An assessee who submits a revised return after the Income-tax Officer has discovered the assessee's dishonesty cannot avoid the penalty under Section 28 (1) (c) of the Income-tax Act.

1. This is a reference under Section 66 (1) of the Income-tax Act referring the following question for the opinion of this Court:

Whether if an assessee submits a revised return under Section 22 (3) of the Indian Income-tax Act or seeks permission to revise the return as originally filed after the assessee's dishonesty has come to the notice of the Income-tax Officer, a penalty under Section 28 (1) (c) can be imposed.

The facts are: The assessee deals in purchase and sale of land and owns property. He did not submit a return in spite of service of notice under Section 22 (2) of the Act. On a notice under Section 22 (4) being served on him, he submitted a return on 24th February 1948 for the assessment year 1947-48 in which he disclosed sales of plots & fields to the extent of Rs. 59,222/- but instead of returning the actual profit that he made on these sales he returned profit at a flat rate of 5/- per cent and returned a loss under the head 'business'.

The Income-tax Officer not being satisfied with this obviously incorrect return, issued a notice under Section 23 (3) calling upon the assessee to prove the cost price of the land sold and fixed the case for 11th March 1948. On that date the assessee filed a statement giving an account of the cost of acquisition and sale proceeds of the various items. That account disclosed a net profit of Rs. 23010/- instead of a net loss of Rs. 5,192-8-9 shown by him in his return. No explanation was offered how he arrived at the profits at the flat rate of 5 per cent. The only ground for not returning the actual profits as disclosed in the statement was that the sales were not fully effected.

2. At the adjourned hearing on the 23rd March 1948, the assessee made an application purporting to be under Section 22 (3) of the Act seeking permission to revise the return. In this application, it was said that the return was prepared hurriedly and filed on the 24th February 1948 as the Income-tax Officer declined to grant time, that a profit of Rs. 2793-8-0 on the sales of two plots remained to be shown in a hurry and that the profit should be ascertained in the next year as all the sales were not effected. It was contended that if the book profits were to be taxed, the book profits of Rs. 23010/- were offered for assessment. It is also stated in the application that the assessee was under the bona fide impression that the profits arising from the purchase and sale of fields were not at all taxable.

3. The Appellate Tribunal did not accept this plea of bona fide impression which could not be true in view of the fact that the assessee had returned income at a flat rate of 5 per cent. Although it is not stated in the application or the statement dated 11th March 1948, it was urged before the Appellate Assistant Commissioner that the true profits were not returned as the books were not ready. This contention was however not pressed before the Tribunal. Thus on the facts found by the Appellate Tribunal the submission of incorrect return was intentional and the return was sought to be corrected when the dishonesty was noticed by the Income-tax Officer.

4. Section 28 (1) (c) provides:

If the Income-tax Officer, the Appellate Assistant commissioner or the Appellate Tribunal in the course of any proceedings under this Act, is satisfied that any person has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income he or it may direct that such person shall pay by way of penalty in addition to the tax payable by him, a sum not exceeding one and a half times the amount of income-tax and super-tax, if any, which would have been avoided if the income as returned by such person has been accepted as the correct income.

This section is attracted if there is a finding that the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars of such income. The learned counsel for the assessee contends that there is no such finding.