2014 (10) TMI 220 - AT - Income Tax

Penalty u/s 271(1)(c) Voluntary disclosure or not - Concealment of income and inaccurate particulars furnished Held that - the assessee had shown trade liabilities in the balance sheet, that the AO had directed the assessee to produce the parties in whose names liabilities were shown outstanding, that on seven occasions the assessee had made submission before the AO between 12. 02. 2008 to 28. 08. 2008, that on 15. 10. 2008 it surrendered ₹ 52 lakhs, that before that the AO had issued commission to one of the officers of Bareli to make inquiries about some of the suppliers, that the AO levied penalty after invoking the provisions of Expl. 1 B to section 271(1)(c) of the Act and the FAA had confirmed the penalty. Voluntary disclosure does not release the assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. The Assessing Officer should not be carried away by the plea of the assessee such as voluntary disclosure , buy peace , avoid litigation , amicable settlement , to explain away its conduct. The assessee has not produced cogent and reliable evidences, as desired by the Hon ble Apex court in the case of Mak Data 2013 (11) TMI 14 - SUPREME COURT , to explain the difference about the trade liability that were part of his books of accounts - penalty confirmed - Decided against assessee.

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act.
2. Concealment of income or furnishing inaccurate particulars.
3. Voluntary surrender of income to avoid litigation.
4. Specific initiation of penalty in the assessment order.
5. Adhoc addition and rejection of books of account under Section 145.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The primary issue is whether the penalty of Rs. 17,50,320 levied under Section 271(1)(c) of the Income Tax Act was justified. The Assessing Officer (AO) determined that the assessee had concealed income and furnished inaccurate particulars, leading to the imposition of the penalty. The First Appellate Authority (FAA) upheld this penalty, noting that the assessee had accepted the incorrectness of the trade liability claim only during assessment proceedings and not voluntarily.

2. Concealment of Income or Furnishing Inaccurate Particulars:
The AO found that the assessee failed to maintain a day-to-day stock register and could not verify purchase rates. The assessee did not produce meat suppliers to substantiate the liabilities shown in the books. The AO concluded that the assessee had concealed income and furnished inaccurate particulars, invoking Explanation 1(B) of Section 271(1)(c). The FAA agreed, stating that the surrender of liability was not voluntary but compelled by ongoing investigations.

3. Voluntary Surrender of Income to Avoid Litigation:
The assessee argued that the surrender of Rs. 52 lakhs was voluntary to buy peace and avoid litigation. However, the FAA and the Tribunal found that the surrender was not voluntary but a result of the AO's scrutiny and inquiries. The Tribunal cited the Supreme Court's judgment in Mak Data, emphasizing that voluntary disclosure does not absolve the assessee from penalty if concealment is detected.

4. Specific Initiation of Penalty in the Assessment Order:
The assessee contended that the AO did not specifically initiate penalty proceedings in the assessment order. However, the Tribunal noted that the AO had issued a notice under Section 274 on 24.11.2008, indicating the initiation of penalty proceedings. The Tribunal found no merit in the assessee's argument.

5. Adhoc Addition and Rejection of Books of Account under Section 145:
The AO rejected the assessee's books of account under Section 145(3) due to unverified purchase rates and the absence of a stock register. The assessee did not challenge this rejection. The Tribunal upheld the AO's decision, noting that the assessee failed to substantiate the explanation for the trade liabilities and that the AO was justified in invoking Section 271(1)(c).

Conclusion:
The Tribunal concluded that the assessee failed to provide cogent and reliable evidence to substantiate the trade liabilities and that the AO rightly invoked the provisions of Section 271(1)(c). The Tribunal dismissed the appeal, confirming the penalty imposed by the AO and upheld by the FAA. The order was pronounced in the open court on 17th September 2014.

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