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TMI Blog2015 (1) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... ) For the Assessee : Pramod Y. Vaidya For the Revenue : Vinay Singh Rawat, DR ORDER P. K. Bansal (Accountant Member) 1. Since these appeals relate to common issue, they are disposed off by this common order. ITA Nos. 253 259/PNJ/2013 : 2. These cross appeals have been filed against the order of CIT(A) dt. 11.7.2013 for the A.Y 2006-07 by taking the following grounds of appeal : ITA No. 253/PNJ/2013 : 1. The learned CIT(A) erred in upholding penalty in respect of addition of ₹ 790,719/- being unexplained unsecured loans without appreciating the fact that the appellant accepted the addition in the spirit of settlement rather than concealment, all these unsecured loans are explainable. ITA No. 259/PNJ/2013 : 1. The order of the Learned Commissioner of Income Tax (Appeals) is opposed to law and facts of the case. 2. The Learned Commissioner of Income Tax (Appeals) has erred in deleting the penalty made in additions of ₹ 2,15,916/-, ₹ 14,09,286/-, ₹ 6,919/- and ₹ 4,11,512/- stating that the assessee has offered all the findings of disproportionate income for tax during the course of survey. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PNJ/2013 : 7. So far as the original ground taken by the Assessee is concerned, we noted that the ground taken by the Assessee is duly covered in favour of the Revenue by the decision of the Hon'ble Supreme Court in MAK Data P. Ltd. vs. CIT, 358 ITR 593 (SC) wherein the Hon'ble Supreme Court has held as under : Voluntary disclosure does not release the assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. The Assessing Officer should not be carried away by the plea of the assessee such as voluntary disclosure , buy peace , avoid litigation , amicable settlement , to explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. We, therefore, dismiss the said ground. 8. Now, coming to the additional ground which survives for our adjudication, we heard the rival submissions and carefully considered the same. We noted that the Assessee is proprietor of M/s. S.M.B. Enterprises engaged in the business of supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 7,90,719/- introduced during the previous year relevant to the assessment year under consideration. Similarly, it was found that the assessee had debited bogus expenditure to the Profit Loss Account, which he was not able to prove as genuine expenditure. Hence, he offered the same for taxation. The assessee s contention that he has voluntarily declared additional income, is not acceptable as the additional income has been offered by the assessee only after survey which is one of the mode of investigation. Secondly, if the assessee had no intention to conceal the income and evade tax on the same he should have immediately after survey filed revised return of income declaring additional income offered at the time survey. Even in response to notice u/s 148, he has not filed return of income declaring the additional income offered at the time of survey. Thus, it is clear that the additional income assessed to tax is only on account of survey and scrutiny of the case. Even during the course of present proceeding, the assessee has not proved that he has not concealed the particulars of income and furnished inaccurate particulars of income. 4. It is clear from the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for initiation of penalty proceedings u/s 271(1)(c) as the AO has not uttered anything in the assessment order in this regard. The action of the AO, in our opinion, is totally illegal and does not meet the requirement of Sec. 271(1)(c) even after the amendment made by the Finance Act, 2008. In the case of Ms. Madhushree Gupta British Airways Plc vs. Union of India, 317 ITR 107 (Del), the scope of amendment was explained by the Hon'ble Delhi High Court as under : In our opinion, the impugned provision only provides that an order initiating penalty cannot be declared bad in law because it states the penalty proceedings are initiated, if otherwise it is discernible from record that the AO has arrived at prima facie satisfaction for initiation of penalty proceedings. The issue is of discernibility of the satisfaction arrived at by the AO during the course of proceeding before him. The presence of prima facie satisfaction for initiation of penalty proceedings was and remains a jurisdictional fact which cannot be wished away as the provision stands even today, i.e. post amendment. If there is no material to initiate penalty proceedings; an assessee will be entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition as it is mandatory and automatic. It does not state for what default penalty is levied Sec. 271(1) (c) (iii) is expressly clear that the penalty can be levied for concealment of particulars of income or furnishing of inaccurate particulars of income. It is the particulars of income which is the common subject matter of both the charges. The word conceal as per Webster s Dictionary means to hide, withdraw, or remove from observation; cover or keep from sight; to keep secret; to avoid disclosing or divulging. That means non disclosure of particulars of income. On the other hand, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to furnishing of inaccurate particulars of income. For example, in case of businessman, if a particular transaction of sale is not shown in the books, it would amount to concealment of particulars of income while sale is shown but at a lesser value, it would amount to furnishing of inaccurate particulars of income. 12. It is pertinent to note that thrust of the legislature is upon the particulars of income which are either concealed or furnished inaccurately by the assessee. Therefore, one must un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances would fall under the main provisions itself. In such cases, the burden is on the AO to establish the existence of the charge on the basis of material on record. 15. Explanation 1 to section 271(1) (c) states that the amount added or disallowed in computing the total income of the assessee shall be deemed to be the income in respect of which particulars have been concealed. This deeming provision is not absolute one but is rebuttable one. It only shifts the onus on the assessee. Explanation 1 refers to the two situations in which presumption of the concealment of the particulars of income is deemed. It is not applicable where the charge against the assessee is furnishing inaccurate particulars of the income. The first situation is where the assessee in respect of any fact material to the computation of his total income fails to offer an explanation or offers an explanation, which is found by the AO or the Commissioner to be false. The second situation is where the assessee in respect of any facts material to the computation of his total income offers an explanation, which, the assessee is not able to substantiate and also fails to prove that such explanation was bona fide o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and means rea are not essential ingredients for attracting the civil liability as is the case in the matter of prosecution u/s 276 of the Act. It has further been held in that case that mens rea is not an essential ingredient for imposing the penalty. The Hon ble Supreme Court in this case nowhere held that if the addition is made, penalty is automatic. Even in Union of India v. Dharmendra Textile Processors reported in (2008) 306 ITR 277 (SC), the Supreme Court has observed that the finding as to suppression or inaccurate particulars in the return are necessary for attracting the penal provision under section 271(1) (c) of the Income tax Act, 1961. This judgment does not overrule the Explanations appended to section 271(1) (c). It even held that the object behind the enactment of section 271(1) (c) read with Explanations 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. Thus, the ratio laid down in this judgment was confined to treating the wilful concealment is not essential for imposing the penalty u/s 271(1) (c) of the Act. Where an assessee genuinely makes a claim for a particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, SEBI v. Shriram Mutual Fund (2006) 5 SSC 361. In the said case, the Supreme Court held: - 27. The Explanation appended to section 271(1) (c) of the Income-tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroffs case (2007) 8 SCALE 304 (SC) has not considered the effect and relevance of section 276C of the Income Tax Act. The object behind the enactment of section 271(1) (c) read with the Explanations 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 as is the case in the matter of prosecution under section 276C of the Income-tax Act. 22. The aforesaid decision has taken note of in CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC). While considering the phrase concealment of particulars, the Apex Court referred to section 271 and held as follows: - 9. Therefore, it is obvious that it must be shown that the conditions under section 271 (1) (c) must exist before the penalty is imposed. There can be no dispute that everything would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The basic reason why decision in Dilip N Shroff v. Joint CIT was overruled by this Court in Union of India v. Dharmendra Textile Processors was that according to this Court the effect and difference between section 271(1) (c) and section 276C of the Act was lost sight of in the case of Dilip N Shroff v. Joint CIT. However, it must be pointed out that in Union of India v. Dharmendra Textile processors, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT, where the court explained the meaning of the terms conceal and inaccurate. It was only the ultimate inferencein Dilip N. Shroff v. Joint CIT to the effect that mens rea was an essential ingredient for the penalty under section 271(1) (c) that the decision in Dilip N. Shroff v. Joint CIT was overruled. 23. From the perusal of the aforesaid decisions, it is apparent the in none of the decision of Hon ble Supreme Court as relied by the AO, it has been held that the penalty u/s 271 (1) (c) is mandatory or automatic wherever the addition or disallowances are made by the AO. The assessing officer merely observed that the penalty is mandatory as he was fully aware of that no charge as specified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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