2014 (10) TMI 491 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Income from commission received from various shoe traders and interest on loans Held that - Following the decision in Vijay Kumar Gupta vs. ITO 2014 (3) TMI 175 - ITAT AGRA - it is clear case of concealment of income because the assessee has concealed the bank account maintained with ICICI Bank Ltd. from the Revenue department - It is the net profit rate which has to be adopted in such cases - As regards the legal proposition that sales cannot be regarded as profit of the assessee and net profit rate has to be applied, there is no quarrel with the same, but the same proposition would not apply to the facts and circumstances of the case - The assessee admittedly accepted the order of the AO in maintaining the addition because no appeal was preferred before any authority against the said addition - The assessee, therefore, admitted that he has earned unaccounted income from undisclosed business - Therefore, in the penalty proceedings, finding of fact recorded by the AO which have reached finality cannot be disturbed. The AO issued several statutory notices calling for the explanation of the assessee, but no reply was filed - the AO was already having information with him through AIR information and the details called for u/s. 133(6) of the IT Act that the assessee has maintained two unaccounted bank accounts with ING Vaishya Bank Ltd. The assessee did not explain source of entries in the same bank accounts and statutory notices remained un-complied and it is only on 17.09.2009 just prior to completion of assessment, the assessee s counsel replied that earlier no compliance could be made on account of slackness of the counsel to whom notice was handed over and the details of bank account could not be obtained - The assessee in the same reply surrendered as additional income on account of peak credit in these bank accounts - The assessee also filed revised income computation chart and requested the AO that the return filed originally may be treated as revised accordingly - The course of action adopted by the assessee is not permissible under law - There is no provision under law to file revised income computation chart without actual filing of revised return of income within the period of limitation in accordance with law - the AO has correctly levied penalty against the assessee - Since no explanation, whatsoever, was filed at the assessment stage as well as at the penalty stage, therefore, levy of penalty u/s. 271(1)(c) is wholly justified The concept of reasonable cause or exception as contended by the assessee has no applicability to the penalty proceedings u/s. 271(1)(c) of the IT Act - Decided against assessee.

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the IT Act.
2. Voluntary surrender of income and its implications.
3. Specific findings required for imposing penalty.
4. Applicability of legal precedents in penalty cases.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the IT Act:
The appeal concerns the levy of penalty under section 271(1)(c) for the assessment year 2007-08. The assessee filed a return declaring an income of Rs. 1,08,400/-. During scrutiny, the AO found substantial cash deposits in the assessee's bank accounts, which were not accounted for in the return. The AO added Rs. 2,05,070/- to the income and initiated penalty proceedings for concealment of income. The AO imposed a minimum penalty of Rs. 44,050/- after the assessee failed to respond to show cause notices.

2. Voluntary Surrender of Income and Its Implications:
The assessee contended that no penalty should be imposed as the additional income of Rs. 2,05,070/- was voluntarily surrendered. However, the CIT(A) dismissed this argument, noting that the surrender was made only after the case was selected for scrutiny and the department had already identified the unaccounted transactions. The Tribunal upheld this view, referencing the case of Vijay Kumar Gupta vs. ITO, where it was held that surrendering income after being cornered by the AO does not constitute voluntary disclosure.

3. Specific Findings Required for Imposing Penalty:
The assessee argued that the AO did not specify whether the penalty was for concealment of income or for filing inaccurate particulars. The Tribunal found that the AO had clearly indicated in both the assessment and penalty orders that the penalty was for concealment of income. The Tribunal referenced several legal precedents, including the Hon'ble Supreme Court's decision in Mak Data P. Ltd. vs. CIT, which held that there is no automatic immunity from penalty on voluntary surrender of income.

4. Applicability of Legal Precedents in Penalty Cases:
The Tribunal cited various judgments to support the imposition of penalty. For instance, in Jyoti Laxman Konkar vs. CIT, the Bombay High Court upheld a penalty where the assessee revised the return only after discrepancies were found during a survey. Similarly, in CIT vs. Rakesh Suri, the Allahabad High Court held that the assessee's disclosure was not voluntary but made under compulsion. The Tribunal also referred to LMP Precision Engg. Co. Ltd. vs. DCIT, where the Gujarat High Court upheld penalties for disclosures made after the department had already initiated inquiries.

Conclusion:
The Tribunal concluded that the assessee's actions constituted concealment of income. The AO's findings were upheld, and the penalty was deemed justified. However, the Tribunal modified the penalty from 200% to the minimum rate of 100%, amounting to Rs. 2,32,058/-, considering the facts and circumstances. The appeal of the assessee was dismissed on merits, but the penalty was reduced to the minimum statutory limit.