2008 (1) TMI 470 - AT - Income Tax

Penalty imposed under s. 271(1)(c) - Surrender the amount voluntary considered as concealment of income and furnishing wrong statement? - onus to prove - HELD THAT - In our view the onus was on the Department to prove that the assessee had concealed his particulars of income and furnished wrong statement and burden shifts to the assessee only if the assessee fails to offer any explanation for the undisclosed income or offers an explanation which is found to be false by the AO. In the instant case there is no discussion in the assessment order or penalty order that the assessee had concealed the particulars of income and furnished wrong statement with mala fide intention to evade tax or the explanation given by the assessee was not bona fide or false. Thus it is not a fit case for imposition of penalty because the concealment of income and furnishing wrong statement are not found to be established from the material on record and there is no material on record to prove that the assessee had concealed his income and furnished wrong statement. We may also add here that the surrender made by the assessee was voluntary and the Department failed to detect any concealment of income. Thus the penalty levied by the AO and confirmed by the CIT(A) is not sustainable in law and therefore we cancel the same. In the result the appeal is allowed.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Voluntary surrender of income and its implications on penalty.
3. Burden of proof for concealment of income and furnishing of inaccurate particulars.
4. Validity and timeliness of revised returns under Section 139(5) of the IT Act, 1961.
5. Bona fide intention and voluntary disclosure in penalty proceedings.

Issue-wise Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the IT Act, 1961:
The primary issue revolves around the penalty of Rs. 6,31,800 imposed under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The Assessing Officer (AO) argued that the assessee concealed income by not declaring Rs. 17,50,000 and Rs. 50,000 in the original return, which was later surrendered. The CIT(A) confirmed the penalty, stating that the assessee had concealed particulars of income in the original return and disclosed them only after the time prescribed under Section 139(5) had expired.

2. Voluntary Surrender of Income and Its Implications on Penalty:
The assessee contended that the income was surrendered voluntarily to avoid litigation and to buy peace. The AO, however, noted that the surrender was not voluntary but prompted by the detection of a bogus gift racket by the Investigation Wing. The Tribunal found that there was no investigation against the assessee at the time of surrender, indicating that the surrender was indeed voluntary. The Tribunal cited several cases, including Smt. Sunita Tuli vs. ITO, where voluntary surrender without detection by the department was not considered concealment.

3. Burden of Proof for Concealment of Income and Furnishing of Inaccurate Particulars:
The Tribunal emphasized that the burden of proof lies with the Department to establish that the assessee concealed income or furnished inaccurate particulars. The Department must prove that the explanation offered by the assessee is false or not bona fide. In this case, the AO failed to provide material evidence to prove that the surrendered amounts were concealed income. The Tribunal referenced the case of CIT vs. Suresh Chandra Mittal, where the Supreme Court held that the Department must establish concealment with authentic evidence.

4. Validity and Timeliness of Revised Returns under Section 139(5) of the IT Act, 1961:
The AO argued that the revised return filed on 24th Dec., 2003, was not valid under Section 139(5) as it was barred by limitation. The Tribunal noted that the revised return was filed voluntarily, and there was no material evidence to show that the credits were concealed income. The Tribunal held that the Department's argument on the invalidity of the revised return did not justify the imposition of penalty.

5. Bona Fide Intention and Voluntary Disclosure in Penalty Proceedings:
The assessee argued that the surrender was made with bona fide intention to avoid litigation and to cooperate with the Department. The Tribunal agreed, stating that the surrender was voluntary and done in good faith. The Tribunal highlighted that there was no evidence of contumacious conduct or mala fide intention on the part of the assessee. The Tribunal referenced several cases, including CIT vs. M.P. Narayanan, where it was held that mere inability to prove the source of income does not justify the imposition of penalty if the surrender was made voluntarily and in good faith.

Conclusion:
The Tribunal concluded that the Department failed to prove that the assessee had concealed income or furnished inaccurate particulars. The voluntary surrender of income by the assessee was not prompted by any detection or investigation by the Department. Therefore, the penalty imposed under Section 271(1)(c) was not sustainable. The appeal was allowed, and the penalty was canceled.

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