2006 (5) TMI 495 - HC - Income Tax

Penalties imposed u/s 271(1)(c) - Revised return filed voluntarily and the surrender the concealed income being made at the initiation of the enquiry before the detection of any undisclosed income - Penalty can be escaped merely on the ground surrendered the concealed income amount? - HELD THAT - It is not possible to hold that in every case mere surrender of income will foreclose any action for concealment of income. Judgments of the Hon ble Supreme Court in Sir Shadi Lal 1987 (7) TMI 3 - SUPREME COURT and CIT vs. Suresh Chandra Mittal 2001 (6) TMI 63 - SC ORDER have rightly been distinguished by the Tribunal. Findings recorded by the Tribunal cannot be held to be perverse in any manner the same being based on relevant material. The assessees have been held to be members of the same family and it has also been found that revised returns were filed on coming to know about detection of concealment. Accordingly no substantial question of law arises - The appeals are dismissed.

Issues Involved:
1. Justification of penalty levy despite voluntary revised return.
2. Difference between initiation of enquiry and detection of income.
3. Treatment of revised return as non est.
4. Alleged perverse findings by the Tribunal regarding presence before ADI and explanation bona fides.

Detailed Analysis:

1. Justification of penalty levy despite voluntary revised return:
The Tribunal upheld the penalty under section 271(1)(c) of the IT Act, 1961, despite the assessees filing a revised return voluntarily and surrendering undisclosed income before its detection by the authorities. The Tribunal held that the question of concealment or furnishing inaccurate particulars of income must be determined with reference to the original return. Even if income is surrendered in the revised return, the assessees must explain why the income was not shown in the original return. The Tribunal cited multiple precedents to support the view that intentional concealment in the original return warrants penalty, irrespective of subsequent voluntary disclosure.

2. Difference between initiation of enquiry and detection of income:
The Tribunal clarified that the timing of surrender (before or after detection) is immaterial for the purpose of section 271(1)(c) if there was intentional concealment in the original return. The Tribunal referred to the case of CIT vs. J.K.A. Subramania Chettiar, which held that section 139(5) applies only to omissions or wrong statements, not to concealments or false statements. The Tribunal emphasized that the concept of "detection before surrender" is relevant for waiver or reduction of penalty under section 273A, not for general cases under section 271(1)(c).

3. Treatment of revised return as non est:
The Tribunal treated the revised return as non est, meaning it had no legal effect, because it was filed after the initiation of enquiries by the authorities. The Tribunal noted that the assessees initially claimed the income as agricultural, which was later included in the taxable income after inquiries. The Tribunal held that the assessees failed to provide any material evidence to substantiate the claim of agricultural income in the original return, thereby justifying the penalty for furnishing inaccurate particulars.

4. Alleged perverse findings by the Tribunal regarding presence before ADI and explanation bona fides:
The assessees argued that the Tribunal's findings were perverse, particularly the mention of Mr. Rajesh's presence before the ADI instead of Rajneesh and Rajeev, and the rejection of their explanation as not bona fide. The Tribunal, however, found that the explanation provided by the assessees was not credible and that the revised returns were filed only after detection of concealment. The Tribunal's decision was based on the fact that the assessees did not provide any evidence to support their claim of agricultural income, and the surrender was made to avoid legal consequences.

Conclusion:
The Tribunal's decision to uphold the penalty under section 271(1)(c) was based on the finding that the assessees intentionally concealed income in their original returns and only surrendered the income after detection by the authorities. The Tribunal distinguished the case from precedents where penalties were canceled due to bona fide voluntary disclosures. The High Court dismissed the appeals, affirming that no substantial question of law arose and that the Tribunal's findings were not perverse.

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