MOHD IBRAHIM AZIMULLA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) In pursuance of an order passed by this court, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following question of law for the opinion of this court:

(2.) Facts on which these questions of law have been founded are that penalty proceedings, under Section 271(l)(c) of I.T. Act, were initiated against the assessee, a manufacturer of carpets, maintaining its accounts from Diwali to Diwali, for the non-disclosure of Rs. 61,460, Rs, 50,810 and Rs. 3,200 in its return filed under Section 139(l)for the assessment year 1968-69, received from Damodar Das and Co., Bombay, M/s. C. A. Agarwal Ltd., Bombay, and Amrit Silk Store, Bombay, respectively, as incentive profit for sale of import licence. The sum of Rs. 61,460 was recorded in the balance-sheet of 1966-67. The lTO, therefore, asked the assessee to supply details of the transaction and particulars of the company at Bombay. But as the assessee avoided and took adjournments the ITO took action on his own under Section 131 and sent summons to the company at Bombay. The company informed that goods as per import entitlements were delivered to them at Bombay as far back as September 2, 1966, and they, after obtaining the bill dated March 20, 1967, from the assessee, closed the transaction in the last week of March, 1967. They also sent a photostat copy of the original bill signed by one of the partners submitted on August 20, 1967, for Rs. 17,20,719-10 resulting in a profit of Rs. 61,460. Being armed with this material the ITO issued a written requisition, under registered cover, on November 25, 1969, asking the assessee to explain various transactions of incentive profit which was returned with an endorsement, "refused". Soon after on 9th December, 1969, the assessee filed a revised return under Section 139(5) for 1968-69, and a return under Section 139(7) for 1969-70 also, including this amount as receipt of that year as well. It appears that the assessee was not aware till then of the detailed information obtained by the ITO. Therefore, it was taking all possible chances to make it appear that its conduct was bona fide and the mistake was inadvertent. After assessment, when penalty proceedings started, the assessee pleaded mistake and lack of knowledge of Hindi and Mahajani. The circumsances were, however, so glaring that the ITO did not see any merit in the explanation and levied the penalty. In appeal, the IAC agreed with the finding of the ITO and held that the conduct of the assessee was not clean. In further appeal, the Tribunal upheld the conclusions as, from the making of the inquiry since 1968 about Damodar Das and Co., presence of the assessees' agent in Income-tax Office on November 25, 1969, filing of revised return immediately thereafter, disclosing the same income in 1969-70, then excluding it by filing revised return and submission of original bill under signature of one of the partners on which profit was not negligible, it was obvious that assessee was concealing its income.

(3.) The learned counsel for the assessee argued that the return filed under Section 139(1) was supplanted by a revised return and as it was a statutory right the question of penalty did not arise. The argument goes a little too far. Section 139(1) makes it obligatory on an assessee whose income exceeds the maximum, which is not chargeable to income-tax, to file a return of its total income. In case of discovery or wrong statement it may file a revised return under Section 139(5), the acceptance of which depends on the fulfilment of these essentials. It is not the voluntary disclosure but the disclosure in the circumstances mentioned in the section which enures to the benefit of the assessee as a disclosure may be voluntary, yet dishonest. Even without this sub-section there could have been no bar for an honest disclosure. This sub-section only gives statutory recognition to what was otherwise inherent in it. But if the disclosure is to cover up or was in the knowledge of the assessee or made in bad faith then it does not come within the ambit of Section 139(5), nor can the assessee claim any benefit on it. The original and revised return become one if they are in accordance with Section 139(1) and (5) but not otherwise. The guilt of non-disclosure is not washed off by the admission of confession. The mere filing of a revised return, therefore, does not rule out the applicability of Section 271. In Amjad Ali NazirAli v. CIT [1977] 110 ITR 419, it was held by a Division Bench of this court (p. 426):