M/S.V.P.THOMAS vs. ASST.COMMISSIONER

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 15TH DAY OF JANUARY 2021 / 25TH POUSHA, 1942 ITA.No.5 OF 2003 AGAINST THE ORDER IN ITA 84/C/1999 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/RESPONDENT IN ITA NO.84/C/99 M/S.V.P.THOMAS & SONS REPRESENTED BY PARTNER RAPHEAL TERRANCE, KARTHEDATH JEWELLERY, TRIPUNITHURA. BY ADVS. SRI.V.B.UNNIRAJ SMT.P.ANITHA SMT.R.S.GEETHA RESPONDENT/APPELLANT IN ITA NO.84/C/99: ASST.COMMISSIONER INVESTIGATION CIRCLE - 2, DIVN. I, ERNAKULAM. R1 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 15.01.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.T.Appeal No.5/03 -:2:- JUDGMENT Dated this the 15th day of January, 2021 Bechu Kurian Thomas, J. For the assessment year 1987-88, appellant had filed his return of income on 2.11.1987 reporting a loss in income. Prior to the filing of the return, the sales tax authorities had conducted an inspection of the business premises of the assessee and unearthed suppression of purchase bills in the sales turnover. To bring a quietus to the issue relating to suppression for sales tax purposes, the assessee opted for compounding the offence under Section 47 of the Kerala General Sales Tax Act and remitted the compounding fee. In the meantime, on the basis of two letters, the income tax department initiated enquiry proceedings. However, the assessee filed a revised return under the Income Tax Act 1961 (for short the Act) on 14.1.1991 and offered an additional sum to be added towards his total income. 2. Since even at the time when the revised return was filed, the assessment proceedings had not been completed, the assessee was served with a notice on 12.3.1992 under Section 143(2) of the Act. Reply to the said notice was furnished on 23.3.1992 and the assessment was completed on the very same

I.T.Appeal No.5/03 -:3:- day itself. 3. While the assessment order was issued, penalty proceedings under Section 271(1)(a) and Section 271(1)(c) of the Act was initiated separately resulting in the imposition of penalty of Rs.65,000/- under Section 271(1)(c) of the Act by order dated 26.06.1997. Assessee challenged the order of imposition of penalty before the CIT (Appeals). By order dated 11.12.1998, the appeal was allowed finding that the imposition of penalty was not correct. Challenging the order of the CIT (Appeals), the department filed I.T.A. No.84 of 1999 before the Appellate Tribunal. By the impugned order, the Tribunal allowed the revenue's appeal after relying upon the judgment in Commissioner of Income Tax v. A.Sreenivasa Pai (242 ITR 29) and confirmed the order imposing the penalty. 4. Assessee is in appeal before this Court under Section 260A of the Income Tax Act. It was admitted on four questions of law. However, during the course of the hearing, the questions of law were rephrased into two, as follows: (1) Whether the revised return filed by the assessee under the Act can be treated as a revised return completely effacing the original return filed?; (2) Whether the imposition of penalty under Section 271(1) (c) of the Income Tax Act, 1961, was justified in the facts and circumstances of the case?

I.T.Appeal No.5/03 -:4:- 5. We have heard Adv. Jaikrishnan for Adv.V.B.Unniraj, learned counsel for the appellant and Senior Counsel Sri.P.K.Raveendranath Menon instructed by Adv.Jose Joseph, learned Standing Counsel for the respondent. 6. Learned counsel for the appellant vehemently canvased for the proposition that once a revised return filed by the appellant is accepted, the same ought to be treated as valid in the eye of law and hence there was no suppression warranting any imposition of penalty. He referred to the notice issued under Section 148 of the Act to submit that since the assessment had not been completed as on the date of filing of the revised return, it must be deemed that the original return filed had been effaced and replaced with the revised return and thereafter the revised return became the only return filed and available in the eye of law. It was also submitted that penalty under Section 271 of the Act could not have been imposed since the requirements of the said statutory provision was not satisfied in the light of the fact that the alleged concealment of income was not revealed in the course of any proceedings under the Income Tax Act. The learned counsel also relied upon the decisions reported in Dhampur Sugar Mills v. Commissioner of Income Tax (90 ITR 236), Commissioner of Income Tax v. Mangalore Chemicals and

I.T.Appeal No.5/03 -:5:- Fertilizers Ltd. (191 ITR 156) and Commissioner of Income Tax v. Suresh Chandra Mittal (241 ITR 124) and canvassed for the proposition that once the revised return is filed, the original return ought to be treated as never filed in the eye of law. 7. The learned Senior Counsel Sri.P.K.Raveendranath Menon opposing the aforesaid contentions argued that the revised return filed by the assessee was not a return in the eye of law and hence the contentions urged by the assessee cannot be countenanced. It was also pointed out that the proceedings under Section 271 of the Act were initiated only in the course of the assessment proceedings which was brought to the notice of the assessing officer by the assessee during the revised assessment. He, therefore, sought for dismissal of the appeal. 8. Section 139(5) of the Income Tax Act, as it existed during the relevant period, is extracted as below: “S.139.(5). If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub- section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier: Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.”

I.T.Appeal No.5/03 -:6:- 9. It is true that as per the provisions of Section 139(5) an assessee is entitled to file a revised return on discovering any omission or any wrong statement. The right to substitute an incorrect return with a correct and complete return is given to an assessee by law. When the assessee files a revised return, he is in fact admitting that the original return filed by him was not correct or proper. The revised return filed by the assessee will be substituted in the place of the original return. The effective return is thus the revised return. 10. However, in order to treat the revised return as the true and complete record, certain conditions are to be satisfied. The first of which is that, if the assessment relates to a period prior to 1.4.1988, the revised return must be filed either before two years from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. For a revised return to have the legal attributes of one as effacing the original return completely and for the assessee to have the benefit of revised return in all respects, it is essential that the revised return be filed in accordance with law. 11. Having said so, we find that in the instant case, revised return was filed only on 14.1.1991, while the two years period for filing the revised return under Section 139(5) as it then stood for

I.T.Appeal No.5/03 -:7:- the assessment year 1987-88 expired on 31.3.1990. In the aforesaid factual scenario, it cannot be held that the revised return filed by the assessee can be treated in the eye of law as a return to substitute the original return with the revised one with the effect of completely effacing the original return. The decisions relied upon by the learned counsel for the appellant are not strictly applicable to the facts of the present case, though we have no quarrel with the propositions laid therein. 12. Once we have found that the revised return cannot have the effect of effacing the original return, it is explicit that concealment of the particulars of income and furnishing of inaccurate particulars of income were revealed to the assessing officer in the course of proceedings under the Act. There could be no manner of doubt that, if the assessing officer in the course of any proceedings under the then Act becomes satisfied about the concealment of income or furnishing of inaccurate particulars of such income, he is entitled to initiate proceedings for imposition of penalty as per Section 271(1)(c) of the Act. In the aforesaid circumstances, we answer the questions of law rephrased by us as follows: (i) In a case in which revised return was not filed within the time stipulated under law, the legal nature and attribute of a

I.T.Appeal No.5/03 -:8:- revised return cannot be stricto sensu be claimed by the assessee. (ii) Since the assessing authority came to the knowledge of the concealment and incorrect particulars furnished by the assessee through the revised return, penalty proceedings under Section 271 of the Act was validly initiated. In the aforesaid circumstances, We answer the questions of law as mentioned above and dismiss this appeal. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE vps

I.T.Appeal No.5/03 -:9:- APPENDIX PETITIONER'S/S EXHIBITS: ANNEXURE.A A TRUE COPY OF THE ASSESSMENT ORDER ANNEXURE.B A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI. ANNEXURE.C A TRUE COPY OF THE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME TAX, INVESTIGATION CIRCLE 2 DIVISION.I., ERNAKULAM. ANNEXURE.D A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI. ANNEXURE.E A TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. RESPONDENT'S/S' EXHIBITS: NIL