Income-tax---

----Penalty---Concealment of income---Failure to furnish particulars of income in returns filed and particularly till such time as assessment order was passed---Amounts to concealment of particulars of income---Assessee effecting sale of jewellery on 21-3-1978, and sales proceeds received on 7-8-1978---Assessee not showing capital gain on sale of jewellery in original return filed on 18-1-1980, or in first revised return filed on 18-2-1982-- Failure to disclose capital gain not due to omission or oversight and not a technical or venial breach of law---Cancellation of penalty not valid---Indian Income Tax Act, 1961, S.271(l)(c).

The assessee filed her return for the Assessment Year 1979-80 on January 18, 1980, in which she declared a total income of Rs.1,550. She filed a revised return on February 18, 1982, wherein the total income was shown at Rs.45,130. The Assessing Officer made an ex parte assessment under section 144 of the Income Tax Act, 1961, on a total income of Rs.48,970 on March 10, 1982. Before the order, dated March 10, 1982, could be served on the assessee, she filed a second revised return on March 24, 1982, disclosing capital gain of Rs.45,120 on the sale of jewellery. The total income in the revised return was declared at Rs.88,220. The Assessing Officer cancelled the ex parte assessment made on March. 10, 1982, under section 146 of the Act and in the fresh assessment made on March 15, 1984, he held that the second revised return filed on March 24, 1982, was invalid and out of time. In the fresh assessment, the Assessing Officer made an addition on account of capital gain on sale of jewellery and also initiated proceedings under section 271(1)(c) of the Income-tax Act for not disclosing the capital gain in the original return. After considering the reply of the assessee, the Assessing Officer levied a penalty of Rs.20,503 under section 271(1)(c) of the Act, being 100 percent. of the tax sought to be avoided by the assessee on the concealed income. The First Appellate Authority affirmed the order of the Assessing Officer. On further appeal, the Tribunal set aside the order levying penalty under section 271(1)(c) of the Act on the ground that even though the assessee had not included the item of capital gains in the original return, or in the first revised return, and had included this item for the first time in the second revised return filed by her on March 24, 1982, which was after the assessment order, dated March 10, 1982, was passed, the assessee could not be held liable to pay penalty under section 271(1)(c) of the Act, because in the opinion of the Tribunal- it was merely through an oversight and an omission that she failed to disclose the capital gain in the first two returns and on discovery of the mistake she voluntarily placed information regarding the capital gains in the second revised return filed on March 24, 1982. The Tribunal was of the opinion that the breach of the statutory provisions on the part of the assessee was of a technical or venial nature and being, by way of an oversight or omission, .it did not attract the levy of penalty under section 271(1)(c) of the. Act. On a reference:

Held, (i) that if the assessee failed to furnish the particulars of the income in the returns filed and particularly till such time as the assessment order was passed, she could be said to have concealed the, particulars of her income, and thus, become liable to be proceeded against under section 271(1)(c) of the Act. The assessee did not include in, the original return or in the first revised return the particulars of the capital gain. Therefore, it could be said that she concealed the particulars of this part of her income from the return filed by her:

(ii) That the sale of the jewellery by the assessee was effected on March 21, 1978, and the sale proceeds were received by her on August 7, 1978, and the same was deposited in a bank on August 8, 1978. Thereafter, this amount was given as a loan to a family concern of the assessee. These facts clearly established beyond any doubt that even as on the day when she filed the original return, it was in her knowledge that she had earned this income by way of capital gains. Yet she did not disclose this in the original return. When she filed the first revised return, again she did not disclose this part of the income. Therefore, the Tribunal was wrong in holding that the failure on the part of the assessee to disclose the particulars of income was either due to an omission or by way of an oversight or that it was a mere technical or venial breach of the law.

(iii) That, therefore, the Tribunal was not right in cancelling the penalty under section 271(l)(c) of the Act.

Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC); (1970) 25 STC 211 (SC); Kumar Jagadish Chandra Sinha v. CIT (1982) 137 ITR-722 (Cal.) and Sulemanji Ganibhai v. CIT (1980) 121 ITR 373 (MP) ref.

Prabir Kumar Bhowmick for the Commissioner.

Sukumar Bhattacharya for the Assessee.

JUDGMENT

The following two questions of law have been referred for our opinion

"(1) Whether, the finding of the Tribunal that the assessee through oversight omitted to disclose capital gains in the first two returns was based on no evidence or partly relevant or partly irrelevant evidence and is otherwise perverse and arbitrary? .

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in cancelling the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961?"

The brief facts are that the assessee, who is an individual, filed her return for the Assessment Year 1979-80 on January 18, 1980, in which she declared the total income of Rs.1,550. She filed a revised return on February 18, 1982, wherein the total income was shown at Rs.45,130. The Assessing Officer made an ex parte assessment under section 144 of the Income-tax Act on the total income of Rs.48,970 on March 10, 1982. In this assessment order and out of this total income, no part was linked with the capital gains of the assessee.

Before the order dated March 10, 1982, could be served on the assessee, she filed a second revised return on March 24, 1982, disclosing capital gain of Rs.45,120 on the sale of jewellery. The total income in the revised return then was declared at Rs.88,220. The Assessing Officer cancelled the ex parte assessment made on March 10, 1982, under section 146 of the Act and in the fresh assessment made on March 15, 1984, he held that the second revised return filed on March 24, 1982, was invalid and out of time. In the fresh assessment, the Assessing Officer made an addition on account of capital gain on the sale of jewellery and also initiated proceedings under section 271(1)(c) of the Income-tax Act for not disclosing the capital gain in the original return. After considering the reply of the assessee, the Assessing Officer levied a penalty of Rs.20,503 under section 271(1)(c) of the Act, being 100 percent. of the tax sought to be avoided by the assessee on the concealed income.

The assessee filed an appeal against the aforesaid order of the Assessing Officer but the first appeal failed. Ultimately, she approached the Tribunal which set 'aside the order levying penalty under section 271(1)(c) of the Act on the ground that even though admittedly the assessee. had not included the item of capital gains in the original return, or in the first revised return, and had admittedly included this item for the first time in the second revised return filed by her on March 24, 1982, which admittedly was after the assessment order, dated March 10, 1982, was passed, the assessee could not be held liable to pay penalty under section 271(1)(c) of the Act, because in the opinion of the Tribunal it was merely through an oversight and an omission that she failed to disclose the capital gain in the first two returns and on discovery of the mistake she voluntarily placed information regarding the capital gains in the second revised return filed on March 24, 1982. The Tribunal was. of the opinion that the breach on the part of the assessee was of technical or venial nature of the statutory provisions and being by way of an oversight or omission, did not attract the levy of penalty under section 271(1)(c) of the Act.

The learned Advocate for the Revenue has relied upon a judgment of this Court in the case of Kumar Jagadish Chandra Sinha v. CIT (1982) 137 ITR 722. He has also relied upon a judgment in the case of Sulemanji Ganibhai v. CIT (1980) 121 ITR 373 (MP).

Section 271(1)(c) of the Act clearly deals with the situation where the assessee becomes liable to pay penalty if penalty proceedings are initiated on the ground that he concealed the particulars of his income. The concealment of the particulars of income arises in a situation where the assessee is obliged to file a return under section 139 of the Act. In the case before us admittedly the assessee did not include in the original return or in the first revised return the particulars of the capital gain. Therefore, it can be said that she concealed the particulars of this part of the income from the return filed by her. The Tribunal unnecessarily made an observation that part of the income relating to capital gain was not discovered by the Assessing Officer. If the assessee failed to furnish the particulars of the income in the returns filed and particularly till such time as the assessment order was passed, she can be said to have concealed the particulars of her income, and thus, become liable to be proceeded against under section 271(1)(c) of the Act.

It is undisputed that the sale of the jewellery by the assessee was effected on March 21, 1978, and the sale proceeds were received by her on August 7, 1978, and the same was deposited with the Central Bank of India, N. S. Road, Calcutta, on August 8, 1978. Actually thereafter, this amount was given-as loan to Alipore (Pvt.) Ltd., a family concern of the assessee. These facts clearly established beyond any doubt that even as on the day. when she filed the original return, it was in her knowledge that she had earned this income by way of capital gains. Yet she did not disclose this in the original return. When she filed the first revised return, again she did not disclose this part of the income. In this background, therefore, we fail to understand or appreciate as to how could the Tribunal hold that the failure on the part of the assessee to disclose this income was either by an omission or by way of an oversight or that it was a mere technical or venial breach of the law. There was absolutely no material on record to suggest that such a finding could be. arrived at by the Tribunal. We have, therefore, no hesitation in holding that the aforesaid finding arrived at by the Tribunal was perverse, based as it was on no evidence at all.

The learned Advocate appearing for the assessee has relied upon a judgment of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26. We are afraid that this judgment is not applicable to the facts of the present case since their Lordships of the Supreme Court were dealing with the question about the exercise of discretion by the Assessing Officer with regard to the levy of penalty and the quantum thereof. Whether in the case an assessee who admittedly is liable to pay penalty, should be proceeded against or not by the Assessing Officer in exercise of his discretion under section 271(1)(c) of the Act is a question which is entirely different from the one whether an assessee is at all liable or not. This is a case relating to the determination of liability as such. hi our case, there is no question as to whether the discretion ought to have been exercised by the Assessing Officer or not. That question is totally outside the purview of this reference.

We, thereof, find that the Tribunal was not correct in cancelling the penalty order passed under section 271(1)(c) of the Act.

For the foregoing reasons, therefore, we answer question No. 1 in the affirmative and in favour of the Revenue. Similarly, we answer question No. 2 in the negative and also in favour of the Revenue.

M.B.A/3218/FC Reference answered.