2016 (3) TMI 448 - AT - Income Tax

Penalty u/s 271(1)(c ) - income offered by the assessee in the revised return by treating it as unexplained - Held that - The entirety of the facts reveals the facts narrated above reveals that the assessee s entire defense qua penalty is to the effect that he filed the revised return voluntarily. The statement of the assessee is to be examined in the back drop of the facts, human conduct and preponderance of probabilities; not on mere assessee s assertion. It is not disputed that search in the case of B.C. Purohit Group (Tax Consultant) having office at Jaipur and Kolkata was undertaken on 12-04-2005. The news of the massive search operations on this Group engaged in network of black money operators must have spread like a wildfire in the hawala circles. In reply filed by the assessee, the knowledge about search on B.C. Purohit Group (Tax Consultant) had not been denied. In these circumstances, it cannot be assumed that assessee became Saint by sheer dawn of wisdom and filed revised return voluntarily. I find merit in the arguments of the ld. DR that revised return as contemplated by Section 139(5) of the Act is to correct any omission or wrong statement in the computation of income and not to correct tax evasion. These provisions did not give any immunity from any bogus transactions declared in the original return. The interpretation given by the assessee to the claim of revised return is not tenable and not in accordance with law. The Hon ble Apex Court in the case of Union of India and Others vs. Dharmendra Textiles Processors and Others (2008 (9) TMI 52 - SUPREME COURT ) has clearly held that penalty is a civil liability and there is no onus on the Department to prove mensrea on the part of the assessee. The facts of the case as examined in the case of Sumati Dayal vs CIT (1995 (3) TMI 3 - SUPREME Court) i.e. after taking into consideration the human conduct and preponderance of probability clearly indicate that the assessee became a willing party to nefarious black money racket for obtaining bogus gifts. Such acts cannot be taken lightly as they lead to scourge of black money in the country. Thus in view of the foregoing, the penalty order of the ld. CIT(A) is confirmed. - Decided against assessee

Summary

Issues:
Confirmation of penalty u/s 271(1)(c) on income offered in revised return treated as unexplained.

Analysis:
1. The assessee filed a revised return declaring income of Rs. 1,86,000 after a search operation revealed the receipt of bogus gifts. The Assessing Officer (AO) initiated penalty proceedings u/s 271(1)(c) considering the revised return as an attempt to cover up tax evasion. The AO imposed the penalty, stating that inaccurate particulars of income were furnished.

2. The first appellate authority confirmed the penalty, emphasizing that the revised return became non-est after the search operation. The authority held that the AO rightly discussed the revised return in the assessment order but did not take cognizance of it, justifying the penalty on concealed income.

3. The assessee contended before the ITAT that the revised return was filed voluntarily before the notice u/s 148, and since the income was already offered to tax, no penalty should be imposed. The assessee relied on case law to support the argument that the revised return was valid and voluntary.

4. The Department contended that the revised return was an attempt to cover up tax evasion, not a valid revision, as the search operation's knowledge was well-known to the assessee. The Department argued that the case laws cited by the assessee were factually different and not applicable to the current scenario.

5. The ITAT considered the facts, human conduct, and preponderance of probabilities. It noted that the search operation on the black money racket group was widely known, indicating that the revised return was not voluntary. The ITAT agreed with the Department that the revised return was not to correct tax evasion but to address bogus transactions, leading to the confirmation of the penalty.

6. The ITAT cited legal precedents to support its decision that penalty imposition does not require proving mens rea on the part of the assessee. Considering the gravity of involvement in a black money racket, the ITAT upheld the penalty, dismissing the appeal of the assessee.

7. Ultimately, the ITAT confirmed the penalty imposed by the AO and upheld by the first appellate authority, dismissing the appeal of the assessee.