2009 (8) TMI 128 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - addition u / s 68 for unproved cash credit - income not disclosed in the return - main contention advanced on behalf of the assessee is that penalty proceeding was initiated by invoking Expln. 5 to s. 271(1)(c) and, therefore, question has to be strictly examined in the light of above Explanation - HELD THAT - In our considered opinion, it was totally unnecessary on the facts of these cases for the AO to invoke (allegedly) Expln. 5 to s. 271(1)(c) as income not disclosed in the return u/s. 139 but detected subsequently and established to be assessee's income and assessed accordingly is concealed and fully covered by u/s. 271(1)(c). There was absolutely no need to try and bring the cases under Expln. 5 to the section. It has been referred by the AO out of abundant precaution to make clear to the assessee that subsequent disclosure of income u/s. 153C would not alter her default u/s. 271(1)(c) committed in returns filed u/s. 139 (before the search). Factual matrix is not in dispute. It is immaterial that above Explanation has been referred in the assessment order. On facts, application of s. 271(1)(c) is not affected. The proposition that assessee has an obligation to show correct income u/s. 139 and if it is not done. Revenue is entitled to invoke provision of s. 271(1)(c) notwithstanding that correct income is shown in response to notice u/s. 148 or in some other proceedings is well established and is beyond doubt. For the purpose of present proceeding, there is no material difference whether the returns were filed in response to notice u/s. 148 or u/s. 153C. The legal position on the issue is more than clear. The Hon'ble Allahabad High Court in the case of CIT vs. Ram Achal Ram Sewak 1974 (2) TMI 12 - ALLAHABAD HIGH COURT held that the relevant return for the purposes of s. 271 is the original return filed by the assessee, and not the return filed subsequent thereto. We are of the view that these are fit cases where penalties u/s. 271(1)(c) have been rightly imposed on the assessee. Levy of penalty is hereby confirmed. Appeals of the assessee are dismissed.

Issues Involved:
1. Legality of penalty under section 271(1)(c) of the IT Act.
2. Applicability of Explanation 5 to section 271(1)(c).
3. Assessment of income under section 153C.
4. Voluntary disclosure of income by the assessee.
5. Procedural aspects of penalty imposition.

Issue-wise Detailed Analysis:

1. Legality of Penalty under Section 271(1)(c) of the IT Act:
The primary issue is whether the penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars was justified. The Tribunal confirmed the penalty, noting that the assessee's income was concealed in the original returns filed under section 139 and only disclosed in response to notices under section 153C. It was established that the deposits in the bank accounts, which were detected during the search, represented the assessee's income that was not disclosed initially. The Tribunal emphasized that the penalty provisions are to be strictly construed and upheld the penalty imposed by the AO and confirmed by the CIT(A).

2. Applicability of Explanation 5 to Section 271(1)(c):
The Tribunal dealt with the controversy regarding the invocation of Explanation 5 to section 271(1)(c). The assessee argued that Explanation 5 was not applicable as no search was conducted on the assessee or her premises. The Tribunal, however, noted that the main provision of section 271(1)(c) was sufficient to impose the penalty for the concealed income detected during the search. The Tribunal referred to various judicial precedents to support the view that the penalty can be imposed under the main provision without necessarily invoking Explanation 5.

3. Assessment of Income under Section 153C:
The assessment of income under section 153C was a critical aspect. The Tribunal observed that the additional income disclosed in the returns filed under section 153C was based on the credit entries in the bank accounts, which were not disclosed in the original returns. The Tribunal agreed with the CIT(A)'s finding that the assessee was liable for penalty under section 271(1)(c) for not disclosing the correct income in the original returns. The Tribunal noted that the sequence of events and the assessee's non-compliance with summons and notices indicated concealment of income.

4. Voluntary Disclosure of Income by the Assessee:
The assessee contended that the additional income was surrendered voluntarily to buy peace of mind and avoid litigation. The Tribunal rejected this argument, stating that there was no material on record to show that the entries in the bank accounts were not the assessee's income. The Tribunal emphasized that the disclosure of income in response to notices under section 153C was not voluntary but a result of the detection of concealed income during the search. The Tribunal concluded that the assessee's claim of voluntary disclosure was without substance.

5. Procedural Aspects of Penalty Imposition:
The Tribunal addressed the procedural aspects of penalty imposition, noting that the AO had recorded a clear finding of concealment of income and furnished inaccurate particulars in the assessment orders. The Tribunal referred to judicial precedents to support the view that the penalty provisions and explanations are integral parts of section 271(1)(c) and do not require explicit invocation in the notice. The Tribunal held that the penalty was validly imposed based on the facts and circumstances of the case, which clearly established concealment of income.

Conclusion:
The Tribunal dismissed the appeals of the assessee, confirming the penalties imposed under section 271(1)(c) for concealment of income. The Tribunal's decision was based on the clear facts of the case, the assessee's non-compliance with summons and notices, and the detection of concealed income during the search. The Tribunal upheld the view that the penalty provisions are to be strictly construed and applied based on the established facts, regardless of the invocation of specific explanations.

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