Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found difference between the reported and assessed income - No separate reasons not necessary to record whether to intiate proceedings or not - but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden shift on the Ao then he has to given reasons for imposing penalty =
whether the penalty proceedings be initiated or
not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. =
whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. = Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. - The burden is then on the assessee to show otherwise, by cogent and reliable
evidence. =
The department initiated penalty proceedings for concealment of
income and not furnishing true particulars of its income under Section
271(1)(c) of the Income Tax Act.
During the course of the hearing, the
assessee contended that penalty proceedings are not maintainable on the
ground that the AO had not recorded his satisfaction to the effect that there has been concealment of income/furnishing of inaccurate particulars of income by the assessee and that the surrender of income was a
conditional surrender before any investigation in the matter.
The AO did
not accept those contentions and imposed a penalty of Rs.14,61,547/- under Section 217(1)(c) of the Act.
the scope of Explanation 1 to Section 271(1)(c) of the Act,
which reads as follows :-
“Explanation 1 – Where in respect of any facts material to the
computation of the total income of any person under this Act, --
A) Such person fails to offer an explanation or offers an explanation
which is found by the Assessing Officer or the Commissioner
(Appeals) or the Commissioner 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 bona fide
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.”
7. The AO, in our view, shall not be carried away by the plea of the
assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”,
“amicable settlement”, etc. 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.
Explanation to Section 271(1) raises a presumption of concealment, when a
difference is noticed by the AO, between reported and assessed income. The
burden is then on the assessee to show otherwise, by cogent and reliable
evidence. When the initial onus placed by the explanation, has been
discharged by him, the onus shifts on the Revenue to show that the amount
in question constituted the income and not otherwise.
Statute does not
recognize those types of defences under the explanation 1 to Section
271(1)(c) of the Act.
It is trite law that the voluntary disclosure does
not release the Appellant-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 had to be absolved from penalty.
It is the statutory duty of the assessee to record all its
transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year.
The AO, in our view, has recorded a categorical
finding that he was satisfied that the assessee had concealed true
particulars of income and is liable for penalty proceedings under Section
271 read with Section 274 of the Income Tax Act, 1961.
10. The AO has to satisfy
whether the penalty proceedings be initiated or
not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing.
The scope of Section 271(1)(c) has also been elaborately
discussed by this Court in Union of India vs. Dharmendra Textile Processors
(2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.
11. The principle laid down by this Court, in our view, has been
correctly followed by the Revenue and we find no illegality in the
department initiating penalty proceedings in the instant case.
We,
therefore, fully agree with the view of the High Court. Hence, the appeal
lacks merit and is dismissed.
There shall be no order as to costs.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9772 OF 2013
(Arising out of Special Leave Petition (Civil) No.18389 of 2013)
MAK Data P. Ltd. … Appellant
Versus
Commissioner of Income Tax-II … Respondent
J U D G M E N T
K.S. Radhakrishnan, J.
1. Leave granted.
2. The Appellant-assessee filed his return of income for the assessment
year 2004-05 on 27th October, 2004, declaring an income of Rs.16,17,040/-
along with Tax Audit Report.
The case was selected for scrutiny and
notices were issued under Sections 143(2) and 142(1) of the Income Tax Act.
During the course of the assessment proceedings,
it was noticed by the
Assessing Officer (AO) that
certain documents comprising of
share application forms,
bank statements,
memorandum of association of companies,
affidavits, copies of Income Tax Returns and assessment orders and
blank share transfer deeds duly signed had been impounded.
These documents had been found in the course of survey proceedings under Section 133A conducted
on 16.12.2003 in the case of M/s Marketing Services (a sister concern of the assessee).
The AO then proceeded to seek information from the assessee
and issued a show-cause notice dated 26.10.2006.
By the show-cause notice,
the AO sought specific information regarding the documents pertaining to
share applications found in the course of survey, particularly, bank
transfer deeds signed by persons, who had applied for the shares.
Reply to
show-cause notice was filed on 22.11.2006, in which the assessee made an offer to surrender a sum of Rs.40.74 lakhs with a view to avoid litigation and buy peace and to make an amicable settlement of the dispute.
Following are the words used by the assessee:-
“The offer of surrender is by way of voluntary disclosure of without admitting any concealment whatsoever or with any intention to conceal and subject to non-initiation of penalty proceedings and prosecution.”
3. The AO after verifying the details and calculations of the share
application money accepted by the Company completed the assessment on
29.12.2006 and a sum of Rs.40,74,000/- was brought to tax, as “income from other sources” and the total income was assessed at Rs.57,56,700/-.
4. The department initiated penalty proceedings for concealment of
income and not furnishing true particulars of its income under Section
271(1)(c) of the Income Tax Act.
During the course of the hearing, the
assessee contended that penalty proceedings are not maintainable on the
ground that the AO had not recorded his satisfaction to the effect that there has been concealment of income/furnishing of inaccurate particulars of income by the assessee and that the surrender of income was a conditional surrender before any investigation in the matter.
The AO did
not accept those contentions and imposed a penalty of Rs.14,61,547/- under Section 217(1)(c) of the Act.
The assessee challenged that order before
the Commissioner of Income Tax (Appeals) by filing Appeal No.2/07-08, which
was dismissed vide order dated 17.2.2010.
The assessee filed an appeal
being ITA No.1896/Del/10 before the Income Tax Appellate Tribunal, Delhi.
The Tribunal recorded the following findings :-
“The assessee’s letter dated 22.11.2006 clearly mentions that “the
offer of the surrender is without admitting any concealment whatsoever
or any intention to conceal.”
The Tribunal took the view that the amount of Rs.40,74,000/- was surrendered to settle the dispute with the department and since the assessee, for one reason or the other, agreed or surrendered certain amounts for assessment, the imposition of penalty solely on the basis of assessee’s surrender could not be sustained. The Tribunal, therefore,
allowed the appeal and set aside the penalty order.
5. The Revenue took up the matter in appeal before the High Court by
filing ITA No.415 of 2012.
The High Court accepted the plea of the
Revenue that there was absolutely no explanation by the assessee for the
concealed income of Rs.40,74,000/-.
The High Court took the view that in
the absence of any explanation in respect of the surrendered income, the
first part of clause (A) of Explanation 1 is attracted. Holding so, the
judgment of the Tribunal was set aside and the appeal filed by the Revenue
was allowed.
6. We have heard counsel on either side. We fully concur with the view
of the High Court that the Tribunal has not properly understood or
appreciated
the scope of Explanation 1 to Section 271(1)(c) of the Act,
which reads as follows :-
“Explanation 1 – Where in respect of any facts material to the
computation of the total income of any person under this Act, --
A) Such person fails to offer an explanation or offers an explanation
which is found by the Assessing Officer or the Commissioner
(Appeals) or the Commissioner 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 bona fide
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.”
7. The AO, in our view, shall not be carried away by the plea of the
assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”,
“amicable settlement”, etc. 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.
Explanation to Section 271(1) raises a presumption of concealment, when a
difference is noticed by the AO, between reported and assessed income. The
burden is then on the assessee to show otherwise, by cogent and reliable
evidence. When the initial onus placed by the explanation, has been
discharged by him, the onus shifts on the Revenue to show that the amount
in question constituted the income and not otherwise.
8. Assessee has only stated that he had surrendered the additional sum
of Rs.40,74,000/- with a view to avoid litigation, buy peace and to
channelize the energy and resources towards productive work and to make
amicable settlement with the income tax department.
Statute does not
recognize those types of defences under the explanation 1 to Section
271(1)(c) of the Act.
It is trite law that the voluntary disclosure does
not release the Appellant-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 had to be absolved from penalty.
9. We are of the view that the surrender of income in this case is not
voluntary in the sense that the offer of surrender was made in view of
detection made by the AO in the search conducted in the sister concern of
the assessee. In that situation, it cannot be said that the surrender of
income was voluntary. AO during the course of assessment proceedings has
noticed that certain documents comprising of share application forms, bank
statements, memorandum of association of companies, affidavits, copies of
Income Tax Returns and assessment orders and blank share transfer deeds
duly signed, have been impounded in the course of survey proceedings under
Section 133A conducted on 16.12.2003, in the case of a sister concern of
the assessee. The survey was conducted more than 10 months before the
assessee filed its return of income. Had it been the intention of the
assessee to make full and true disclosure of its income, it would have
filed the return declaring an income inclusive of the amount which was
surrendered later during the course of the assessment proceedings.
Consequently, it is clear that the assessee had no intention to declare its
true income.
It is the statutory duty of the assessee to record all its
transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year.
The AO, in our view, has recorded a categorical
finding that he was satisfied that the assessee had concealed true
particulars of income and is liable for penalty proceedings under Section
271 read with Section 274 of the Income Tax Act, 1961.
10. The AO has to satisfy
whether the penalty proceedings be initiated or
not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing.
The scope of Section 271(1)(c) has also been elaborately
discussed by this Court in Union of India vs. Dharmendra Textile Processors
(2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.
11. The principle laid down by this Court, in our view, has been
correctly followed by the Revenue and we find no illegality in the
department initiating penalty proceedings in the instant case.
We,
therefore, fully agree with the view of the High Court. Hence, the appeal
lacks merit and is dismissed.
There shall be no order as to costs.
……..……………………..J.
(K.S. Radhakrishnan)
……………………………J.
(A.K. Sikri)
New Delhi,
October 30, 2013.
whether the penalty proceedings be initiated or
not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. =
whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. = Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. - The burden is then on the assessee to show otherwise, by cogent and reliable
evidence. =
The department initiated penalty proceedings for concealment of
income and not furnishing true particulars of its income under Section
271(1)(c) of the Income Tax Act.
During the course of the hearing, the
assessee contended that penalty proceedings are not maintainable on the
ground that the AO had not recorded his satisfaction to the effect that there has been concealment of income/furnishing of inaccurate particulars of income by the assessee and that the surrender of income was a
conditional surrender before any investigation in the matter.
The AO did
not accept those contentions and imposed a penalty of Rs.14,61,547/- under Section 217(1)(c) of the Act.
the scope of Explanation 1 to Section 271(1)(c) of the Act,
which reads as follows :-
“Explanation 1 – Where in respect of any facts material to the
computation of the total income of any person under this Act, --
A) Such person fails to offer an explanation or offers an explanation
which is found by the Assessing Officer or the Commissioner
(Appeals) or the Commissioner 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 bona fide
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.”
7. The AO, in our view, shall not be carried away by the plea of the
assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”,
“amicable settlement”, etc. 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.
Explanation to Section 271(1) raises a presumption of concealment, when a
difference is noticed by the AO, between reported and assessed income. The
burden is then on the assessee to show otherwise, by cogent and reliable
evidence. When the initial onus placed by the explanation, has been
discharged by him, the onus shifts on the Revenue to show that the amount
in question constituted the income and not otherwise.
Statute does not
recognize those types of defences under the explanation 1 to Section
271(1)(c) of the Act.
It is trite law that the voluntary disclosure does
not release the Appellant-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 had to be absolved from penalty.
transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year.
The AO, in our view, has recorded a categorical
finding that he was satisfied that the assessee had concealed true
particulars of income and is liable for penalty proceedings under Section
271 read with Section 274 of the Income Tax Act, 1961.
10. The AO has to satisfy
whether the penalty proceedings be initiated or
not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing.
The scope of Section 271(1)(c) has also been elaborately
discussed by this Court in Union of India vs. Dharmendra Textile Processors
(2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.
11. The principle laid down by this Court, in our view, has been
correctly followed by the Revenue and we find no illegality in the
department initiating penalty proceedings in the instant case.
We,
therefore, fully agree with the view of the High Court. Hence, the appeal
lacks merit and is dismissed.
There shall be no order as to costs.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9772 OF 2013
(Arising out of Special Leave Petition (Civil) No.18389 of 2013)
MAK Data P. Ltd. … Appellant
Versus
Commissioner of Income Tax-II … Respondent
J U D G M E N T
K.S. Radhakrishnan, J.
1. Leave granted.
2. The Appellant-assessee filed his return of income for the assessment
year 2004-05 on 27th October, 2004, declaring an income of Rs.16,17,040/-
along with Tax Audit Report.
The case was selected for scrutiny and
notices were issued under Sections 143(2) and 142(1) of the Income Tax Act.
During the course of the assessment proceedings,
it was noticed by the
Assessing Officer (AO) that
certain documents comprising of
share application forms,
bank statements,
memorandum of association of companies,
affidavits, copies of Income Tax Returns and assessment orders and
blank share transfer deeds duly signed had been impounded.
These documents had been found in the course of survey proceedings under Section 133A conducted
on 16.12.2003 in the case of M/s Marketing Services (a sister concern of the assessee).
The AO then proceeded to seek information from the assessee
and issued a show-cause notice dated 26.10.2006.
By the show-cause notice,
the AO sought specific information regarding the documents pertaining to
share applications found in the course of survey, particularly, bank
transfer deeds signed by persons, who had applied for the shares.
Reply to
show-cause notice was filed on 22.11.2006, in which the assessee made an offer to surrender a sum of Rs.40.74 lakhs with a view to avoid litigation and buy peace and to make an amicable settlement of the dispute.
Following are the words used by the assessee:-
“The offer of surrender is by way of voluntary disclosure of without admitting any concealment whatsoever or with any intention to conceal and subject to non-initiation of penalty proceedings and prosecution.”
3. The AO after verifying the details and calculations of the share
application money accepted by the Company completed the assessment on
29.12.2006 and a sum of Rs.40,74,000/- was brought to tax, as “income from other sources” and the total income was assessed at Rs.57,56,700/-.
4. The department initiated penalty proceedings for concealment of
income and not furnishing true particulars of its income under Section
271(1)(c) of the Income Tax Act.
During the course of the hearing, the
assessee contended that penalty proceedings are not maintainable on the
ground that the AO had not recorded his satisfaction to the effect that there has been concealment of income/furnishing of inaccurate particulars of income by the assessee and that the surrender of income was a conditional surrender before any investigation in the matter.
The AO did
not accept those contentions and imposed a penalty of Rs.14,61,547/- under Section 217(1)(c) of the Act.
The assessee challenged that order before
the Commissioner of Income Tax (Appeals) by filing Appeal No.2/07-08, which
was dismissed vide order dated 17.2.2010.
The assessee filed an appeal
being ITA No.1896/Del/10 before the Income Tax Appellate Tribunal, Delhi.
The Tribunal recorded the following findings :-
“The assessee’s letter dated 22.11.2006 clearly mentions that “the
offer of the surrender is without admitting any concealment whatsoever
or any intention to conceal.”
The Tribunal took the view that the amount of Rs.40,74,000/- was surrendered to settle the dispute with the department and since the assessee, for one reason or the other, agreed or surrendered certain amounts for assessment, the imposition of penalty solely on the basis of assessee’s surrender could not be sustained. The Tribunal, therefore,
allowed the appeal and set aside the penalty order.
5. The Revenue took up the matter in appeal before the High Court by
filing ITA No.415 of 2012.
The High Court accepted the plea of the
Revenue that there was absolutely no explanation by the assessee for the
concealed income of Rs.40,74,000/-.
The High Court took the view that in
the absence of any explanation in respect of the surrendered income, the
first part of clause (A) of Explanation 1 is attracted. Holding so, the
judgment of the Tribunal was set aside and the appeal filed by the Revenue
was allowed.
6. We have heard counsel on either side. We fully concur with the view
of the High Court that the Tribunal has not properly understood or
appreciated
the scope of Explanation 1 to Section 271(1)(c) of the Act,
which reads as follows :-
“Explanation 1 – Where in respect of any facts material to the
computation of the total income of any person under this Act, --
A) Such person fails to offer an explanation or offers an explanation
which is found by the Assessing Officer or the Commissioner
(Appeals) or the Commissioner 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 bona fide
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.”
7. The AO, in our view, shall not be carried away by the plea of the
assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”,
“amicable settlement”, etc. 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.
Explanation to Section 271(1) raises a presumption of concealment, when a
difference is noticed by the AO, between reported and assessed income. The
burden is then on the assessee to show otherwise, by cogent and reliable
evidence. When the initial onus placed by the explanation, has been
discharged by him, the onus shifts on the Revenue to show that the amount
in question constituted the income and not otherwise.
8. Assessee has only stated that he had surrendered the additional sum
of Rs.40,74,000/- with a view to avoid litigation, buy peace and to
channelize the energy and resources towards productive work and to make
amicable settlement with the income tax department.
Statute does not
recognize those types of defences under the explanation 1 to Section
271(1)(c) of the Act.
It is trite law that the voluntary disclosure does
not release the Appellant-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 had to be absolved from penalty.
9. We are of the view that the surrender of income in this case is not
voluntary in the sense that the offer of surrender was made in view of
detection made by the AO in the search conducted in the sister concern of
the assessee. In that situation, it cannot be said that the surrender of
income was voluntary. AO during the course of assessment proceedings has
noticed that certain documents comprising of share application forms, bank
statements, memorandum of association of companies, affidavits, copies of
Income Tax Returns and assessment orders and blank share transfer deeds
duly signed, have been impounded in the course of survey proceedings under
Section 133A conducted on 16.12.2003, in the case of a sister concern of
the assessee. The survey was conducted more than 10 months before the
assessee filed its return of income. Had it been the intention of the
assessee to make full and true disclosure of its income, it would have
filed the return declaring an income inclusive of the amount which was
surrendered later during the course of the assessment proceedings.
Consequently, it is clear that the assessee had no intention to declare its
true income.
It is the statutory duty of the assessee to record all its
transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year.
The AO, in our view, has recorded a categorical
finding that he was satisfied that the assessee had concealed true
particulars of income and is liable for penalty proceedings under Section
271 read with Section 274 of the Income Tax Act, 1961.
10. The AO has to satisfy
whether the penalty proceedings be initiated or
not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing.
The scope of Section 271(1)(c) has also been elaborately
discussed by this Court in Union of India vs. Dharmendra Textile Processors
(2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.
11. The principle laid down by this Court, in our view, has been
correctly followed by the Revenue and we find no illegality in the
department initiating penalty proceedings in the instant case.
We,
therefore, fully agree with the view of the High Court. Hence, the appeal
lacks merit and is dismissed.
There shall be no order as to costs.
……..……………………..J.
(K.S. Radhakrishnan)
……………………………J.
(A.K. Sikri)
New Delhi,
October 30, 2013.
