Madras High Court
Late M.S.Mohammed Marzook vs The Income-Tax Officer on 21 February, 2006
Bench: P.D.Dinakaran, P.P.S.Janarthana Raja
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 21/02/2006
CORAM
THE HON'BLE MR.JUSTICE P.D.DINAKARAN
and
THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA
T.C.No.916 of 2005
and T.C.No.917 to 919 of 2005
and TC.M.P.Nos.662 to 664 of 2005
1. Late M.S.Mohammed Marzook, rep. by
M.Sulaiha Beevi (deceased)
Legal heir and wife of
late M.S.Mohamed Marzook.
2. M.Shahul Hameed
(2nd appellant brought on record as L.R. Of deceased first
appellant)
... Appellants in
all appeals.
-Vs-
The Income-tax Officer,
Ward II (1), Madurai
(formerly: the Assistant Commissioner
of Income-tax, Investigation Circle II,
Madurai).
... Respondent in all
appeals.
Tax Case Appeal under Section 260A of the Income Tax Act 1961 against
the order of the Income Tax Appellate Tribunal, Madras `B' Bench dated
25.11.2004 made in ITA Nos.1285, 1286, 1287 and 1289/Mds/1997 for the
assessment years 1984-85, 1985-86, 1986-87 and 1988-89.
!For appellant : Mr.V.S.Ramakrishnan
^For Respondent : ---
:JUDGMENT
(Delivered by P.D.DINAKARAN,J.) The above tax case appeals are directed against the order of the Income-tax Appellate Tribunal dated 25.11.2004 made in ITA Nos.1285, 12 86, 1287 and 1289/Mds/1997 and the following substantial questions of law have been raised for consideration.
T.C.Nos.916 to 918 of 2005:
1. Whether on the facts and circumstances of the case, when a nontaxable amount has been offered for assessment even before issue of notice under section 148, due to the inability of the assessee to adduce proof, penalty could be levied by the assessing officer without recording any satisfaction and establishing mens rea that the amount offered is taxable income?
2. Whether the ratio in the judgments of the Supreme Court reported in Sri Shandilal Sugar & General Mills (168 ITR 705) and Suresh Chandra Mittalal (251 ITR 9) would apply to this case which is before the amendment/introduction of Explanation 1 clause (B) to section 271(1)(c)?
3. Whether in the circumstances of the case, when the entirety of the circumstances do not point to reasonable conclusion that disputed amount represents taxable income and that the assessee had consciously concealed his income or had deliberately furnished inaccurate particulars, penalty could be imposed?
T.C.No.919 of 2005:
1. Whether on the facts and circumstances of the case, when a nontaxable amount has been offered for assessment even before issue of notice under section 148, due to the inability of the assessee to adduce proof, penalty could be levied by the assessing officer without recording any satisfaction and establishing mens rea that the amount offered is taxable income?
2. Whether in the circumstances of the case, when the entirety of the circumstances do not point to reasonable conclusion that disputed amount represents taxable income and that the assessee had consciously concealed his income or had deliberately furnished inaccurate particulars, penalty could be imposed?
2. The assessment years with which we are concerned are 1984-85, 19 85-86, 1986-87 and 1988-89. The facts which are relevant for the purpose of disposal of the tax case appeals are as under:-
2.1. The assessee M.S.Mohamed Marzook, who died on 2.11.2001, got repatriated from Sri Lanka in the year 1975. He married the daughter of a businessman in Sri Lanka, by name, T.O.M.Mustafa. The said Mustafa came to India in 1979 and died in the year 1982. The assessee later received some of his father-in-law's outstandings in Sri Lanka for which he could not adduce proof.
2.2. In the previous years relevant to the assessment years, the assessee filed revised returns before the issue of notice under section 148 of the Income-tax Act, 1961 which was accepted by the assessing officer, but the assessing officer levied penalty on the ground that the assessee filed revised returns only after the search that took place at the premises of the assessee on 21.9.1989.
2.3. The Commissioner of Income-tax (Appeals), on appeal, set aside the penalty, but the Appellate Tribunal confirmed the order of the assessing officer in the department appeal.
2.4. Against the order of the Appellate Tribunal, the above appeals have been preferred by the wife/legal heir of the deceased assessee, namely, M.Sulaiha Beevi. The said M.sulaiha Beevi is reported dead and the second appellant has been brought on record as legal representative of the deceased, M.Sulaiha Beevi.
3. Heard learned counsel appearing for the appellant. According to the learned counsel for the appellant, the assessee offered the sums as non-taxable income only with a view to purchase peace and avoid prolonged litigation and the assessing officer has not recorded a finding that the income so offered by the assessee is a taxable income and as the assessee neither concealed his income, nor furnished inaccurate particulars, the Appellate Tribunal was not correct in confirming the order of the assessing officer levying penalty.
4. The points raised in the above questions are,
(i) whether the assessee has deliberately concealed his income or furnished inaccurate particulars; and
(ii) whether the assessee has acted bona fide and honestly filed the revised returns with a view to purchase peace.
5. It is relevant to mention that in similar circumstances, this Court by judgment dated 1.2.2006 in T.C.No.112 of 2000, etc. batch (M. Sajjanraj Nahar v. The Commissioner of Income Tax, Coimbatore) has elaborately considered the above points, in the light of decisions of Supreme Court as well as various High Courts and held that if the assessee, at the time of submitting the original return intended to conceal a part of his income or deliberately gave false particulars at that time, the mere fact that he subsequently rectified the omission by giving the full particulars would not avoid the applicability of section 28(1)(c) of the Income-tax Act, 1922.
6. This Court also held that the provision for penalty would be attracted if there had been a deliberate concealment of particulars in any return, and when the original return did not disclose considerable portions of the income, there would be deliberate concealment. This Court further held that Where the omission is deliberate, the results of such deliberate omission cannot be got rid of by merely filing a revised return.
7. This Court, in the above-said judgment, after referring to the decision of this Court in Sivagaminatha Moopanar & Sons v. Commissioner of Income-tax, [1964] 52 ITR 591, wherein the decision of the Full Bench of this Court in Arunachalam Chettyar v. Commissioner of Income-tax [1931] 6 ITC 58 and the decision in Ayyaswami Nadar & Brothers v. Commissioner of Income-tax [1956] 30 ITR 565 were referred to, held as follows:
"If an assessee, therefore, makes a false return knowing it to be false, the fact that he subsequently discloses the true particulars of income cannot prevent the application of the section which is intended to punish fraud or contumacy on the part of the assessee. Indeed in such a case it would not even be open to the assessee to submit a revised return: see Arunachalam Chettyar v. Commissioner of Income-tax [1931] 6 ITC 58 (Mad) [FB]. The point, therefore, is not whether all the particulars were given at the time of the return or at or before the assessment, but whether at any time the a ssessee deliberately concealed particulars or gave false particulars. That obviously is a question of fact. In the decision of the question certain tests are applied to find whether the suppression, etc., was deliberate. Where for example the original return is incorrect, but the assessee voluntarily submits the correct return before the assessment, the Tribunal would be justified in coming to the conclusion that there was no concealment. This would be so even if the assessee put forward a false case after giving voluntarily the particulars. But where the disclosure was under circumstances which make it not a voluntary act of the assessee, there would be a justification for the finding that there was a concealment because there was an intention to conceal and actual concealment at the beginning, the attempt having been frustrated by other causes. It cannot, therefore, be held that wherever particulars are given before the actual assessment, there would be no concealment.
...
It follows that, if the assessee, at the time of submitting the original return intended to conceal a part of his income or deliberately gave false particulars at that time, the mere fact that he subsequently rectified the omission by giving the full particulars would not avoid the applicability of section 28(1)(c)."
8. Referring the decision of the Gauhati High Court in F. C. Agarwal v. Commissioner of Income-tax, [1976] 102 ITR 408, this Court held as under:
" ...to avoid the penalty proceeding as contemplated under section 27 1(1)(c) by reason of submission of revised return, the revised return itself must be within the correct ambit and scope of sub-section (5) of section 139 of the Act. If it cannot be said that a revised return in fact does come within the correct ambit and scope of section 139 (5), then immunity from section 271(1)(c) cannot be availed of by the assessee."
9. Following the decision of the Supreme Court in Sir Shadilal Sugar and General Mills Ltd. v. CIT, (168 ITR 705) this Court held that in view of the deletion of the word "deliberately" by the Amendment Act, the jurisdiction of the Revenue to initiate penalty proceedings for the concealment of the income or furnishing inaccurate particulars by the assessee has become more stringent, of course subject to the procedure prescribed under the Explanation to Section 271(1)(c) of the Act to enable the assessee to submit his explanation in this regard.
10. That apart, in T.C.112 of 2000, etc. batch, cited supra, this Court held that the acceptance of revised order itself cannot be a bar for initiating penalty proceedings under Section 271(1)(c) of the Act against the assessee for concealment of income. In the same judgment, this Court, citing the judgment of this Court in Commissioner of Income-tax Vs. C. Ananthan Chettiar, (273 ITR 401), held that the when the assessee had offered no explanation except to assert that he disclosed the income only to buy peace with the Department and what was disclosed was additional income, the penalty should be levied with reference to the concealed income, since the reason for not having disclosed the income earlier was not stated.
11. In the instant case, the assessee filed the revised return only after the search was conducted in the premises of the assessee. The Appellate Tribunal, on the facts of the case, found that the omission or wrong statement by the assessee in the original return was not due to any bona fide or inadvertence or mistake on his part, but the revised return was filed only after the search action. Though it is the case of the assessee that with a view to purchase peace he offered the sums as non-taxable income, the Appellate Tribunal held that there is no material with assessee to show that the mistake had crept in the original return accidentally without any intention warranting deletion of penalty. On the other hand, the Appellate Tribunal found that the reasons assigned by the assessing officer to hold that the assessee had concealed the income are genuine and accordingly, confirmed the penalty.
12. It is a settled law that once the authorities have arrived at a subjective satisfaction under the facts and circumstances of the case, it may not be proper for this Court to enter upon the merits of the controversy at all, and unless it is demonstrated that the indication made by the Assessing Officer to initiate penalty proceedings is mala fide, perverse, based on no evidence, misreading of evidence or which a reasonable man could not form or that the person concerned was not given due opportunity resulting in prejudice, the said proceedings need no interference.
For the foregoing reasons, we are of the considered opinion that the Appellate Tribunal was justified in confirming the penalty levied by the assessing officer. We do not see any merit in these appeals. Accordingly, finding no question of law, much less a substantial question of law, all the appeals stand dismissed. Connected TC.M.Ps. are closed.
na.
To:
1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai (5 copies with records)
2. The Secretary, Central Board of Direct Taxes, New Delhi ( 3 copies)
3. The Commissioner of Income-tax (Appeals VII), Madras.
4. The Asst. Commissioner of Income-tax, Inv. Circle II, Madurai.
5. The Deputy Commissioner of IT., Range I, Madurai.