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2017 (11) TMI 1762 - AT - Income TaxLevy of concealment of penalty u/s 271(1)(c) - addition of unexplained cash credit u/s 68 - AO has initiated the penalty proceedings u/s 271(1)(c) on the ground that the assessee has furnished inaccurate particulars of its income - mistake in notice - Held that - As decided in MAK DATA P. LTD. VERSUS COMMISSIONER OF INCOME TAX-II 2013 (11) TMI 14 - SUPREME COURT AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. As decided in COMMISSIONER OF INCOME-TAX VERSUS SMT. KAUSHALYA AND OTHERS 1995 (1) TMI 25 - BOMBAY HIGH COURT under section 274 all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings The sequence of events as narrated hereinbefore is (i) the assessee-company filed its return of income for the AY 2008-09 on 09.07.2008 disclosing total income of ₹ 11,49,410/-, (ii) the AO issued notice u/s 148 on 21.02.2012, (iii) the assessee filed an affidavit on 20.03.2013 offering ₹ 15,00,000/- to tax and (iv) the AO complete the assessment on 22.03.2013 making an addition of ₹ 15,00,000/- to the income shown by the assessee. The background as delineated hereinbefore is that during the course of search and seizure action u/s 132 conducted in the case of M/s Mahasagar Securities Pvt. Ltd., it was revealed that these were fraudulent transactions. This led the assessee-company to offer ₹ 15,00,000/- to tax by filing an affidavit before the AO on 20.03.2013. Therefore, the submission of the Ld. counsel of the assessee delineated at para 9 hereinbefore loses its significance. Where the assessee himself voluntarily concedes that a particular item of income had been concealed by him and surrenders such income for the purpose of assessment, there is nothing left for the Revenue to prove the factum of it being assessee s income and also the factum of it having been concealed by him. In such cases, such concession by the assessee may afford sound foundation for the imposition of penalty. To recapitulate, the AO issued the notice u/s 148 on 21.02.2012. The assessee-company filed an affidavit on 20.03.2013 offering ₹ 15,00,000/- to tax. The said affidavit filed by the assessee has not explained the manner in which the said income was earned and the reason, if any, for not offering the said income to tax in the original return filed or in response to the notice issued u/s 148. - Decided against assessee.
Issues Involved:
1. Legitimacy of the concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Validity of the notice issued under Section 274 read with Section 271 of the Income Tax Act, 1961. Detailed Analysis: 1. Legitimacy of the Concealment Penalty under Section 271(1)(c): The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] upholding the penalty of ?4,63,500/- levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed for concealment of income related to the assessment year 2008-09. The facts of the case reveal that during the assessment proceedings, it was discovered that the assessee had engaged in transactions with M/s Mahasagar Securities Pvt. Ltd., which was involved in fraudulent activities. The AO issued a notice under Section 148, and the assessee subsequently filed an affidavit admitting ?15,00,000/- as income to buy peace with the Department. The AO completed the assessment, adding ?15,00,000/- as unexplained cash credit under Section 68. The AO imposed the penalty on the grounds that the assessee did not disclose this income in the original return and only admitted it after the notice under Section 148 was issued. The CIT(A) upheld this penalty, referencing the Supreme Court's decision in Mak Data Pvt. Ltd. vs. CIT, which emphasized that voluntary disclosure to avoid litigation does not absolve the assessee from penalty. The Tribunal found that the assessee's admission of ?15,00,000/- as income was a clear indication of concealment. The Tribunal cited various precedents where voluntary concession by the assessee regarding concealed income justified the imposition of penalty. The Tribunal upheld the penalty, stating that the assessee's explanation lacked merit and did not provide genuine reasons for not disclosing the income initially. 2. Validity of the Notice Issued under Section 274 Read with Section 271: The assessee raised an additional ground challenging the validity of the notice issued under Section 274 read with Section 271, arguing that it was not clear whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal admitted this additional ground, considering it a legal issue that goes to the root of the case. The Tribunal examined the assessment order and found that the AO had initiated penalty proceedings for furnishing inaccurate particulars of income. The Tribunal referenced the Supreme Court's decision in Mak Data Pvt. Ltd., which held that the AO is not required to record satisfaction in a particular manner. The Tribunal also cited the Bombay High Court's decision in CIT vs. Smt. Kaushalya, which stated that a mistake in the notice's language does not invalidate penalty proceedings if the assessee is aware of the charges and given an opportunity to be heard. The Tribunal dismissed the additional ground, concluding that the notice's language did not prejudice the assessee's right to a fair hearing. The Tribunal found that the assessee was fully aware of the charges and had the opportunity to respond. Conclusion: The Tribunal upheld the penalty of ?4,63,500/- under Section 271(1)(c) for concealment of income, finding the assessee's explanations unconvincing and the additional ground regarding the notice's validity without merit. The appeal was dismissed, affirming the CIT(A)'s order.
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