2017 (3) TMI 900 - HC - Income Tax

Penalty under Section 271(1)(c) - apportionment of foreign exchange fluctuation loss between the Tonnage Income and Non Tonnage Income while filing the return of income for A. Y. 2007-08 - whether socalled voluntary disclosure was not voluntary? - Held that - The so-called mistake as claimed by the assesssee, was only after notices dated 14th January, 2009 were issued under Sections 142 and 143 of the Act. It was only an attempt to preempt the Revenue finding out the the appellant had furnished inaccurate particulars. Therefore, it cannot be said that it was voluntary disclosure. In fact, the Apex Court in MAK Data (P) Ltd., (2013 (11) TMI 14 - SUPREME COURT ) has held that voluntary disclosure itself does not release the assessee from penal consequences. In the peculiar fact of the present case, the socalled voluntary disclosure was only after the Assessing Officer initiated proceedings under Section 142 of the Act. Thus, it was not a voluntary disclosure. In fact, the Assessment Order dated 24th December, 2009 under Section 143(3) of the Act also records the fact of verification by the Assessing Officer, leading to a finding that the appellant-assessee had debited foreign exchange loss to arrive its non-tonnage income. This order was accepted and no grievance in respect of the same being found by the Assessing Officer, was made by the appellant-assessee. It is only in penalty proceedings that this issue is raised for the first time. Further, the appellant-assessee besides stating it is a mistake, has not offered any explanation. Therefore, the explanation under Section 271(1)(c) of the Act was not found to be satisfactory by the authorities under the Act and penalty imposed and sustained. - Decided against assessee

Summary

Issues:
- Challenge to order imposing penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2007-08.

Analysis:
1. The appellant, engaged in shipping business, classified income as tonnage and non-tonnage business. Foreign exchange loss of ?9.37 lakhs was incorrectly debited to non-tonnage income. Assessing Officer added this loss to taxable income, initiating penalty proceedings under Section 271(1)(c) of the Act.

2. Penalty of ?3.09 lakhs was imposed by the Assessing Officer, upheld by CIT(A) and Tribunal. CIT(A) found deliberate attempt to furnish inaccurate particulars. Tribunal rejected appellant's claim of mistake in debiting foreign exchange loss, citing lack of satisfactory explanation and reliance on Apex Court's decision regarding voluntary disclosure not absolving from penal consequences.

3. Appellant argued it voluntarily disclosed the mistake during penalty proceedings, citing an affidavit ignored by authorities. Claimed debiting loss was a mistake and relied on an Apex Court decision that mistakes by assessee cannot lead to penalty imposition. However, the alleged mistake was only admitted after receiving notices under Sections 142 and 143 of the Act, not constituting voluntary disclosure.

4. The Tribunal, CIT(A), and Assessing Officer found the disclosure not voluntary but a response to notices, leading to penalty imposition. The decision cited by the appellant was deemed inapplicable as no authority classified the debiting of loss as a mistake or computation error after complete disclosure. The finding of fact regarding the lack of voluntary disclosure was upheld, dismissing the appeal without costs.