bench of the Madras High Court, although in the context of the Income-tax Act, 1922, has analysed the relevant provisions and laid down the guiding principles in Arunachalam Chettyarv. C/T[1931) 6ITC 58 (Mad.). An assessee who made a bona fide discovery about having made a previous incorrect return was entitled to make a revised return invoking the enabling provisions of Section 22(3) of the 1922 Act. Such a course, however, is not open when a previous return was dishonestly made. The Full Bench had no hesitation to reject outright a contention, though “seriously argued”, that an assessee is enabled to put. in return correcting a former inaccurate one notwithstanding the fact that the previous return was a deliberately dishonest one. Such an exercise could not absolve him from liability to penalty. A different conclusion according to the Court, was “to put a premium on dishonesty”. The same principle has been applied by the Madras High Court in subsequent judgment in CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602. The decisions considered by the Court in the aforesaid judgment include Ayyasami Nadar& Bros. v. CIT[ 1956] 30 ITR 565 (Mad.), Vadilal Ichhachand v. CIT[ 1957] 32 ITR 569 (Bom.), Dayabhai Girdharbhaiv. CIT[ 1957] 32 ITR 677 (Bom.), Sivagaminatha Moopanar&S v. CIT [1964] 52 ITR 591 (Mad.), CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad.), Bakshi Mohd. Yusuf and Bakshi Mohd. Shqf v. CIT[ 1974] 93 ITR 38 (J & K) and F.C. Agarwalv. C1T\ 1976] 102 ITR 408 (Gauhati). A similar opinion has been expressed by the Allahabad High Court in the case of Amjad AUN azir All v. CJT[1977] 110 ITR 419. Since in this case the two amounts referred to supra were offered for assessment by the assessee after detection by the department, in view of the aforesaid judgments the assessee is not. absolved of the charge of concealment. As regards the addition of Rs. 11,380 for low household expenses we find that the addition was made on estimate basis by rejecting the explanation of the assessee and as such no penalty is leviable for this addition. We accordingly uphold levy of penalty for concealment of two amounts i.e., Rs. 18,000 as salary from M/s. Laxmi Oil Extraction Mills (P.) Ltd. and Rs. 40,126 as share income from Motiram Roopchand, and direct the ITO to recompute the quantum of penalty.
8. Coming to the judgments relied upon by the learned counsel of the assessee we find that these judgments lay down general principles about levy of penalty i.e., totality of circumstances should be taken into consideration. In this case the totality of circumstances leads to the conclusion that the assessee surrendered the two amounts referred to supra after the detection by the department. In fact the judgment in K. Mahim’s case (supra) relied upon by the 1d. counsel supports the case of the revenue. In this case it has been held that the filing of a revised return voluntarily by the assessee when he knew that the department was conducting investigations against him will not exonerate the assessee from the liability of the penalty under Section 271 (1)(c). In the instant case investigations were carried through the Inspector about the different sources of the income of the assessee and the assessee had knowledge of such investigations and accordingly he offered the two amounts for assessment after detection by the department.
9. In the result, the appeal is allowed in part.