A revised return validly filed under Section 139(5) of the Income-tax Act, 1961, which supplants the original return, has to be taken into consideration for the purposes of ascertaining whether failure to return the correct income arose from any fraud or wilful neglect on the part of the assessee.

C.S.P. Singh, J.

1. THE Income-tax Appellate Tribunal, Delhi Bench "C", has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the minimum penalty to be levied was to be determined by reference to the tax that would have been avoided if the first return submitted had been accepted or to the tax that would have been avoided if the second revised return submitted by the assessee had been accepted ? " The assessee is a registered firm doing business in tobacco. For the assessment year 1962-63, the assessee submitted a return of income on August 17, 1962, declaring an income of Rs. 32,665. He filed a revised return showing an income of Rs. 55,000 on July 30, 1963. A second revised return was submitted on May 14, 1965, showing an income of Rs. 85,000.

2. AN assessment order was first passed on May 21, 1964, i.e., before the second revised return was filed and the total income computed by the Income-tax Officer was Rs. 1,62,257. On appeal, the order of the Income-tax Officer was confirmed, but the Tribunal set aside the assessment order and directed the Income-tax Officer to make a fresh assessment after giving the assessee an opportunity of producing necessary evidence to prove the contention regarding the genuineness of certain loans. In pursuance of this order, the Income-tax Officer made a fresh assessment on November 21, 1968, determining the total income at Rs. 1,17,779. This was reduced in appeal to Rs. 1,13,277 by the Appellate Assistant Commissioner. The income ultimately determined included an amount of Rs. 59,054 on account of unexplained portion of the investment in the Shanker Bidi Factory. The total investment by the assessee in this factory was determined at Rs. 2,76,763, but the income-tax authorities were ultimately satisfied about the investment to the extent of Rs. 2,17,709. The balance, i.e., Rs. 59,054, was treated as the assessee's income from undisclosed sources. Thereafter, proceedings under Section 271(1)(c) were taken and as, apparently, a sum of more than Rs. 1,000 was leviable as penalty, the matter was taken by the Inspecting Assistant Commissioner of Income-tax. He imposed a penalty of Rs. 15,000. The petitioner, thereafter, filed an appeal before the Tribunal. Before the Tribunal, it was contended that no penalty was leviable as the assessee had submitted the first revised return voluntarily without any initiative from the Income-tax Officer, and the second revised return was filed as a measure of compromise. The Tribunal held that the assessee was guilty of concealment, but considering the fact that it had co-operated in the assessment proceedings, it directed the levy of minimum penalty with respect to his first return. As regards the contention of the assessee that there was no concealment on his part as he had disclosed the correct income in the revised returns, it held that the revised returns were filed by the assessee when he was faced with the situation that he could not sustain the original return. In this connection, the Tribunal found that the Income-tax Officer, Rampur, had on January 8, 1963, written to the Income-tax Officer, Baroda, to make enquiries of the assets of the assessee, particularly the godown built at Savli. The Income-tax Officer, Baroda, wrote to the Income-tax Officer, Rampur, that enquiries in the matter had been conducted and the godown had been constructed by the assessee. It further transpires that in the original return the assessee had not shown certain assets owned by it, viz., a jeep purchased for Rs. 15,048 and a godown at Rampur constructed at a cost of Rs, 7,000. It also transpired that the assessee had not shown loans advanced to Shanker Bidi Factory in his books. These loans amounted to Rs. 2,76,763. The assessee claimed that certain amount had been taken by it from other parties for advancing the loan. These transactions were, however, not shown in the books of the assessee.

In this reference,