CIT vs. Usha International Ltd (Delhi High Court)

Surrender via revised ROI before issue of formal notice does not necessarily avoid s. 271(1)(c) penalty

The assessee filed a ROI claiming deduction u/s 35CCA for a donation made to another party. The department had information that the donation was bogus and so a survey was conducted on the assessee’s premises. Pursuant to the survey, the assessee filed a revised return of income in which it withdrew the claim for deduction and paid up the taxes thereon. The AO imposed penalty u/s 271(1)(c) on the ground that the revised return withdrawing the claim was not voluntary but was pursuant to the survey. The CIT (A) & Tribunal deleted the penalty on the ground that as the revised return was filed before any concrete evidence was gathered by the income tax authorities the assessee was exonerated from guilt. On appeal by the Department to the High Court, HELD reversing the Tribunal:

The mere fact that a revised return was filed withdrawing a claim or offering additional income before issue of a formal notice by the AO does not necessarily mean that the return is voluntary. The filing of a revised return does not expatiate the contumacious conduct, if any, on the part of the assessee in not having disclosed the true income in the original return. At the same time, it cannot be said that the revised return is of no consequence at all. The original return cannot be considered in isolation without reference to the conduct of the assessee subsequent to the filing of the original return. The question whether a revised return is “voluntary” or not has to be decided in the light of the entire material brought on record and whether the revised return was filed when the assessee is cornered by the evidence or material collected by the revenue authorities or before that stage. On facts, the revised return was filed by the assessee only when it was cornered and the income tax authorities had collected material on the basis of which it could be said that the claim for deduction was false or bogus. The filing of the revised return is thus an act of despair and the assessee can gain nothing from it (Qammar-Ud-Din 129 ITR 703 (Del), Sarvaria 158 ITR 803 (Del), Ramdas Pharmacy 77 ITR 276 (Mad) & S.A.S. Pharmaceuticals 335 ITR 259 (Del) referred)