2011 (6) TMI 56 - HC - Income Tax

Penalty - Search - Seizure of bank deposits and jewellery - Undisclosed income - The assessee filed the revised return in respect of the first two assessment years and filed the return for the first time for the last of the assessment year only after search in the Managing Partner s residence wherein undisclosed cash and investments were found - The conduct of the assessee hence assumes significance in coming forward to disclose the income of the firm which are relatable to the investments made by the Managing Partner - The fact that the assessee had not disclosed any reason for the omission in the original return and that the revised return was filed only after the search this Court held that penalty was leviable -do not find any justification to cancel the penalty levied by the Assessing Officer which is admittedly a minimum penalty - Decided against of assessee.

Summary

Issues:
1. Whether the revised return filed by the assessee to avoid litigation constitutes concealment, attracting penalty under Section 271(1)(c) of the Income Tax Act?
2. Whether the Tribunal was correct in holding that the revised return formed a valid basis for penalty under Section 271(1)(c) without additional evidence justifying the assessment?
3. Whether a mere admission by the assessee establishes concealment, and if the Tribunal was right in confirming the penalty under Section 271(1)(c)?

Analysis:
1. The assessee, a registered firm, originally admitted income for three assessment years. Following a search at the Managing Partner's premises, a revised return was filed admitting undisclosed income. The Assessing Authority levied penalties for concealment. The Commissioner of Income Tax (Appeals) canceled the penalties based on voluntary disclosure. However, the Tribunal, citing legal precedents, reinstated the penalties due to the introduction of Explanation to Section 271(1)(c) of the Income Tax Act, disregarding the earlier Supreme Court decision.

2. The Tribunal rejected the assessee's claim that the revised return was filed to purchase peace and not conceal income. It emphasized the significance of the undisclosed income being revealed only after the search at the Managing Partner's residence. The Tribunal upheld the penalties based on the lack of satisfactory explanation for non-disclosure in the original return, in line with previous court decisions.

3. The Revenue argued that the revised return did not absolve the assessee of culpability since the undisclosed income was only disclosed after the search. Citing case law, the Revenue contended that the mere claim of offering income in the revised return to purchase peace does not negate the penalty when there is no explanation for the original non-disclosure. The court agreed with the Revenue, upholding the penalties as a minimum penalty without justification for cancellation.

In conclusion, the court dismissed all appeals, affirming the penalties imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, based on the lack of satisfactory explanation for non-disclosure in the original return and the subsequent revised returns filed by the assessee.