2018 (12) TMI 330 - HC - Income Tax

Penalty u/s 271(1)(c) - penalty originally levied was 200%, which was reduced to 100% by the Appellate Tribunal - unexplained income - returns filed subsequent to the search - Failure on the part of the assessee to file the returns voluntarily - Held that - Admittedly there was unexplained income as discernible from the records maintained by the assessee revealed on search and subjected to seizure. Admittedly, there was no explanation offered by the assessee as to the non-filing of the income tax return. Under such circumstances, we are of the opinion that the returns filed subsequent to the search would not absolve the penal provisions under Section 271(1)(c). Failure on the part of the assessee to file the returns voluntarily, as statutorily prescribed, would be a culpable act or omission attracting penalty under Section 271(1)(c). It was only subsequent to the search that the assessee filed returns and this reveals the intention of the assessee to avoid payment of tax; if the search had not been taken out. There is also clear evidence of attempt to evade payment of tax on rental income, which is received by his wife for property belonging to him. The fact regarding the sale of the property in variance with the consideration mentioned in the agreement is also evidence of intention to evade payment of tax - Decided in favour of the Revenue and against the assessee

Summary

Issues:
1. Whether the appellate tribunal was justified in partly sustaining the order of the appellate authority?
2. Whether the appellate tribunal was justified in not waiving the penalty in full when the additional income was offered voluntarily?
3. Whether the appellate tribunal was justified in sustaining the order of the appellate authority to the extent of 100% of the penalty when the additional income was offered voluntarily?

Analysis:

Issue 1:
The case involved an NRI businessman appealing against the penalty levied under Section 271(1)(c) of the Income Tax Act for the assessment years 2001-02 to 2003-04. The Tribunal partially allowed the appeals by restricting the penalty to 100% of the tax on concealed income, which was originally directed to be paid at 200% by the Assessing Officer and affirmed by the Commissioner of Income Tax (Appeals).

Issue 2:
The appellant argued that the additional income declared was voluntary and not based on seized materials, thus not constituting concealment or furnishing inaccurate particulars. However, the Senior Standing Counsel contended that the search and seizure revealed the concealed income, and the appellant filed returns only after receiving notice under Section 153A, making him liable for penalty.

Issue 3:
Citing legal precedents, the Court emphasized that the failure to file returns voluntarily before the search constituted a culpable act attracting penalty under Section 271(1)(c). The intention to evade tax was evident from actions such as the variance in property sale consideration, non-disclosure of rental income, and delayed filing of returns. The Tribunal's decision to reduce the penalty to 100% was upheld, dismissing the appeals in favor of the Revenue.

In conclusion, the Court found no grounds to interfere with the Tribunal's decision and ruled in favor of the Revenue, upholding the penalty imposed on the appellant for concealed income.