Income Tax Appellate Tribunal - Hyderabad
Gudiwada Ramachandra Rao vs Income-Tax Officer on 25 September, 1990
Equivalent citations: [1991]37ITD443(HYD)
ORDER
M.K. Chaturvedi, Judicial Member
1. These two appeals by the assessee are directed against the order of the Appellant Assistant Commissioner, Vijayawada and relate to the asst. years 1982-83 and 1983-84. The common issue in both these two appeals pertains to the maintenance of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961 (hereinafter called the Act) amounting to Rs. 12,000 for each year. Since the issue is common, for the sake of convenience these appeals are disposed of together by a consolidated order.
2. Smt. G. Hemalata, wife of the assessee, was partner in the firm Shri Mahalakshmi Boiled Rice & Groundnut Oil Mill Co., Machilipatnam along with the assessee. Vide prescription of Section 64(1) of the Act, the share income of the assessee's wife was includible in the assessment of the assessee. For the relevant asst. years income includible under Section 64 was not included. The original assessments were completed on the basis of returns filed by the assessee without inclusion of wife's share income under Section 64(1) of the Act. Subsequently the assessment was re-opened and in re-assessment, the income was included under Section 64(1). According to Income-tax Officer, non-inclusion of income under Section 64(1) amounted to concealment. He accordingly initiated penalty proceedings under Section 271(1)(c) of the Act for the relevant assessment years. In response to the said notices the assessee stated that there was no concealment of income as he was labouring under a bona fide belief that the share of wife would be included in her return only. The assessee submitted his return at Machilipatnam. The wife of the assessee submitted her return at Vijayawada. The assessee and his wife are represented by two different auditors. There was no conscious disregard of the legal provisions. This explanation was not accepted by the Income-tax Officer. According to Income-tax Officer ignorance of law is not a valid excuse. The omission to disclose income under Section 64 tantamounts to concealment. Thus, penalty was levied.
3. Before us, Shri M. Subrahmanya Sastry, learned counsel for the assessee appeared and submitted that the assessee was labouring under a bona fide belief that the income of the spouse is not assessable in his hands, on the detection of fault assessee readily corrected the error. The omission was solely on account of ignorance of law. The fact that the assessee and his wife are assessed separately and represented by different auditors reveals, inter alia, that omission in regard to applying the prescription of Section 64 was not deliberate and cannot be construed to be the conscious disregard of law. Learned counsel placed his reliance on the ratio laid down in the case of CIT v. S.S. Gulati [1989] 179 ITR 62 (Punj. & Har.).
4. Shri B. Shyam Sundar, learned Departmental Representative relied on the orders of the revenue authorities. It was submitted by the learned Departmental Representative that it is a well accepted fact that ignorance of law is no excuse. Since assessee failed to apply the prescription laid down under Section 64, this amounted to concealment and penalty was rightly imposed by invoking the provisions of Section 271 (1)(c). Learned Departmental Representative placed his reliance on the ratio laid down by the Hon'ble Supreme Court in the case of CIT v. Smt. P.K. Kochammu Amma, Peroke [1980] 125 ITR 624. It was also submitted by the learned Departmental Representative that the ratio laid down in the case of S.S. Gulati cited supra is not applicable in the facts and circumstances of the present case.
5. We have heard the rival submissions in the light of material placed before us and precedents relied upon. The principle of "ignorance of law is no excuse" is propounded in a well-known dictum "Ignorentia Legis non excusat". This is a general proposition and it was very correctly laid down but it should be viewed in right perspective. It is all very well to paint justice blind but she does better without a bandage round her eyes. She should be blind indeed to favour or prejudice but clear to see which way lies the truth and the less dust there is about the better. A return cannot be said to be "false" unless there is an element of deliberateness in it. It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the court may in a given case infer deliberateness and the return may be liable to be branded as false return. But where the assessee does not include a particular item in the taxable income under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. This view is supported by the decision of the Apex Court in Cement Marketing Co. India Ltd. v. Asstt. CST [1980] 124 ITR 15, 18.
6. There were conflicting decisions in regard to the proposition whether the provisions contained in Section 271(1)(c) apply only to concealment of his income. The Hon'ble Supreme Court, in the case of Smt. P.K. Kochammu Amma (supra) set at rest this controversy to the effect that the assessee's failure to include, in his return, tangible income under Section 64 attracts the applicability of Section 271(1)(c). It is nowhere mentioned that in all the circumstances where tangible income has not been included, penalty should be imposed. As a matter of fact Supreme Court in Smt. P.K. Kochammu Amma's case (supra) deleted the penalty. We have also noticed that in the case of S.S. Gulati (supra) it was held that where the assessee and his wife had no other income excepting l/3rd share each from a firm in which they were partners, a plain reading of the Section 64(1) of the Act and Explanation 1 thereunder would show that it should not be determined in whose income the income of the other spouse was to be included. If the assessee failed to include the wife's income in his while filing the returns, he should not be charged with concealment of income and penalty could not be imposed on him under Section 271(1)(c) of the Act. Apropos the same we have considered the arguments of learned Departmental Representative also that this decision is distinguishable in the present case. So far so in the present case, the assessee had other incomes also apart from the share of profits in the registered firm. The fact that the assessee is assessed at Machilipatnam and his wife is assessed at Vijayawada and also the fact that assessee is represented by different auditors suggest that there can be a bona fide error in not including the share of his spouse in the return. Since these are the technical aspects and at least for purposes of imposition of penalty which is penal in character and proceedings are quasi-criminal in nature, the dictum of "lgnorentia Legis non excusat" cannot be stretched beyond its true limits. The word 'conceal' is derived from a Latin concelare which implies Concelare, to hide. Webster in his New International Dictionary equates its meaning "to hide or withdraw from observation, to cover or keep from sight, to prevent disco very of, to withhold knowledge of. The offence of concealment is thus a direct attempt to hide an item of income or portion thereof from the knowledge of the income-tax authorities. It is implicit in the word "concealed" that there has been a deliberate act on the part of the assessee. The meaning of the word 'concealment' as found in Shorter Oxford English Dictionary, 3rd Edition, Vol. I is as follows :
In law, the intentional suppression of fact or truth or fact none to the injury or prejudice of another.
7. Having regard to the facts and circumstances of the case and in view of the finding in regard to the existence of bona fide belief, we are of the opinion that there was no concealment of income. We, therefore, direct the ITO to delete the amount of penalty.
8. In the result, the appeals stand allowed.