2008 (3) TMI 379 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of penalty levied u/s 271(1)(c).
2. Applicability of Explanation 5 to Section 271(1)(c).
3. Voluntariness of the assessee's disclosure of income.

Summary:

1. Confirmation of Penalty Levied u/s 271(1)(c):
The common issue raised by the assessee was that the CIT(A) erred in confirming the penalty levied u/s 271(1)(c). The brief facts reveal that a search was conducted on the premises of SRM Group of companies, leading to the discovery of undisclosed deposits by the assessee. The assessee paid taxes and filed returns after receiving summons from the Dy. Director of IT (Inv.). The AO initiated penalty proceedings u/s 271(1)(c) for the assessment years 2000-01 to 2004-05, which were confirmed by the CIT(A). The CIT(A) held that the returns filed under s. 153C were not voluntary and were filed only after the receipt of summons, indicating concealment of income.

2. Applicability of Explanation 5 to Section 271(1)(c):
The assessee contended that Explanation 5 to s. 271(1)(c) should apply, which provides relief from penalty if the assessee makes a statement during a search u/s 132 and pays the tax. However, the CIT(A) and the Tribunal held that Explanation 5 is applicable only in cases where a search u/s 132 has taken place. Since the assessee was not searched u/s 132 but was issued summons u/s 131(1), Explanation 5 could not be invoked. The Tribunal emphasized that fiscal statutes must be strictly construed, and there was no scope for assumptions or presumptions in applying Explanation 5.

3. Voluntariness of the Assessee's Disclosure of Income:
The Tribunal examined whether the assessee's disclosure of income was voluntary. It referred to case law, including the Karnataka High Court's decision in K.L. Swamy vs. CIT, which defined "voluntary" as an act done intentionally without coercion. The Tribunal concluded that the assessee's disclosure was not voluntary as it was made under the constraint of exposure to adverse action by the Department. The Tribunal also cited the Full Bench of the Allahabad High Court in Bhairav Lal Verma vs. Union of India, which held that disclosure made after the Department seized incriminating materials cannot be considered voluntary. Consequently, the Tribunal affirmed the orders of the authorities below and decided the issue in favor of the Revenue.

Conclusion:
The appeals by the assessee were dismissed, and the penalty levied u/s 271(1)(c) was confirmed. The Tribunal held that Explanation 5 to s. 271(1)(c) was not applicable as there was no search u/s 132, and the disclosure of income by the assessee was not voluntary.