2013 (1) TMI 263 - AT - Income Tax

Penalty u/s 271(1)(c) - notice under Section 153A - Held that - A plain look at the copies of the seized material discloses that recordings were made in a systematic manner in a tabular form. The other papers when perused disclose that they are entries made on plain paper with calculations, initials and signatures. When confronted with these pages a group company of the assessee M/s BPTP Ltd. submitted that the expenditure does not pertain to it. It further argued that there is no question of booking the same in its books of accounts. There after M/s Business Park Construction Co.Ltd. the assessee company stated on 24.12.2009 that they are unable to explain these documents. It further stated that, it has no grievance if addition is made on account of these papers subject to no penalty being levied. Thus on facts, the assessee company failed to explain these seized papers and offered the amounts mentioned therein to tax with a condition that no penalty should be levied. On these facts the penalty was rightly levied and upheld by the Ld.CIT(A) as assessee M/s Business Park Construction Co.Ltd. has at no stage attempted to explain the seized documents. The explanation given by M/s BPTP Ltd. of the seized documents, does not come to the rescue of the assessee. The assessee in this case has not stated that the documents in question does not belong to it. It is not the case of the assessee that entries recorded in these documents are not expenditure incurred by it or that they are dumb documents. All that the asssessee stated is that, it is unable to explain the documents. It is well settled that there is no estoppel against law. There is no agreement possible for non levy of penalty. Had the assessee furnished an explanation as regards the seized documents, the question of considering whether such explanation is bonafide or not would arise. In this case the assessee has not attempted to explain any of the seized documents, even during the course of penalty proceedings - appeal decided against assessee.

Summary

Issues Involved:
1. Legitimacy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the assessee's explanation regarding seized documents.
3. Applicability of judicial precedents cited by both parties.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c):
The primary issue revolves around the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the penalty imposed by the Assessing Officer (AO). The AO's decision was based on the assessee's failure to explain certain seized documents found during a search operation. The AO concluded that the assessee had furnished inaccurate particulars of income and concealed income, thereby justifying the penalty.

2. Validity of the Assessee's Explanation Regarding Seized Documents:
During the search and seizure operation, specific documents were found which indicated unaccounted expenditure. The assessee, in response, claimed that the documents did not pertain to them and were "dumb documents." However, the AO rejected this explanation due to a lack of corroborative evidence. The assessee later offered the amounts mentioned in the documents for taxation but requested that no penalty be levied. The AO imposed the penalty, noting that the assessee only surrendered the amount after being confronted with the documents and had not filed a revised return of income.

3. Applicability of Judicial Precedents:
The assessee relied heavily on the Supreme Court judgment in CIT vs. Suresh Chandra Mittal, arguing that the income was voluntarily surrendered to avoid litigation and buy peace. However, the CIT(A) and the Tribunal distinguished this case from the present one, noting that in Suresh Chandra Mittal, the revised returns were regularized without objection, whereas, in the present case, the income was not disclosed in the return filed in response to the notice. The Tribunal also considered various other judgments cited by both parties but concluded that the facts of the present case warranted the imposition of the penalty.

Conclusion:
The Tribunal upheld the CIT(A)'s order confirming the penalty under Section 271(1)(c). The Tribunal emphasized that the assessee failed to explain the seized documents and only offered the income after being confronted with evidence. The Tribunal also noted that mere surrender of income does not absolve the assessee from penal consequences, especially when the surrender is made after detection by the AO. The appeal of the assessee was dismissed, and the penalty was deemed justified based on the facts and circumstances of the case.