The Judgment of the Court was delivered by

Ramachandra Iyer, O.C.J:— The Income-tax Appellate Tribunal has submitted a further and revised statement of the case in compliance with our order dated December 3, 1959. For the proper appreciation of the questions arising in the case, it is necessary to recapitulate briefly the facts which have given rise to this reference. The assessee is a Hindu undivided family, carrying on business in yarn and cloth at Madurai. There was a branch for this business at Ramachandrapuram in Ramanathapuram District. One part of the business of the assessee was to export handloom products to Ceylon under permits granted by the Government. The practice observed in regard to such exports was to prepare invoices in duplicate and send the original to the foreign purchaser and the copy to the Chamber of Commerce at Madurai. The Chamber also maintains a record for the prevailing market prices at Ceylon of handloom goods manufactured and despatched from Madurai.

2. For the assessment year 1945-46 (the year ending with April 12, 1945), the assessee submitted a return of the income on October 25, 1945, to the Income-tax Officer, South Madurai, disclosing an income of Rs. 25,437 of which Rs. 25,152 represented the income from business. The return was made on the basis of the entries in the account books maintained by the assessee. No voucher or copy of the balance-sheet or of the profit and loss account accompanied the return.

3. Even earlier, the assessee had submitted the return for the assessment year 1944-45. That return was the subject-matter of scrutiny by the department, which, during the course thereof, obtained on March 13, 1945. from the Madurai Chamber of Commerce the duplicate invoices in respect of goods exported to Ceylon by the assessee during the year of account relative to the assessment year 1944-45. The invoices disclosed sales at prices higher than what were contained in the account books maintained by the assessee. Some time thereafter, on March 6, 1946, the auditors of the assessee sent a financial statement relative to the assessment year 1945-46, which is the subject-matter of the present proceedings. The statements showed the total business income as Rs. 29,182, an addition of Rs. 1,038 over that contained in the return; that represented the profits of the yarn department of the assessees at the Madurai shop belonging to the assessee. Enclosed with the statement was a list of particulars indicating invoice prices in respect of the exports made during the year of account to the Ceylon constituents with the relative duplicate invoices submitted to the Chamber of Commerce. The disparity between the prices disclosed therein and those contained in the account books was also indicated by a memo. The invoices certified by the Chamber of Commerce showed that the prices for which goods were exported during the year was Rs. 1,91,299 the entries in the books on the basis of which the original return was made showed only a receipt of Rs. 88,479. There was thus a difference of Rs. 1,02,820 between the prices disclosed by the invoices and those contained in the assessee's books. But no attempt was made then to explain the discrepancy between the two figures. That was however done nearly a year later when on February 20, 1947, the auditors of the assessee informed the Income-tax Officer that the disparity of Rs. 1,02,820 did not represent any actual receipts, but was occasioned by an artificial inflation of prices in the invoices which had to be made at the behest of the Ceylon constituents. The true receipts in respect of the consignments to Ceylon were stated to be those represented by the books. The Income-tax Officer refused to accept the explanation of the assessee; on March 31, 1947, he made the assessment on the basis of the prices disclosed by the invoices. This assessment was affirmed on appeal as well as by the Appellate Tribunal on further appeal.

4. The Income-tax Officer initiated proceedings under section 28 of the Income-tax Act. He held that the assessee, far from disclosing the true income, had deliberately concealed the income and also made false entries in his accounts to support his case and levied a penalty of Rs. 60,000 on the assessee. The appeal from the order levying penalty to the Appellate Assistant Commissioner and the further appeal to the Tribunal failed. The substantial reason which influenced the Tribunal to sustain the penalty imposed on the assessee was the time-lag between the original return filed on October 25, 1945, and the disclosure of the invoices, prices, etc. which was done on March 6, 1946. By our order dated December 3, 1959, we held that the question whether the assessee was guilty of concealment or of deliberately furnishing false particulars in his return within the meaning of Section 28(1)(c) could not be judged solely on the basis of the time factor but that other circumstances in the case would have to be considered. The Tribunal has recorded its findings in the revised statement of the case which contains its finding that the assessee's case as to inflation of prices in the invoices is not true but that on the other hand the invoices truly represented the value for which the goods were sold. It follows that the books maintained by the assessee did not represent the transactions correctly. The return based on the books could not properly reflect the true income of the assessee during the relevant year.

5. Reference is made to the fact that the disclosure of the details of the invoice prices was made only in the context of the investigation of the previous year's return. The Tribunal has also found that the original suppression of the sum of Rs. 1,038 representing the profits made in the yarn department and the existence of false credits to the extent of Rs. 41,000 in the books showed that the profits must have been larger than what the books represented.

6. Mr. R. Kesava Ayyangar, who appeared for the assessee, contends that, inasmuch as the particulars relating to the sum of Rs. 1,02,820 had been furnished to the department before the assessment was made by the Income-tax Officer, it should be held that there was no concealment of particulars of income by the assessee. Learned counsel submitted that at its worst the assessee's conduct could be regarded only as amounting to raising of an untenable or false plea in respect of which proceedings under Section 28(1)(c) could not be sustained. In other words, it is contended that the question of concealment has to be decided as to the materials disclosed on the date of assessment and if on that date the assessee had furnished the materials, the mere fact that he stated that the materials so furnished did not represent the actual receipts which according to him is something less, the rejection of his case would not mean that there was any concealment. On the other hand, Mr. Ranganathan, appearing for the department, contends that the question whether there had been a concealment of particulars of income or a deliberate furnishing of inaccurate particulars thereof should be considered with reference to what the assessee said or did on the date of the submission of the return and that what he did subsequently would not be relevant.

7. We are, however, unable to agree with either of the two extreme contentions. Taking up Mr. Ranganathan's contention, it is one which is obviously opposed to the underlying principle of Section 28(1)(c), as its essential requirement is that there should be “a concealment of the particulars of income or the deliberate furnishing of inaccurate particulars thereof”. Concealment means a keeping back or hiding the information. It is a deliberate or intentional Act. Section 22(3) provides that, where a person furnishing a return discovers an omission or wrong statement therein, he could furnish a revised return at any time before the assessment is made. Therefore, in a case where the original return does not contain the true particulars by reason of a genuine mistake or accidental omission, it would be open to the assessee to furnish a revised return containing the correct particulars at any time before the assessment. In Radha Rukmani Ammal…Applicant; v. Commissioner Of Income-Tax, Madras…. [1957] 31 I.T.R 704. it was held that, notwithstanding the absence of the qualifying word “deliberately” in the first alternative in Section 28(1)(c) referring to concealment, the concealment also should be a conscious and deliberate one. Where, therefore, the assessee was not conscious of his concealing any particulars at the time when he furnished the return, he could rectify it as soon as he discovers the mistake. In such a case it cannot be said that the assessee was guilty of concealment on the date when he submitted the return. It is not therefore the time of return that is material. What has to be seen is whether the assessee consciously submitted a false return. We agree with Mr. Kesava Ayyangar that, in a case where the assessee furnishes all the particulars but states falsely that the income was less than what the particulars show, the case is not one of concealment or furnishing false particulars but the mere raising of a false plea. In The Commissioner Of Income-Tax, Ahmedabad v. Messrs Gokuldas Harivallabhdas, Nadiad* [1958] 34 I.T.R 98. certain credit entries were found to exist in the names of some persons. It was found that the entries were false and that they represented income from undisclosed sources. It was held that the proceedings under Section 28(1)(c) being in the nature of penal proceedings, the burden of proving that the assessee was guilty of the offence of concealment would be on the department and that the mere fact that the assessee gave a false explanation could not necessarily mean that there was a concealment, the gist of the offence under Section 28(1)(c) being concealment of particulars of income or deliberately furnishing inaccurate particulars of such income, and not of giving false explanation. In Khemraj Chagganlal v. Commissioner of Income-tax [1960] 38 I.T.R 523. the account books of the assessee showed a credit entry purporting to be the sale proceeds of certain ornaments. In the assessment proceeding it was found that there was no sufficient evidence to establish that they represented sale of ornaments and that they should be treated as secreted profits of the assessee's business. Proceedings were thereafter initiated under Section 28(1)(c) of the Income-tax Act. It was held that the mere fact that the assessee was not able to establish by satisfactory evidence the explanation offered by him in regard to the credit entry did not mean that the assessee had been guilty of a deliberate suppression of particulars of income within the meaning of Section 28(1)(c). These cases should however be distinguished from one where there is a deliberate concealment but where either to explain it away or to avoid the consequences, a false plea is taken. Section 28(1)(c) is intended to cover cases of concealment as well as one of deliberate furnishing of false particulars. 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 Chettiyar v. Commissioner of Income-tax. 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 assessee 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.

8. Mr. Kesava Ayyangar contends that even assuming that the assessee was aware on March 6, 1946, when he submitted the particulars of the proceedings initiated or inquiries conducted by the department in respect of the previous year's assessment, there were no materials on record to show that for the year of assessment 1945-46 the assessee was aware of similar proceedings or inquiries being initiated and that, therefore, his furnishing the financial statements, etc., should be deemed to be a voluntary one. As we indicated earlier, the question is one of fact, namely, as to whether the assessee had the intention to conceal the materials or deliberately furnished false particulars. That intention can be gathered from the circumstance that he came forward with the particulars only when it became apparent that a similar attempt on his part for the previous year threatened to fail. In Vadilal Ichhachand v. Commissioner of Income-tax the original return submitted by the assessee did not disclose the entire income. The Income-tax Officer discovered the omission of income during the course of the assessment proceedings. Almost simultaneously, the assessee submitted a revised return showing a larger income. It was held that, for the purpose of the application of Section 28(1)(c) it was not the later return that had to be taken into account, but the original one, which, if accepted, would have resulted in the avoidance of tax. In Dayabhai Girdharbhai v. Commissioner of Income-tax it was held that, where the omission to include an item of income in the original return was deliberate, the results of such deliberate omission could not be got rid of by merely filing a revised return. Arunachalam Chettiyar v. Commissioner of Income-tax to which we had occasion to refer earlier, was a case where the assessee, after deliberately sending an incorrect return, submitted a second return when the omission in the prior return was on the point of being discovered by the department. Beasley, C.J, in delivering judgment observed:

“It is argued here that the assessee discovered on the 7th January, 1929, that his previous return was an inaccurate one and that he was therefore, entitled to claim the benefit of section 22(3) and make a revised return and that as has been accepted no penalty can be inflicted upon him for having concealed his income. That certainly is correct statement of what an assessee is entitled to do, if he makes a bona fide discovery that he has made a previous incorrect return but it certainly does not apply to the facts of this case which show clearly that the previous return was deliberately dishonestly made. It is seriously argued that, notwithstanding that fact, the assessee is still enabled to put in a return correcting his former inaccurate one and that he is to be absolved from liability to have any penalty inflicted upon him. That, it seems to me, is to put a premium on dishonesty and nowhere in the Income-tax Act do we find any provision which does anything of the kind.”

9. In Ayyasami Nadar v. Commissioner of Income-tax the assessee omitted to include in his return a part of his income; but he admitted the true income before the assessment was completed, and consented to the inclusion of the omitted portion of the income. Rejecting the contention that Section 28(1)(c) would not apply and that the concealment did not continue right upto the assessment, the learned judges held that it would be sufficient for the purpose of application of the section that there had been a deliberate concealment of particulars in any return. 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). It would make no difference in principle if at the subsequent time the assessee, after giving the full particulars, reiterates his original stand that the true income was that as disclosed in the return, and that the particulars do not represent the same.

10. In the present case, the Tribunal has found in the penalty proceedings that the prices disclosed in the invoices represented those obtained by the assessee for the goods sent abroad, that the entries in the account books did not represent the transactions correctly, and that full particulars were given only when the department discovered a similar attempt by the assessee during the previous year. It is contended for the assessee that there are no materials on record to show that, when he furnished the particulars on March 6, 1946, it was anything but a voluntary act on the part of the assessee not induced by anything done by the department. The materials available reveal a contrary state of things. In the letter written by the assessee to the Income-tax Officer, on November 22, 1951, which has been enclosed as annexure “C” to the statement of the case, we find the following significant statement:

“(1) The differences were noted by the department for the first time in 1944-45 assessment. In 1945-46 assessment, these differences were duly disclosed in the statements submitted by my auditors and they were not kept back from the department.

(2) As regards 1944-45 assessment, I believed that my books will be accepted. When, however, a different construction was put upon these differences and my explanation was not accepted by the department, such differences for 1945-46 were, as already stated, duly disclosed, while my explanation was there with the department already in connection with 1944-45 assessment.”

11. This letter shows that the particulars were furnished on March 6, 1946, after the assessee came to know that the income-tax department was not satisfied with the book results. The assessee must therefore have been aware of the fact that, as early as March, 1945, the department had come into possession of materials which would discredit the assessee's account books. There were therefore sufficient materials for the Tribunal to come to the conclusion it did, namely, that, in the context of the events that happened in the case, the disclosure by the assessee of full particulars was not the result of any voluntary act on his part, but by reason of the discovery of the falsity of the account books in respect of the previous year. It would therefore follow that there was a concealment of the particulars of income in the first instance, or at any rate, a deliberate furnishing of inaccurate particulars in the original return filed by the assessee. We therefore answer the question referred to us in the affirmative and against the assessee.

12. The assessee will pay the costs of the department. Counsel's fee Rs. 250.

13. Question answered in the affirmative.