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Benefits of filing a revised return
December, 01st 2007

An omission or wrong statement in the original return must be due to a bona fide inadvertence or a mistake on the part of the assessee, without which the benefit of this provision cannot be claimed.

H.P. Ranina

The dates for filing tax returns have passed. If a tax payer has missed out on an item of income in his original return, he has the opportunity to file a revised return. Such a revised return is valid under section 139(5) of the Income-tax Act, 1961 (the Act). If the person who has furnished a return discovers any omission or wrong statement therein, he may furnish a revised return at any time before the assessment is made. However, the revised return should be filed withi n one year from the end of the relevant assessment year.

The benefit of this provision cannot be claimed by a person who has made a false return knowing it to be false. Deliberate omissions and false and fraudulent statements fall outside the purview of this provision.

Similarly, an omission or wrong statement in the original return must be due to a bona fide inadvertence or a mistake on the part of the assessee, without which the benefit of this provision cannot be claimed.

Under appropriate section

In Kumar Jagdish Chandra Sinha v. C.I.T. (220 I.T.R. 67), the Supreme Court observed that no revised return could be filed under section 139(5) in a case where the return was filed under section 139(4), and thus, such revised return was invalid. It, therefore, reversed the decisions of the Calcutta, Madras and Madhya Pradesh High Courts which had held that an assessee who has filed a return pursuant to sub-section (4) was entitled to file a revised return under sub-section (5) and approved the decisions of the Delhi, Allahabad, Rajasthan and Kerala High Courts. A charitable or religious trust that has filed a return under sub-section (4-A) is entitled to file a revised return under sub-section (5).

The offence of filing a deliberately false return, which is punishable under section 277, is not condoned by the filing of a revised return, and a penalty may be imposed under section 271 in respect of the previous false return, notwithstanding the filing of the revised return.

However, the department, having assessed the income of the assessee on the basis of that return and having taken advantage of the extended period of one year for completion of assessments under section 153(1)(c) from the date of its filing, cannot be allowed to take a stand that the return was not a revised return under section 139(5).

Defining revised

An application by the assessee to the Assessing Officer asking him to add certain income to the income already disclosed in the return would not be furnishing a revised return within the meaning of this sub-section. Once the original return is withdrawn or is substituted by filing a valid revised return, the consequence is that the earlier return would be nullified for all purposes under the Act; it is not open for the Assessing Officer to advert to the original return or the statements filed along with the original return.

Instance of higher income

When an assessee files a revised return showing higher income and gives an explanation that he offered higher income to buy peace of mind and avoid litigation, penalty could not be imposed merely on account of higher income having been subsequently declared. This point was considered by the Supreme Court in C.I.T. v. Suresh Chandra Mittal (251 I.T.R. 9).

In C.I.T. v. Suraj Bhan (294 I.T.R. 481), the assessee derived his income from property, personal business and share income. He filed his return of income declaring a loss of Rs 8,410. In the balance sheet, cash balance and personal capital were shown at Rs 3,090 and Rs 29,341 for the assessment year 1969-70.

For the assessment year 1970-71, a return of income was filed declaring the income at Rs 11,451 while in the balance-sheet, cash and credit balance in the capital account were shown at Rs 2,248 and Rs 43,963.

A search took place in the premises of the assessee on November 28, 1970, and certain books of account were seized, apart from cash amounting to Rs 33,000. The assessee revised his balance-sheet, cash balance, and other entries and thereafter filed a revised return with the Department. Proceedings were initiated under section 271(1)(c) of the Act, for furnishing inaccurate particulars.

Two probabilities

In his reply, the assessee took the plea that surrender of amounts for purpose of assessment was made bona fide and no inference of admission of concealment could be drawn.

The Assessing Officer imposed a penalty of Rs 25,515 and Rs 45,680. The Tribunal deleted the penalty, holding that the assessee had discharged the onus in terms of the Explanation to section 271(1)(c) of the Act and since there was no evidence except the revised return filed by the assessee to show that the disputed amounts constituted the assessees income in two years, the preponderance of probability was in favour of the assessee.

On a reference, the Punjab and Haryana High Court held that from the order of the Tribunal it was clear that there were two probabilities pointed out by the assessee, one, the amounts that had been subjected to tax in the two years really did not constitute the assessees income because the assessee had been doing business for the past many years. Second, a part of the money on which tax was levied belonged to his sons.

The preponderance of probability was in favour of the assessee. Thus the penalty was not leviable even with reference to the Explanation to section 271(1)(c). In view of the finding of the Tribunal that the explanation of the assessee was satisfactory and the burden had been discharged by the assessee, even if two views were possible, the finding could not be held to be perverse.

Omission or wrong statement

Where a revised return is filed, the crux of the matter is that if, after examining the return and the accounts of the assessee in the course of the assessment proceedings, the Assessing Officer discovers an omission or wrong statement made by the assessee and, thereafter, a revised return is filed, the assessee cannot be absolved of the liability for imposition of penalty under section 271(1)(c).

However, if the assessee himself voluntarily files a revised return before the order of assessment is made, after he has himself discovered an omission or wrong statement in the original return, penalty for concealment of particulars of income or for furnishing inaccurate particulars of such income, as contemplated under section 271(1)(c), cannot be imposed.

In C.I.T. v. Manibhai and Bros. (294 I.T.R. 501), the Gujarat High Court held that the claim for depreciation and investment allowance made in the original return was not a false claim but it was a bona fide and right claim and if contested could have been allowed by the Revenue authorities.

However, the assessee did not wish to take any chance or risk with the Income-tax Department and filed a revised return voluntarily and suo motu without there being any detection by the Assessing Officer. The Commissioner of Income-tax (Appeals) and the Tribunal both had found that there was no intention to conceal the fact of claiming depreciation. The deletion of penalty was justified.

Thus, there is a distinct advantage in filing a revised return. In appropriate circumstances, penalty can be avoided if the revised return sets right any error or brings to tax, income that was not bona fide disclosed in the original return.

(The author, a Mumbai-based advocate)
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