2016 (7) TMI 1049 - AT - Income Tax

Penalty u/s 271(l)(c) - undisclosed cash deposits - assessee argued that as sufficient surrender has been made by the assessee suo motu, the penalty proceedings initiated against him should be quashed - Held that - The surrender of income in case of the assessee was not voluntary as the offer of surrender was made in lieu of CIB information made available by the Assessing Officer during the assessment proceedings. It is noted that the assessee himself has contradicted his own submissions from the relevant pages relied upon by the Ld. D.R. filed in the compilation. The assessee has not maintained the books of accounts and considered all the transactions as required by the statute. That the assessee surrendered the income as he could not prove the transactions and its cash deposits. Had the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring the income including omission later during the course of assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. The Assessing Officer has categorically recorded the findings that he was satisfied that the assessee had concealed the true particulars of income and is liable for penalty proceedings u/s 271 read with Section 274 of the Act. Thus no illegality in the department s initiation of penalty proceedings in the instant case. We, therefore fully agree with the view taken by Ld. CIT(A) and uphold his decision. - Decided against assessee

Summary

Issues Involved:
1. Penalty on estimated basis on disclosed credit transactions.
2. Penalty on estimated basis on voluntarily surrendered bank account.
3. Penalty for mistake of professional.
4. Penalty on income calculated on estimated basis.

Detailed Analysis:

1. Penalty on Estimated Basis on Disclosed Credit Transactions:
The appellant challenged the penalty imposed on income calculated on an estimated basis from disclosed credit transactions in the books of accounts. The tribunal noted that during the assessment, discrepancies were found in the disclosures made by the assessee, leading to an agreement on estimating profits at 6% on an ad-hoc basis. The Assessing Officer (A.O.) initiated penalty proceedings under Section 271(1)(c) of the Act, concluding that the income had escaped assessment intentionally. The tribunal upheld the penalty, stating that the assessee's surrender was not voluntary but prompted by information unearthed during the assessment.

2. Penalty on Estimated Basis on Voluntarily Surrendered Bank Account:
The appellant argued that the surrendered bank account was not detected by the A.O. but was voluntarily disclosed, hence penalty under Section 271(1)(c) should not be levied. However, the tribunal observed that the surrender was made in response to the A.O.'s findings during the assessment proceedings. The tribunal concluded that the voluntary disclosure does not absolve the assessee from penalty, as the surrender was not genuinely voluntary but rather a result of the investigation.

3. Penalty for Mistake of Professional:
The appellant contended that the concealment penalty was due to an inadvertent mistake by the accountant, who failed to merge the income of M/s. Rock International in the Income Tax Return. The tribunal noted that the accountant's affidavit was discredited by the CIT(A) as not genuine. The tribunal emphasized the difference between ignorance and bona fide mistake, stating that the omission must be due to inadvertence and not willful omission. The tribunal found that the assessee failed to prove the bona fide nature of the mistake and upheld the penalty.

4. Penalty on Income Calculated on Estimated Basis:
The appellant argued that the income was calculated on an estimated basis by applying a flat rate of 6% on total credit transactions, which included loans, advances, and cash withdrawals. The tribunal noted that the A.O. considered the total credit transactions as turnover and applied the flat rate of profit. The tribunal reiterated that voluntary disclosure does not relieve the assessee from penalty proceedings and that the surrender was not genuinely voluntary but made in response to the A.O.'s findings. The tribunal upheld the penalty, stating that the assessee failed to maintain accurate books of accounts and disclose true income.

Conclusion:
The tribunal dismissed the appeal, upholding the penalty imposed by the A.O. and confirmed by the CIT(A). The tribunal emphasized that voluntary disclosure prompted by investigation does not absolve the assessee from penalty and that the burden of proving bona fide mistakes lies with the assessee, which was not satisfactorily discharged in this case. The decision was pronounced in the open court on 16th June, 2016.