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TMI Blog2012 (10) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,00,000/- on account of capital introduced in the name of Sh. Sohan Singh and Rs.10,00,000/- introduced in the name of Sh. Swarnjit Singh was added to the income, the assessee having failed to explain the source of said amount of Rs. 30,00,000/- introduced in cash in the name of aforesaid two partners. To a query by the AO vide ordersheet entry dated 12.3.2007, the assessee did not explain the source of aforesaid cash introduced in the name of partners and instead surrendered the amount to tax on 30-03-2007. Accordingly, the AO added the amount and initiated penalty proceedings u/s 271(1)(c) of the Income-tax Act ,1961[hereinafter referred to as the 'Act'] for concealment of particulars of income. The assessee did not file any appeal against the findings of the AO. Subsequently, in response to a show cause notice, the assessee replied vide letter dated 20.8.2009 filed on 17-09- 2007 as under:- "3. The most illustrative legal position in such cases is that when the returned and assessed income is NIL, and no tax liability is created despite several additions, penalty U/s 271(1)(c) is not impossible. 4.That as stated above, despite this, the income assessed is at NIL rather, allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil tax effect was concerned, it did not absolve from levy of penalty u/s 271(1)(c). The submission made on behalf of the assessee is misleading. The explanation-4of section 271(1)(c) defines the amount sought to be evaded. This included the concealment of income or furnishing inaccurate particulars of income which has the effect of reducing losses. The penalty can be levied for concealing income or furnishing inaccurate particulars of income in loss cases also where there is no tax. I hold that the assessee had concealed the income and he was caught by the A.O. I uphold the penalty of Rs.10,97,700/- levied on assessee u/s 271(1)(c) read with section 274." 4.. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A) The ld. AR on behalf of the assessee reiterated their submissions before the ld. CIT(A) while referring to Para 11 of the assessment order and further submitted that the assessee was doing the business of transportation and body building of vehicles and some amount was introduced by way of capital. To a query by the Bench, the ld. AR submitted that no explanation regarding source of cash introduced in the name of partners was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. 5.1 As is evident from the aforesaid cl. (c) of s. 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very nature of the assessment proceedings the ITO while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a posit ion to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. The opportunity of hearing given by the notice under sect ion 271(1)(c), obv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly the assessee miserably failed to discharge the onus laid down in this explanation. In such circumstances, we have no hesitation in upholding the levy of penalty. 5.4 We find that the legal posit ion is squarely covered by the decision of the Hon'ble Apex Court in K.P. Madhusudanan v. CIT [2001] 251 ITR 99,wherein, the Hon'ble Court affirmed the decision of the Kerala High Court in CIT v. K.P. Madhusudanan [2000] 246 ITR 218. Considering the effect of the addition of the Explanation to section 271(1) of the Act and the amendment to section 271(1)(c) of the Act by deletion of the word "deliberately", the Hon'ble Kerala High Court came to the conclusion that penalty was liable to be imposed in a case where the assessee could offer no acceptable explanation for the income not disclosed or the inaccurate particulars he had furnished in his return, had to be examined and if found unacceptable, penalty was liable to be imposed. The Hon'ble Kerala High Court observed as follows: "Section 271(1) (c) of the Income-tax Act, 1961, is attracted where, in the course of any proceedings under the Act, the Assessing Officer or the first appellate authority is satisfied that : (a) any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation appended to sect ion 271(1)(c). In case an explanation is offered, the Assessing Officer is to examine it and find out whether the assessee has been able to establish that there was no concealment. Held, that, in the case at hand, no explanation worth the name was offered by the assessee. The statement made by the assessee was to the effect that hand loans were obtained which were intended to be refunded immediately and, therefore, the entries were not made, but, later on, the arrangement did not work out. Therefore, the amount was offered for taxation. There was a clear admission that the entries were not made on the relevant dates. It was not a case where entries were made on the relevant dates and the source of money was omitted. The entries on the contrary were made on dates when there was sufficient cash balance. The intent ion to hide the actual state of affairs was clear. The explanation offered was fanciful and vague. The imposition of penalty was valid and the Tribunal erred in cancel ling it." 5.5 Hon'ble Supreme court in the case of K.P. Madhusudanan vs. CIT, 251 ITR 99(SC) while affirming the aforesaid view held that;- "We find it difficult to accept as cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated by the Hon'ble Supreme Court in their decision dated 29.9.2008 in the case of Union of India and others Vs. Dharmendra Textile Processors and others, in civil appeal nos.10289-10303 of 2003. Blameworthiness attached to the assessee with reference to the original return cannot be avoided by accepting the addition proposed by the AO after concealment was detected by the assessing authority. Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. The very word 'omission' connotes an intentional act. The factual position is the surrender was a veiled attempt to present a mitigating circumstance. That being the position, the surrender of concealed income does not constitute a mitigating circumstance and penalty has been rightly levied. This view is supported by decision in PC Joseph & Bros. vs. CIT, 158 CTR 104(Ker). 5.7 In the instant case, the assessee claimed before the AO and the ld. CIT(A) that there was no tax liability in their case and therefore, penalty could not be levied and relied upon decision of Hon'ble Apex Court in Pritpal Singh (supra). This submission of the assessee is contrary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also disclosed the income with regard to which no incriminating material was seized by the Department, the disclosure of the income with regard to which the Department has no incriminating material, is liable to be treated as voluntary. For example, if an assessee is having five accounts and the Department has incriminating material with regard to one of those accounts only, the disclosure of income relating to four accounts with regard to which the Department has no incriminating material, is voluntary, because it was made without any constraint or compulsion, even though the disclosure of the income relating to the account regarding which the Department has incriminating material, is liable to be treated as non voluntary." 5.8 From the said decision it is, thus, clear that voluntarily means out of free will without any compulsion. When the assessee concealed incriminating material in the form of transactions of cash in the name of two partners, surrender cannot held to be voluntarily. Hon'ble jurisdictional High Court in Jaswant Rai & Another vs. CBDT,133 ITR 19(Del.) held that the subsequent act of disclosure of an income would not make any difference and it cannot be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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