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TMI Blog2012 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.9 lacs to the total income proposed by the AO. Even in response to SCN before levy of penalty, the assessee did not furnish any explanation whatsoever before the AO and thus, failed to discharge the onus laid down upon him in terms of explanation 1 to sec. 271(1)(c). Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. Order of penalty u/s 271(1)(c) is upheld - Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e period from 1.4.2005 to 31.3.2006,revealing total deposits of Rs.69,93,562-(Rs.42,24,821/- in cash and Rs.27,68,741/- by cheques). On the basis of details obtained from the bank, the AO asked the assessee to explain the source of the said deposits in the undisclosed bank account. In response, the assessee did not furnish any reply despite giving opportunity for hearing on 15.11.2008 and 20.11.2008. In response to another notice dated 12th December, 2008, seeking documentary evidence in support of aforesaid deposits, the assessee submitted that cash was deposited in the undisclosed account to the extent of Rs.41,65,521 besides cheques of Rs.27,86,558/- while withdrawals in cash were Rs.18,31,100 and by cheques Rs.49,85,000/-.The assessee claimed that he made profit of Rs.1,28,009/- (Rs.52,27,951 -Rs.50,99,942) from the business of bearings. Accordingly, initially a sum of Rs.1,30,000/- in lump sum was offered by assessee for taxation. However, the AO did not accept the said offer, the assessee having deposited cash before purchase of goods from some parties, which were not recorded in the books of the assessee. The assessee was having opening balance of Rs.73,093/- in bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO levied penalty of Rs.3,05,834/-@ 100% of the tax sought to be evaded on the aforesaid amount of Rs.9 lacs. 3. On appeal, the ld. CIT(A) upheld the levy of penalty, holding as under:- "3.3 It was only during the course of assessment proceedings, and after the Assessing Officer had confronted the appellant with the entries recorded in the unreported bank account leading to taxable income of Rs.Rs.9 lacs, that the appellant invoked pious intentions to safeguard the interest of revenue, purchase peace, avoid protracted litigation and maintain harmonious and good relations with the department and offered to have Rs.9 lacs taxed. 3.4 However, it is evident from the facts that the penalty was not levied on the basis of any surrender/offer made between the appellant and the Assessing Officer. It is an undisputed fact that the addition of Rs.9 lacs in the total income of the appellant was made by the Assessing Officer following the unearthing of the unreported bank account on the basis of specific information. Thus, the treatment by the Assessing Officer of Rs.9 lacs as taxable income was not a consequence of the appellant's surrender/offer of the sum, but the direct outcome of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Vs. Dharmendra Textile Processors (2008) (Supreme Court). Noting that the correct position in law regarding mens rea has been laid down in Chairman SEBI Vs. Shriram Mutual Fund (2006) 5 SCC 361 and not in Dilip Shroff their Lordships held: The Explanations appended to section 271(1)(c) entirely indicate the element of strick liability on the assessee for concealment or for giving inaccurate particulars of income while filing return. The judgment in Dilip N. Shroff's case (supra) had not considered the effect and relevance of section 276C. Object behind enactment of section 271(1)(c) read with the Explanations thereto indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C. 3.9 Therefore, in view of the facts and circumstances of the case, the action of the Assessing Officer in imposing penalty u/s 271(1)(c) is confirmed." 4. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see did not furnish any explanation whatsoever before the AO and thus, failed to discharge the onus laid down upon him in terms of explanation 1 to sec. 271(1)(c) of the Act. In nutshell, the assessee did not submit any explanation during the penalty proceedings, despite sufficient opportunity allowed. Before proceeding further, we may have a look at the relevant provisions of section 271(1)(c) of the Act, which read as under: "271.Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- ......................................................................................... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (iii) in the cases referred to in clause (c) , in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities." In W ebster's Dictionary, "inaccurate" has been defined as : "not accurate, not exact or correct; not according to truth; erroneous ; as an inaccurate statement, copy or transcript." 6.2 If the disclosure of facts is incorrect or false to the knowledge of the assessee and it is established, then such disclosure cannot take it out from the purview of the act of concealment of particulars or furnishing inaccurate particulars thereof for the purpose of levy of penalty. The penalty u/s 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In this context, Hon'ble Gujrat High Court in the case of AM Shah & Co. vs. CIT,238 ITR 415(Guj) observed that:- " there cannot be a straight jacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and inaccurate particulars of income may at times over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnish any explanation whatsoever before the AO and thus, failed to discharge the onus laid down upon him in terms of explanation 1 to sec. 271(1)(c) of the Act. In these circumstances, it does not lie in the mouth of the assessee that it was not concealing its income by furnishing inaccurate particulars thereof in the return filed originally. In the course of penalty proceedings , the assessee did not bring any material before the AO to rebut the inferences drawn by the AO in the course of assessment proceedings. In terms of provisions of sec. 271(1)(c) of the Act read with explanation 1 thereto and the judicial pronouncements in the case of B.A. Balasubramaniam & Bros. Co. v. CIT [1999] 157 CTR 556(SC), CIT v. B.A. Balasubramaniam & Bros. [1984] 40 CTR (Mad.)/[1985] 152 ITR 529 (Mad.) , CIT v. Mussadilal Ram Bharose [1987] 60 CTR (SC) 34/[ 1987] 165 ITR 14 (SC); TC 50 R. 474; CIT v. K.R. Sadayappan [1990] 86 CTR (SC) 120; [1990] 185 ITR 49 (SC); TC 50 R. 795, Addl. CIT v. Jeevan Lal Sah [1994] 117 CTR (SC) 130; [1994] 205 ITR 244 (SC); TC 50 R. 973 and K.P.Madhusudanan vs. CIT,251 ITR 99(SC), it is well established that whenever there is difference between the returned and assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has concealed the particulars of his income; or (b) has furnished inaccurate particulars of such income. The expressions 'has concealed' and 'has furnished inaccurate particulars' have not been defined either in the section or elsewhere in the Act. However, notwithstanding differences in the two circumstances, they lead to the same effect, viz., keeping off a certain portion of income. The former is direct while the latter may be indirect in its execution. A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanations makes it clear that the statute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation (both after 1964 and 1976) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was clear. The explanation offered was fanciful and vague. The imposition of penalty was valid and the Tribunal erred in cancelling it." 6.5 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 correct the two judgments aforementioned. The Explanation to section 271(1)(c) is a part of section 271. When the Income-tax Officer or the Appellate Assistant Commissioner issues to an assessee a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent. of the total income assessed under section 143 or 144 or 147, reduced to the extent therein provided, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted in order to safeguard the interest of revenue, purchase peace, avoid protracted litigation and maintain harmonious and good relations with the department. The maintenance of hidden and undisclosed bank account and undertaking transactions outside the books of accounts, does not support this explanation of the assessee . The assessment in this case was completed on 30.12.2008. The letter submitted before the AO on 29.12.2008 was filed only a day before while the AO confronted the details collected from bank much earlier .Apparently, only when the assessee was cornered , the assessee accepted the proposal of the AO, adding the amount of Rs.9 lacs. We are of the opinion that the surrender was not at all voluntary. Here ,we may have a look at the meaning of word 'Voluntary.' The meaning of word "Voluntarily" has been deliberated upon by the Hon'ble Allahabad High Court in the case of CIT vs. Shri Rakesh Suri reported in 2010-TIOL-357-HC-ALL-IT as under:- "41. A Full Bench of the Allahabad High Court in the case reported in (1998) 230 ITR 855:Bhairav Lal Verma Versus Union of India, while interpreting the word Rs.voluntarily' given in Section 273(A) of the Act held that voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luntarily, adv. Intentionally; without coercion. Voluntary, Adj.
1. Done by design or intention voluntary act.
2. Unconstrained by interference; not impelled by outside influence X X X X Extracts X X X X X X X X Extracts X X X X ..... cts in another decision in D & H Secheron Electrodes Limited.(supra) relied upon by the ld. AR, were altogether different. In the said case, the assessee claimed expenses under various heads, like sales promotion, lease rent, bad debts, entertainment expenses, etc. The AO was of the view that the expenses claimed by the assessee were on the higher side. During the course of assessment proceedings vide letter dt. 2nd Jan., 1994 it was stated by the assessee that though all the expenses and purchases, etc. are genuine, fully vouched and are fully allowable but in order to avoid protracted litigation with the Department, and to purchase peace an additional income of Rs. 25 lacs was offered with the understanding that no penalty proceedings would be initiated. It is with reference to the above surrendered amount of Rs. 25 lacs that the AO imposed the impugned penalty. However, the CIT(A) and later Tribunal set it aside by holding that no case for penalty is made out on facts and that explanation offered by the assessee is acceptable. It was further held that in somewhat similar circumstances, the AO had imposed penalty for the asst. yr. 1991-92 and the same was set aside by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the later decision of the three judge Bench of the Supreme Court in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99." 7.1 In Aggarwal Pipe Co.(supra) relied upon by the ld. AR, cash credits in the books of account of the assessee, a registered firm were noticed. When confronted, though the assessee filed confirmation letters from the creditors, they were not produced. Summons under section 131 of the Act were also issued to one of the creditors but the same were received back unserved. The assessee surrendered all the cash credits. Accordingly, the amount so surrendered was added to the income of the assessee. On account of the said addition, penalty proceedings under section 271(1)(c) of the Act were initiated against the assessee. The explanation furnished by the assessee to the effect that the cash credits were surrendered on an understanding with the Department that no penalty under the said section will be levied was rejected by the Assessing Officer. He, accordingly, levied a minimum penalty of Rs.64,136 under the said section. On appeal by the assessee, the learned Commissioner of Income-tax (Appeals) deleted the said penalty. In these circumstances, Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his bank account were not recorded in the regular books of accounts of the assessee. 8. 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 that the assessee had not concealed particulars of their income or had not furnished inaccurate particulars of such income. 9.. A very heavy onus was placed on the assessee to explain the difference between the assessed income and returned income and the assessee did not discharge the said onus. In the light of the discussion made above and conduct of the assessee, it is thus clear that all the material facts and particulars relating to the assessee's computation of income were never disclosed by the assessee, and it is further clear that the assessee did not offer any explanation at all before the AO during the penalty proceedings. In these circumstances and in the light of decisions of the Hon'ble Supreme Court and jurisdictional High Court referred to above, we are of the opinion that the assessee has not been able to discharge the burden that lay upon them by Explanation 1 to s. 271(1)(c) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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