JUDGMENT
H.N. Nagamohan Das, J.
1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Bangalore Bench, (the “Tribunal” for short) has referred the statement of the case and the question of law arising out of the order of the Tribunal dated July 25, 1994 in I.T.A. No. 880/Bang/1992 for our consideration and opinion.
2. The question referred reads as under:
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty under Section 271(1)(c) was not exigible in the present case ?
3. The assessment year in question is 1985-86. The assessee filed a return of income on March 30, 1988, declaring a loss of Rs. 2,41,647. The returns filed were accepted. The assessing authority processed the return filed by the assessee and issued a notice dated December 8, 1989, under Section 148 of the Act, by reopening the assessment. In response to this notice, the assessee filed another return of income on January 12, 1990, declaring a loss of Rs. 1,04,531. On the same day, i.e. on January 12, 1990, the assessee filed a petition before the Settlement Commission. The Additional Bench of the Settlement Commission, Madras, by order dated September 26, 1990, rejected the petition filed by the assessee on the ground that there are no complexities of issues involved in the case.
4. Subsequent to the rejection of the petition by the Settlement Commission, the assessee filed a revised return of income on November 23, 1990, before the assessing authority admitting an income of Rs. 4,92,880. The assessing authority concluded the assessment vide order of assessment dated December 19, 1990, accepting the admitted income declared by the assessee. In the course of assessment process, the assessing authority noticed that the assessee had concealed the particulars of income in the original return filed on March 30, 1988, declaring loss. Accordingly, the assessing authority initiated penalty proceedings under Section 271(1)(c) by issuing notice under Section 274 of the Act. The assessee filed his reply on March 1, 1991, inter alia contending, that he is an engineering graduate and not conversant with the tax and financial laws and therefore appointed M/s. Syndicate Bank : Law and Agency, Division to look after the tax matters. The assessee was under the impression that his power of attorney holders being a nationalised bank, they will definitely act in a responsible manner and signed all the papers prepared in good faith and without any intention to evade tax. The omission to declare the correct income is due to the sole and irresponsible behaviour of the officials of the Law and Agency Department of M/s. Syndicate Bank. The assessee further contends that he never had any intention to conceal the income or give any inaccurate particulars in order to evade tax.
5. The assessing authority called upon M/s. Syndicate Bank, to explain the omission and the reason for not discharging their responsibility while preparing the return of the assessee. The sworn statement of one Sri T.V. Madhusudan, Officer of M/s. Syndicate Bank was recorded. The Assessing Officer rejected the explanation offered by the assessee and came to the conclusion that the assessee himself is solely responsible for furnishing the inaccurate particulars and passed order of penalty under Section 271(1)(c) of the Act by his order dated March 11, 1991 levying penalty of Rs. 5,70,000. Aggrieved by this order of penalty, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) in Appeal No. I.T.A. 2/91-92. The Commissioner of Income-tax (Appeals) vide order dated January 29, 1992, dismissed the appeal and confirmed the order of penalty passed by the assessing authority. Against these orders of the assessing authority and the Commissioner of Income-tax (Appeals), the assessee filed second appeal before the Income-tax Appellate Tribunal in I.T.A. No. 880/(Bang)/1992. The Tribunal vide order dated July 25, 1994, allowed the appeal filed by the assessee and set aside the order of penalty passed by the assessing authority. Now, at the instance of the Revenue, the question stated above is referred for our consideration.
6. Sri M.V. Seshachala, learned Counsel for the Revenue contends that the assessee is an engineering graduate, filed his return of income on March 30, 1988, declaring a loss of Rs. 2,41,647. Even after notice under Section 148 of the Act, the assessee again filed a fresh return on January 12, 1990, declaring a loss of Rs. 1,04,531. Again the assessee filed a revised return on November 23, 1990, declaring an income of Rs. 4,92,880. On these admitted facts, it is contended that there is concealment of income in the original return filed on March 30, 1988. It is further contended that except shifting the burden and blame on M/s. Syndicate Bank, Law and Agency Department, the assessee has not placed any other material to absolve himself in the case.
7. Per contra, Sri G. Sarangan, learned senior counsel for the assessee contends that the assessee had no intention to furnish the inaccurate particulars and conceal the income and evade payment of tax. It is only on account of omission on the part of M/s. Syndicate Bank, Law and Agency Department, mistake has crept in and the moment the assessee noticed the mistake, he approached the Settlement Commission with a petition. Along with that petition before the Settlement Commission, the assessee filed the return of income declaring an income of Rs. 4,92,880 and paid the tax due thereon. This conduct of the assessee clearly indicates that there is no mala fide intention on the part of the assessee to evade tax. He justifies the order of the Tribunal.
8. Heard arguments on both sides and perused the entire reference papers.
9. On March 30, 1988, the assessee filed the return of income declaring a loss of Rs. 2,41,647. But in the wealth-tax return filed on March 30, 1988, admitted a net wealth of Rs. 8,37,000. The assessing authority noticed that the assessee has concealed the following in his return of income filed on March 30, 1988.
(a) The assessee has not disclosed the capital gains amounting to Rs. 6,44,515 ;
(b) The assessee from his proprietary concern M/s. Associated Trading Company made a profit of Rs. 1,07,119 but the same is shown as loss ;
(c) The assessee has not disclosed the deposit of Rs. 3,30,000, with M/s. Manipal Printers and Publishers Pvt. Ltd., and the interest of Rs. 45,000 earned.
10. The assessing authority on noticing the above concealment reopened 1 the assessment and issued a notice on December 8, 1989, under Section 148 of the Act. In response to this notice the assessee filed a revised return on January 12, 1990, again declaring a loss of Rs. 1,04,531. In this revised return the assessee has not admitted the capital gains and other income as stated above. The assessee being an engineer and income tax and wealth tax payee for a number of years ought to have disclosed true and correct particulars of income at the first instance when he filed his return of income on March 30, 1988. The assessee even in his revised return filed on January 12, 1990, failed to disclose the true and correct particulars of income. The assessee has not placed any explanation for this failure. This act on the part of the assessee does not absolve him of his responsibility to furnish the correct income as required under the income-tax law.
11. The assessee in his written explanation dated January 22, 1990, and March 1, 1991, contends that due to negligence of his power of attorney holder namely, M/s Syndicate Bank, Law and Agency Division, mistake has crept in and that he had no intention to conceal the income or give in accurate particulars and to evade tax liability. The bank in their letter dated December 24, 1990, explained that they do not directly involve in all the business activities of the assessee or maintain or operate any bank account in connection with the business of the assessee. For the purpose of preparation of return of income the bank called for information from the assessee and on the basis of information furnished by the assessee the return of income was prepared. The bank sent a letter dated March 22, 1988, to the assessee informing about the preparation of the income-tax return stating thus
…on the basis of the information furnished to us by you and other information which we could gather…. If you find that the statement of income is in order you may kindly sign the return of income, acknowledgment from and the statement and send the same to us for filing before the Income-tax Officer.
12. The assessee signed this return and sent to bank for filing. On January 28, 1992, the assessing authority recorded the statement of one Sri T.V. Madhusudhan an officer of the bank. This witness reiterated the stand of the bank that they prepared the return of income on the basis of information furnished by the assessee and that they are not responsible for concealment of income. The bank is the authorised agent of the principal the assessee.
13. The principal is responsible for all the acts done by the agent. That apart in the case on hand there is no material to show that the agent has acted in excess of his authority or in disobedience of the authority given by the principal. The stand taken by the bank manifestly makes it clear to us that they prepared the return of income on the basis of information furnished by the assessee. The assessee is an engineer and a taxpayer for a number of years cannot contend that he signed the return of income by believing his power of attorney holder. This contention of the assessee cannot be believed for the reason that in his revised return dated January 12, 1990, he again declared a loss of Rs. 1,04,531 and did not admit the capital gains and other income. The first appellate authority rightly holds that if the explanation of the assessee is accepted then every tax evader could take shelter by shifting the blame on his clerk and accountants who invariably prepare the return for them. The contention of the assessee that because of the negligence on the part of the bank the mistake of concealment has crept in is not acceptable.
14. On January 12, 1990, the assessee filed a revised return declaring a loss of Rs. 1,04,531 and without admitting the capital gain and other income. On the same day the assessee filed a petition before the Settlement Commissioner along with the return of income of Rs. 4,92,880. The Settlement Commissioner’s order dated September 26, 1990, rejected the petition filed by the assessee on the ground that there are no complexities of issues involved in the case. Thereafter, on November 23, 1990, the assessee again filed a revised return of income before the assessing authority admitting an income of Rs. 4,29,880. These sequence of events clearly establish that the assessee concealed particulars of income in his return of income dated March 30, 1988, and also in the revised return of income dated January 12, 1990. The assessee obviously with an intention to escape levy of penalty approached the Settlement Commissioner declaring an income of Rs. 4,92,880. There is no impediment for the assessee to admit the income of Rs. 4,92,880 in his revised return of income filed on January 12, 1990. It is only after the Settlement Commissioner rejected the petition on September 26, 1990, the assessee filed another revised return of income on November 23, 1990, admitting an income of Rs. 4,92,880. Therefore, the assessee is not absolved of his obligation to furnish the correct particulars of income at the first instance under the provisions of the Income-tax Act. This failure on the part of the assessee cannot be cured or remedied by furnishing correct particulars of income in a subsequent revised return of income. The finding of the Tribunal that the assessee himself cannot be considered to be guilty of any offence under Section 271(1)(c) is contrary to the material on record.
15. For the reasons stated above, we answer the question of law referred to us in the negative and against the assessee.
16. Ordered accordingly.