2009 (7) TMI 55 - HC - Income Tax

Penalty u/s 271(1)(c) surrender / admission by filling revised return - surrender has been accepted as such without making any further enquiries - the assessee concealed transactions in the bank account and when notice of re-assessment was issued finding no other way out the assessee surrendered income to avoid penal consequences. Held that in such a situation it could not be held as was held in the cases relied upon that the assessees wanted to buy peace of mind and there was no evidence of concealment which called for penalty. This is not a case where penalty has been imposed only because assessee disclosed higher income voluntarily but a case of clear concealment where the assessee having found no other way out was forced to surrender undisclosed income. Levy of penalty upheld.

Issues:
1. Justification of reversing penalty by the Tribunal against the first appellate authority's order.
2. Acceptance of revised return after detection of concealed income.
3. Ignoring established principles of law regarding surrender and concealment.
4. Perversity of the Tribunal's order.

Issue 1 - Tribunal's Reversal of Penalty:
The case involved the appeal against the order of the Income Tax Appellate Tribunal regarding the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961. The assessee had substantial transactions in a bank account that were not disclosed initially. The Assessing Officer initiated proceedings for re-assessment, and the assessee filed a revised return offering the undisclosed income, requesting no penalty or prosecution. The CIT(A) accepted the plea, relying on the Supreme Court judgment in CIT Vs. Suresh Chandra Mittal. However, the Tribunal reversed this view, emphasizing that even if income is surrendered in a revised return, the assessee must explain the initial non-disclosure. The Tribunal held that intentional concealment in the original return cannot be absolved by a revised return after detection by the authorities.

Issue 2 - Acceptance of Revised Return:
The Tribunal highlighted that the concealment of income in the original return, followed by surrender in a revised return after detection by the department, does not absolve the assessee from penalty. The Tribunal referenced the case of K.P. Madhusudhanan Vs. CIT and emphasized that surrendering income after detection of concealment does not constitute a voluntary disclosure. The Tribunal further noted that the revised return was not due to an inadvertent mistake, as the assessee failed to provide evidence to support this claim.

Issue 3 - Ignoring Established Principles:
The Tribunal rejected the argument that surrendering income in a revised return should automatically preclude penalty. Citing the case of Rajesh Chawala Vs. CIT, the Tribunal emphasized that surrendering income upon detection of concealment does not qualify as a bona fide voluntary disclosure. The Tribunal stressed that the penalty is imposed based on relevant material, and the mere act of surrendering income does not exempt the assessee from penalty if concealment is detected.

Issue 4 - Perversity of Tribunal's Order:
The appellant contended that the assessee had a plausible explanation and surrendered the income without further inquiry, thus justifying no penalty. However, the Tribunal dismissed this argument, stating that the concealment of transactions in the bank account led to the surrender of income to avoid penalties. The Tribunal emphasized that this was a case of clear concealment, not a voluntary disclosure, and the judgments cited by the appellant did not apply. Consequently, the Tribunal found no merit in the appellant's contentions and dismissed the appeal, stating that no substantial question of law arose.

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