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2015 (7) TMI 127 - HC - Income TaxPenalty under Section 271(1(c) - additional income due to the search operation u/s 132 - assessee disclosed the additional income only after he was confronted by the D.I (Inv), New Delhi with certain evidence - Held that - In the case, before us the assessee on his own showing had furnished inaccurate particulars. The assessee admitted that the return originally filed by him included expenditure disallowable under Section 37(1) which occasioned the revised return filed by him by which a sum of ₹ 3.40 crores was added by the assessee himself to his total income originally returned. The submission advanced by Mr. Kapoor that the Assessing Officer did not call for any explanation from the assessee is not factually correct because it would appear from the assessment order dated 30th March, 2007 quoted above that a notice under Section 271(1)(c) was issued to which the assessee duly replied by its letter dated 1st June, 2006 and offered an explanation that there was no deliberate concealment which was not acceptable to the Assessing Officer. He as such passed an order under Section 271(1). It is, therefore not correct to say that the exercise calling for an explanation from the assessee was not undertaken. Clause (c) of Section 271(1) originally qualified an act of concealment of income or furnishing of inaccurate particulars with the expression deliberately which was omitted by the Finance Act, 1964 w.e.f. 1.4.1964 as a result concealment of income or inaccurate particulars need not originally have been furnished deliberately. The use of the expression deliberately was a pointer to show that mens rea was a necessary element. With the omission of the expression deliberately , mens rea is no longer a prerequisite for imposition of penalty. It is now a case of strict liability. In the case of Dilip N. Shroff Vs- CIT reported in (2007 (5) TMI 198 - SUPREME Court), mens rea was considered to be a necessary ingredient for levy of penalty. But in the case of Union of India Vs- Dharmendra Textile Processors reported 2008 (9) TMI 52 - SUPREME COURT it was held that the view in the case of Dilip. N. Shroff was not correct. It has been held that penalty under Section 271 (1) (c ) is a civil liability and the wilful concealment is not an essential ingredient. - Decided in favour of the Revenue.
Issues Involved:
1. Justification of the Income Tax Appellate Tribunal in confirming the Commissioner of Income Tax (Appeals) order deleting the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2004-05. Issue-wise Detailed Analysis: 1. Tribunal's Justification in Confirming CIT(A)'s Order: The appeal challenges the judgment and order dated 18th January 2008 by the Tribunal, which upheld the CIT(A)'s decision to delete the penalty of Rs. 22,95,000/- levied by the Assessing Officer (AO) under Section 271(1)(c) for the Assessment Year 2004-05. Facts and Circumstances: The assessment order dated 19th May 2006 noted that the assessee had filed a revised return showing additional income of Rs. 3,40,00,000/-. This additional income was disclosed following a search operation under Section 132 in the office of the U.P. Distillers Association, where the payment was found in the seized records. The assessee offered this amount as disallowable under Section 37(1) to avoid litigation. Penalty Proceedings: The AO initiated penalty proceedings under Section 271(1)(c) on the grounds that the additional income was disclosed only after the search operation, suggesting concealment of income. CIT(A) Reasoning: The CIT(A) reversed the AO's order, reasoning that the department did not provide independent evidence proving the payments were actually made by the assessee. The assessee had voluntarily filed a revised return and paid taxes on the additional income to avoid litigation, which the CIT(A) considered a bona fide act. Tribunal's Agreement with CIT(A): The Tribunal upheld the CIT(A)'s decision, stating that the department failed to prove the assessee's mens rea for concealment. The Tribunal emphasized that the assessee voluntarily disclosed the additional income, and there was no evidence of deliberate concealment. Revenue's Argument: The Revenue contended that the so-called voluntary disclosure was not genuine, as it was made only after the search operation. They argued that the Tribunal and CIT(A) erred in concluding that there was no concealment. Legal Precedents: The Revenue cited the Supreme Court judgment in Mak Data Private Limited vs. CIT, which held that voluntary disclosure does not absolve the assessee from penalty if concealment is detected. The burden of proof shifts to the assessee to provide a bona fide explanation. Assessee's Defense: The assessee argued that the penalty proceedings were invalid as the AO did not provide sufficient evidence of concealment. They cited various judgments, including CIT vs. Suresh Chandra Mittal, where penalties were canceled due to voluntary disclosure made to avoid litigation. Court's Analysis: The court analyzed the facts and concluded that the assessee's revised return included disallowable expenditure, indicating inaccurate particulars in the original return. The court noted that the AO had indeed called for an explanation, which the assessee provided, but it was not accepted. The court emphasized that mens rea is not required for penalty under Section 271(1)(c) after the amendment, making it a case of strict liability. Final Judgment: The court found that the Tribunal erred in concluding there was no concealment. The assessee's act of furnishing inaccurate particulars warranted the penalty. The court also dismissed the argument that the appeal was inconsistent due to the absence of a challenge for the assessment year 2003-04, distinguishing between judgments of the Tribunal and High Court. Conclusion: The court answered the question in favor of the Revenue, allowing the appeal and upholding the penalty of Rs. 22,95,000/- for the Assessment Year 2004-05.
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