2017 (9) TMI 658 - AT - Income Tax

Penalty u/s 271(1)(c) - addition u/s 68 - voluntary surrender of income - Held that - The case of the assessee is squarely covered by the observations of the Hon ble Supreme Court in MAK data Pvt.Ltd. (2013 (11) TMI 14 - SUPREME COURT) wherein observed that the statute does not recognize defences like voluntary disclosure , buy peace , avoid litigation , amicable settlement etc. Thus, even voluntary surrender of income will not always necessarily rescue the assessee from the penalty provisions which are in the nature of remedy for loss of possible revenue. In the instant case, the surrender has been made later during the course of assessment proceedings after detection of untruthfulness of the version of the assessee. In these circumstances, the view adopted by the CIT(A) of favourable treatment to such assessee cannot be endorsed. We also notice that the penalty has been imposed for concealment of particulars of income which is consistent with the facts of the case. The assessee has not expressed its handicap anywhere before the lower authorities on the alleged vagueness of notice issued under s.274 r.w.s.271(1)(c) which prevented him in his response in any manner. The onus which lays upon the assessee to rebut the presumption of concealment under Explanation - 1 to s.271(1)(c) has not been discharged. Under the circumstances, the order of the CIT(A) is requires to be reversed and the penalty order of the AO requires to be upheld. - Decided in favour of revenue

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) on addition made under section 68 of the Income Tax Act, 1961 for Assessment Year 2008-09.

Analysis:
1. The Assessing Officer (AO) found discrepancies in an unsecured loan of ?43 lakhs obtained by the assessee from M/s.Sudarshan Enterprise during scrutiny assessment for AY 2008-09. The PAN data did not match, leading to a notice under section 133(6) to M/s.Sudarshan Enterprise. The enterprise denied the transaction, and the assessee eventually admitted the loan as unexplained income, claiming it was to avoid prolonged litigation. The AO made additions and imposed a penalty.

2. The Commissioner of Income Tax (Appeals) deleted the penalty, citing that the assessee agreed to the additions to avoid further litigation. The AO imposed the penalty within the time limit, but failed to specify the reason for penalty imposition, as per the notice and penalty order. The CIT(A) allowed the appeal based on the High Court judgment and the case of Sir Shadi Lal Sugar & General Mills Ltd.

3. The Revenue appealed to the Tribunal, with the assessee absent. The Revenue argued that the disclosure was not voluntary, referencing the case of MAK Data Pvt Ltd. vs. CIT. The Tribunal observed that the assessee's disclosure was not voluntary, as it was made under the fear of penalty or other proceedings. The Tribunal noted that the disclosure made during assessment proceedings after detection of untruthfulness does not qualify as voluntary. The Tribunal held that the penalty was imposed for concealment of income, and the onus to rebut the presumption of concealment was not discharged by the assessee.

4. The Tribunal reversed the CIT(A)'s decision, upholding the penalty imposed by the AO. The Tribunal emphasized that voluntary surrender of income does not always exempt the assessee from penalty provisions, especially when made after detection of untruthfulness. The Tribunal highlighted that the penalty was consistent with the facts of the case, and the assessee failed to express any handicap regarding the notice issued. The order of the CIT(A) was overturned, and the penalty order of the AO was upheld.

5. In conclusion, the Tribunal allowed the Revenue's appeal, emphasizing that the disclosure made by the assessee was not voluntary and did not absolve them from the penalty provisions under section 271(1)(c) of the Income Tax Act, 1961. The decision was pronounced on 06/09/2017.