2012 (12) TMI 11 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of income and furnishing inaccurate particulars - surrender of income to to buy peace, and avoid protracted litigation, however during assessment proceedings, assessee disclosed details of bank account in the name of firm, but not disclosed details of second bank account in his name, having various cash credits during relevant period - Held that - Admittedly, assessee did not disclose the bank account in his name in his balance sheet annexed with the return nor the transactions reflected therein in the regular books of accounts. Indisputably, cheques and cash was deposited in the undisclosed account. The assessee also admitted that transactions of sale of bearings of Rs.Rs.52.27 lacs were not recorded in the regular books of accounts. During the course of assessment proceedings, the assessee did not furnish any explanation regarding source of deposits in the undisclosed bank account to the satisfaction of the AO and accordingly, accepted addition of Rs.9 lacs to the total income proposed by the AO. Even in response to SCN before levy of penalty, the assessee did not furnish any explanation whatsoever before the AO and thus, failed to discharge the onus laid down upon him in terms of explanation 1 to sec. 271(1)(c). Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. Order of penalty u/s 271(1)(c) is upheld - Decided against assessee.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Acceptance of additional income offer by the assessee.
3. Failure to disclose a bank account and its transactions.
4. Validity of penalty proceedings and the assessee's explanations.
5. Judicial precedents and their applicability.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue revolves around the imposition of a penalty of Rs. 3,05,834/- on the assessee under Section 271(1)(c) for allegedly furnishing inaccurate particulars of income. The Assessing Officer (AO) initiated penalty proceedings after discovering an undisclosed bank account with substantial transactions not reflected in the assessee's regular books of accounts.

2. Acceptance of Additional Income Offer:
During assessment proceedings, the assessee offered an additional income of Rs. 9 lakhs for taxation to "buy peace" and avoid litigation, subject to the condition that no penalty or prosecution would be initiated. This offer was made after the AO confronted the assessee with evidence of undisclosed transactions. However, the AO did not accept this condition and proceeded with penalty proceedings.

3. Failure to Disclose a Bank Account and Its Transactions:
The AO discovered that the assessee maintained an undisclosed bank account with Centurion Bank of Punjab, which was not reflected in the balance sheet attached to the return. The account had significant deposits and withdrawals, which the assessee failed to explain satisfactorily. The AO added Rs. 9 lakhs to the income based on these undisclosed transactions.

4. Validity of Penalty Proceedings and the Assessee's Explanations:
The assessee did not appeal against the assessment order. During penalty proceedings, the assessee failed to provide any explanation for the undisclosed income. The CIT(A) upheld the penalty, emphasizing that the penalty was not based on the assessee's offer but on the AO's findings of concealment. The CIT(A) cited judicial precedents, including K.P. Madhusudhanan vs. CIT, to support the imposition of penalty, stating that the assessee failed to discharge the onus of proving that the failure to return correct income was not due to fraud or neglect.

5. Judicial Precedents and Their Applicability:
The assessee relied on several judicial pronouncements to argue against the penalty, including Sir Shadilal Sugar & General Mills Ltd. vs. CIT and CIT vs. Aggarwal Pipe Co. However, the Tribunal found these cases inapplicable, noting that the facts differed significantly. The Tribunal emphasized that the surrender of income was not voluntary but resulted from the AO's detection of undisclosed transactions. The Tribunal upheld the penalty, citing the Supreme Court's decision in K.P. Madhusudhanan vs. CIT, which clarified that the burden of proof lies on the assessee to show that the failure to return correct income was not due to fraud or neglect.

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty imposed under Section 271(1)(c). The decision emphasized that the assessee's failure to disclose the bank account and its transactions constituted concealment of income. The Tribunal found that the assessee did not provide a satisfactory explanation during penalty proceedings, thus failing to discharge the onus under Explanation 1 to Section 271(1)(c). The judicial precedents cited by the assessee were deemed inapplicable, and the penalty was confirmed based on the AO's findings and relevant legal provisions.

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