2021 (3) TMI 558 - AT - Income Tax

Penalty u/s. 271(1)(c) - surrender of income in survey proceedings - assessee argued for non-specific notice initiating the penalty - As submitted amount of 1.5 crore was declared during the course of survey and was offered for taxation to avoid litigation and to buy peace - HELD THAT - There was no ambiguity in the mind of the assessee either at the assessment stage or at the stage of imposition of penalty that the assessee had not disclosed the income of ₹ 1.5 crore in the return of income, despite surrendering ₹ 1,80,00,000/- during survey proceedings. The above said plea of non-specific notice was not raised by the assessee before the Commissioner (appeal). In our considered opinion the notice was issued to the assessee and the assessee had also filed the reply declaring the entire undisclosed amount in the return of income, as was surrendered on survey. The sum and substance of the submission was that the assessee was well aware of the charge against the assessee and the assessee was required to plead not only the plea of non-specific notice but is also required to raise the defense of prejudice caused to him on account of nonspecific notice. In our considered opinion the assessee has not raised the plea of non-specific notice before the lower authorities and have further not raised the plea of prejudice caused to him on account of non-specific notice. Nothing has been pleaded before us or before the lower authorities to prove the prejudice caused to the assessee on account of non-specific notice. In the light of the above we do not find any merit in the contention of the assessee and therefore the CO filed by the assessee is required to be dismissed as no prejudice had been caused to the assessee - charge against the assessee was known to the assessee and had filed the reply thereto setting up the plea of buying the peace and to curtail the litigation. However in the reply the assessee has not submitted that he was not aware of the charges for which the penalty notices were issued by the assessing officer. Surrendered income during the course of survey - Initial surrender made by the assessee on 25 July 2012 was on account of the recovery of loose papers, hard disk and other documents showing the undisclosed income and investment made by the assessee, his daughter and son. It was not voluntary but it was on account of the recovery of the said documents made during survey. Further, from the conduct of the assessee, it is clear that the surrender was lacking voluntariness. In our view the assessee was forced to disclose the income on account of survey and subsequent show cause notice issued by the assessing officer. In view of the above said we do not find any justification for the CIT(appeals) to delete the penalty . Hence the order passed by the CIT (appeals) is required to be annulled and the order of the assessing officer imposing the penalty is required to be confirmed. Accordingly we confirm the penalty imposed by the assessing officer. - Decided against assessee.

Issues Involved:
1. Justification of the CIT(A)'s order in deleting the penalty of ?70,00,000.
2. Whether the admission of additional income of ?1,80,00,000 was discernible from statements or impounded material.
3. Validity of penalty levied under section 271(1)(c) based on non-specific notice.

Detailed Analysis:

1. Justification of the CIT(A)'s Order in Deleting the Penalty:

The Revenue challenged the CIT(A)'s decision to delete the penalty of ?70,00,000, arguing that the CIT(A) ignored binding Supreme Court decisions. The Revenue contended that the statement given by the assessee was not voluntary but was made after being confronted with specific documents during the survey. The documents disclosed the escapement of income, and the Managing Director of the assessee accepted the undisclosed income in his statement. The CIT(A) was criticized for not considering the direct evidence and material found during the survey.

2. Admission of Additional Income:

The CIT(A) held that the admission of additional income of ?1,80,00,000 was not discernible from the statements or impounded material. The Assessing Officer (AO) had asked the assessee to explain the source of ?1.50 crores not shown in the assessment year 2013-14. The assessee offered this amount for taxation to avoid litigation and cooperate with the department, with the condition that no penal action be taken. The AO completed the assessment based on the assessee's reply and initiated penalty proceedings under section 271(1)(c).

3. Validity of Penalty Levied Under Section 271(1)(c):

The assessee argued that the penalty notices were non-specific regarding the charge of penalty, relying on decisions from the Karnataka High Court and the Supreme Court. The AO issued multiple notices to the assessee, stating that the assessee had concealed particulars of income or furnished inaccurate particulars. The assessee contended that the penalty was not leviable for income offered during assessment proceedings.

The Tribunal considered the rival contentions and material before it. It noted that the assessee had agreed to declare additional income during the survey, but this was not reflected in the return of income. The Tribunal found no merit in the assessee's contention of non-specific notice, as the assessee was aware of the charge and had filed a reply. The Tribunal referenced the Supreme Court's decision in Sudhir Kumar Singh, emphasizing that the assessee must prove prejudice caused by non-specific notice, which was not done in this case.

The Tribunal also addressed the CIT(A)'s reliance on certain judgments, distinguishing them from the present case. It highlighted that the Supreme Court in MAK Data held that voluntary disclosure does not absolve an assessee from penalty proceedings. The Tribunal concluded that the initial surrender of income by the assessee was not voluntary but was due to the recovery of incriminating documents during the survey. The subsequent conduct of the assessee further indicated a lack of voluntariness.

Conclusion:

The Tribunal annulled the CIT(A)'s order and confirmed the AO's imposition of penalty, finding that the penalty was justified based on the facts and circumstances of the case. The appeal filed by the Revenue was allowed, and the cross-objection filed by the assessee was dismissed.

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