IN THE INCOME TAX APPELLATE TRIBUNAL DELHI `A' BENCH
BEFORE SHRI HARI OM MARATHA, JM & SHRI A.N. PAHUJA,AM
ITA No.918/Del/2012
Assessment year:2007-08
Ajay Jain ,Prop. Hi Tech V/s . A.C.I.T.,Circle 25(1),
Industries, 38/22/2,Village New Delhi
Ranhola,Nangloi-Najafgarh
Road,New Delhi
[PAN : ACLPJ 9646 C]
(Appellant) (Respondent)
Assessee by Shri Raj Kumar Gupta, AR
Revenue by Shri C.B. Singh, DR
Date of hearing 28-08-2012
Date of pronouncement 01-10-2012
ORDER
A.N.Pahuja:- This appeal filed on 24.02.2012 by the assessee against an order
dated 13th February, 2012 of the ld. CIT(A)-XXIV, New Delhi, raises the following
grounds:-
1. "That under the facts and circumstances, the lower authorities
`erred in law and on merits in levying and sustaining penalty of
``48,413/-/``45,073/- u/s 271(1)(c) of the I.T Act."
2. Facts, in brief, as per relevant orders are that return declaring
income of `7,22,300/- for the AY 2007-08 filed on 22.10.2007 by the assessee,
engaged in the business of manufacturing and wholesale trading of hydraulic,
mechanical presses, machines and hydroclave machines besides trading in iron
and steel in the name of Hi-tech Industries, was selected for scrutiny with the
service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to
as the Act) . During the course of assessment proceedings, the Assessing
2 ITA No.918/Del./2012
officer[AO in short] after obtaining details of creditors, issued notice u/s 133(6) of
the Act to M/s N.K. Jain & Company and M/s GTM Sales Corporation. In the
light of details reflected in the copy of account of the assessee received from
the said parties vis--vis books of the account of the assessee, the AO noticed
the following differences:-
As per Hi-tech As per N.K. Jain Difference
``1,00,000/- nil ``1,00,000/-
As per Hi-tech As per GTM Difference
``2,99,715/- ``2,52,395/- ``47,320/-
2.1 To a query by the AO, the assessee replied as under:-
"In N.K. Jain & Co. ``1 lac is the opening as well as closing balance
of this creditor which is coming from earlier years. In GTM Sales
Corporation, there remains a difference of `47,320/- after
reconciliation. These creditors and difference is fully explainable.
However, due to paucity of time and the matter becoming time
barred, therefore, to purchase peace of mind and to bring an end to
the issue, these 2 amounts may be added as income."
2.2 Accordingly, in terms of the aforesaid surrender of the amount, the
AO added the amount of ``1,47,320/- and initiated penalty proceedings u/s
271(1)(c) of the Act.
3. Subsequently, in response to a show cause notice issued before
levy of penalty, the assessee while relying upon decisions in the case of Ms.
Madhushree Gupta Vs. UOI 225 CTR (Del) 1; Padma Ram Bharoli Vs. CIT, 110
ITR 54 (Gauhati); Jain Bros. vs. CIT,77 ITR 107(SC) & CIT Vs. Chetan Dass
Lachman Dass (1995), 214 ITR 726,submitted that the amount of ``1 lac in the
account of M/s N.K. Jain and Company was opening as well as closing balance
of creditor, which was coming from earlier years. In GTM Sales Corporation,
3 ITA No.918/Del./2012
difference of ``47,320/- remained after reconciliation. Due to paucity of time and
the matter becoming time barred, the assessee surrendered the amount to
purchase peace of mind. However, this surrender was made subject to no
penalty. In these circumstances, the ld.AR pleaded that there was no
concealment. However, the AO did not accept the submissions of the assessee
on the ground that aforesaid submissions of the assessee were devoid of any
merit. Accordingly, while relying upon explanation 1 to sec. 271(1)(c) of the Act,
the AO imposed a penalty of ``48,413/- @100% tax sought to be evaded on the
aforesaid amount of ``1,47,320/-.
4. On appeal, the ld. CIT(A) upheld the levy of penalty as under:-
"4.2 As regards ground Nos. 2 & 3, the issue of recording
of satisfaction of concealment in the assessment order as well as
the issue that the penalty order is without jurisdiction, have, been
adequately dealt with by the Assessing Officer in the body of
penalty order itself. I have carefully considered the contentions
made by the appellant as well as the penalty order passed by the
AO. It is absolutely clear from the penalty order that the appellant
surrendered the amounts standing in the name of two creditors only
after detection of concealment by the, Assessing Officer as there
were discrepancies in the balances mentioned by the appellant
and by the creditors. Putting conditions on such surrenders after
one has been found out, has no meaning whatsoever. I agree with
the stand taken by the AO in the penalty order and therefore,
ground nos. 2 & 3 stand dismissed.
4.3 As regards ground No.4, it is seen that notice u/s. 274 r.w.s.
271 was issued on 30.12.2009, to which a reply was, given by the
appellant on 06.01.2010. Another notice u/s. 274 r.w.s. 271 was
issued to the appellant on 02.06.2010, which was replied by him on
11.06.2010. Therefore, it would not be proper to say that
reasonable opportunities were not provided to the appellant before
passing the impugned order of penalty. The ground taken by the
appellant is therefore dismissed.
4.4 In Ground Nos. 5 & 6, the appellant has impugned the penalty
on merits and has submitted that in view of letters dt. 06.01.2010
and 11.06.2010, no penalty should have been levied. I have
perused the penalty order as well as the justification given by the
appellant. Regarding creditor Sh. N.K. Jain, the opening and
4 ITA No.918/Del./2012
closing balance as per books of accounts of the appellant is `. l lac.
However, as per information called from She N.K. Jain by the AO
u/s. 133(6) of the Act, the closing balance is NIL. The appellant
submitted that it is an old reconciliation which was pending on the
part of the appellant in this case and the appellant still admits his
liability which has not been written off in his books. As regards the
closing balance of the creditor M/s. GTM Sales Corporation, it was
`.2,99;715/-as per the books of accounts of the appellant, while as
per information received by the AO u/s. 133(6) of the Act, it was
`.2,52,395/-. Thus there was a difference of `.47,320/-. The
appellant submitted that without admitting any, concealment or
furnishing of inaccurate particular of income, he had offered this
amount for taxation to purchase peace of mind and to close the
assessment proceedings. The appellant has relied on the following
case laws :
(a) Addl. CIT Vs. Prem Chand Garg 123 TTJ (Del) (TM)
433
(b) Smt. Sandhya Verma (2009) 30 SOT 29 (Del) (URO)
(c) CIT Vs. Harsh Talwar 335 ITR 200 (Del)
(d) CIT Vs. AshokTaker 170 Taxman 471 (Del)
(e) Sir Shadilal Sugar & General Mills Ltd. 168 ITR 705
In my opinion, none of these above referred cases is of any support
to the appellant for two reasons:
(a) The appellant did not have any evidence or corroborating
proof to explain the discrepancies in his books of accounts with
regards to these two creditors and
(b) The AO was in possession of independent material gathered by
him u/s. 133(6) of the Act which conclusively proved concealment
and filing of inaccurate particulars by the appellant.
When the appellant found himself totally cornered by the AO, he
indulged in misplaced magnanimity and surrendered the amount
with the condition of no penalty. Unfortunately, the benevolent
action of the appellant was too late.
5 ITA No.918/Del./2012
In my opinion, the case of the appellant is clearly covered by the
judgments pronounced by Hon'ble Supreme Court of India in the
cases of Dilip N Shroff Vs. Joint CIT (2007) 291 ITR 519 (SC) and
Union of India Vs. Dharamendra Textile Processors (2008) 306 ITR
277 (SC). Therefore, these two grounds of appeal taken by the
appellant are dismissed."
5. 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 while carrying us
through the impugned order contended that the amount of ``1 lac was offered to
tax as income in terms of provisions of section 41(1) of the Act in the AY 2009-
2010. While reiterating the decisions relied upon before the ld. CIT(A), the ld.
AR contended that the ld. CIT(A) was not justified in upholding the levy of
penalty. To a query by the Bench, as to when the credit in the a/c of M/s NK
Jain & company originated , the ld. AR cold not furnish the exact date of credit or
even nature of credit .On the other hand, the ld. DR supported the order of the ld.
CIT(A).
6. We have heard both the parties and gone through the facts of the
case. Admittedly, the assessee did not reconcile the accounts of the
year under consideration in the light of information received u/s
133(6) of the Act in the form of copy of account of the assessee from the
said parties M/s NK Jain & Co. and GTM Sales Corporation vis--vis
assessee's books and accordingly, vide his letter dated 7.12.2009 surrendered
the two amounts as income of the year under consideration to purchase peace
of mind. Subsequently, in response to a showcause notice before levy of penalty,
the assessee reiterated that amount of `1 lac in the a/c of NK Jain & Co/was
brought forward while difference in the a/c of GTM Sales Corporation remained
irreconciled.. Apparently, the assessee did not improve upon his case in the
penalty proceedings. In any case, the AO did not accept the submissions of the
assessee and imposed a penalty of `48,413/- u/s 271(1)(c) of the Act. The
assessee claimed that penalty imposable worked out to be `45,073/-..
Admittedly, the assessee did not reconcile the difference either at
6 ITA No.918/Del./2012
the assessment stage or even in penalty proceedings. Even before
us, no attempt was made to reconcile the difference nor even any
material, establishing bonafide of the explanation of the assessee,
has been placed before us. 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 furnishing of inaccurate particulars of such
income
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
Deputy Commissioner (Appeals) or the 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.
6.1 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
7 ITA No.918/Del./2012
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
material to the determination of an item as income or material to the
correct computation is not filed or that which is filed is not accurate,
then the assessee would be liable to penalty under s. 271(1)(c) of
the Act. The expression 'has concealed the particulars of income'
and 'has furnished inaccurate particulars of income' have not been
defined either in section 271 or elsewhere in the Act. However,
notwithstanding the difference in the two circumstances, it is now
well established that they lead to the same effect namely, keeping
off a certain portion of the income from the return. According to Law
Lexicon, the word "conceal" means:
"to hide or keep secret. The word 'conceal' is con+celare which
implies to hide. It means to hide or withdraw from observation; to
cover or keep from sight; to prevent the discovery of ; to withhold
knowledge of. The offence of concealment 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
8 ITA No.918/Del./2012
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 overlap, as for
example when half of the income under a particular head is not at all
disclosed, that would be concealed to that extent while the
remaining half which is in fact disclosed would, not being his
complete disclosure amount to inaccurate particulars of income as
regards that constituent item of the return. By the 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 position 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 section 271(1)(c), obviously is
against such concealment and inaccuracy as is detected in the
assessment proceedings".
6.3. Indisputably, as a result of enquiries made by the AO, the
assessee did not reconcile the difference in the account of
aforesaid two parties and instead surrendered the amount as income
of the year under consideration. 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
9 ITA No.918/Del./2012
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 IT R 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
assessed income, there is inference of concealment. The
explanation 1 to sec. 271(1)(c) of the Act raises a presumption that
can be rebutted by the assessee with reference to facts of the case.
Thus, the onus is on the assessee to rebut the inference of
concealment. The absence of explanation itself would attract
penalty. In the case of New Bijli Foundry vs. CIT,135 ITR 593,
Hon'ble Punjab and Haryana High Court have held that the findings
recorded in the assessment proceedings are certainly relevant in the
penalty proceedings. In the absence of any fresh material during the
course of penalty proceedings, specially when the assessee failed
to establish that the aforesaid findings of the AO during the course
of assessment proceedings were based on improper facts or wrong
appreciation of the facts, we are afraid that in the penalty
proceedings we are unable to take a different view. The onus laid
down upon the assessee to rebut the presumption raised under
explanation 1 would not be discharged by any fantastic or fanciful
explanation. It is not the law that any and every explanation has to
be accepted. In our considered view, the provisions of clause (B)
of explanation 1 to section 271(1)(c) of the Act, are clearly
attracted and the assessee miserably failed to discharge the onus
10 ITA No.918/Del./2012
laid down in this explanation. In such circumstances, we have no
hesitation in upholding the levy of penalty.
6.4 W e find that the legal position 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 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 of
discharging the onus of rebuttal is on the assessee. Explanation
1 automatically comes into operation when, in respect of any
facts material to the computation of total income of any person,
there is failure to offer an explanation or an explanation is
offered which is found to be false by the Assessing Officer or the
11 ITA No.918/Del./2012
first appellate authority, or an explanation is offered which is not
substantiated. In such a case, the amount added or disallowed in
computing the total income is deemed to represent the income in
respect of which particulars have been concealed. As per the
provision of Explanation 1, the onus to establish that the
explanation offered was bona fide and all facts relating to the
same and material to the computation of his income have been
disclosed by him will be on the person charged with
concealment. The Assessing Officer is not obliged to intimate
the assessee that Explanation 1 to section 271(1)(c) is proposed
to be applied. The scheme of the provisions does not provide for
such a requirement either directly or inferentially. In Sir
Shadilal's case [1987] 168 ITR 705, what the Supreme Court
observed was that there may be several reasons for which the
assessee may have offered an amount for addition, but that itself
is not sufficient to infer concealment. It has not laid down as a
rule of general application that whenever such is the case,
penalty cannot be imposed. On the contrary, in such cases also
the assessee is required to discharge the burden placed by the
Explanation appended to section 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 intention 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 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
12 ITA No.918/Del./2012
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, in the
circumstances stated in the Explanation, that his failure to return
his correct income was not due to fraud or neglect, he shall be
deemed to have concealed the particulars of his income or
furnished inaccurate particulars thereof and, consequently, be
liable to the penalty provided by that section. No express
invocation of the Explanation to section 271 in the notice under
section 271 is, in our view, necessary before the provisions of
the Explanation therein are applied. The High Court at Bombay
was, therefore, in error in the view that it took and the Division
Bench in the impugned judgment was right."
6.6 Therefore, in view of the facts and circumstances and in
the light of above noted authoritative pronouncements, when the
assessee failed to discharge the onus laid down upon him in terms
of explanation 1 to section 271(1)(c) of the Act and failed to
establish the bonafide of his explanation nor even attempted to
reconcile the differences in the aforesaid two accounts even during
the penalty proceedings , we have no option but to uphold the
findings of the ld. CIT(A), confirming the levy of penalty .Even
otherwise the breach of civil obligation which attracts a penalty
under the provisions of an Act would immediately attract the levy of
penalty irrespective of the fact whether the contravention was made
by the defaulter with any guilty intention or not, vide Chairman,
SEBI v. Shriram Mutual Fund [2006] 131 Comp Cas 591 (SC) ;
[2006] 5 SCC 361. This view has been reiterated 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
13 ITA No.918/Del./2012
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,158CR 104(Ker)
6.7 In the instant case, the assessee claimed before the AO and the ld. CIT(A)
that the addition of `1,47,320/- was accepted in order to purchase peace of mind
and to bring an end to the issue. But this explanation was tendered only after the
AO confronted the evidence in the form of copies of account of the assessee in
the books of the aforesaid two parties. .Apparently, only when the assessee was
cornered , the assessee surrendered the amount .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
`voluntarily' given in Section 273(A) of the Act held that voluntarily means out of
free will without any compulsion. When the assessee concealed the
incriminating material with regard to income so disclosed cannot be held to be
voluntarily. It shall be appropriate to reproduce the relevant portion from the
judgment of Bhairav Lal Verma (supra) as under:
"The position thus settled is that the word "voluntarily" in section 273A
of the Act means out of free will without any compulsion. Disclosure of
concealed income after the Department has seized the incriminating
material with regard to the income so disclosed, cannot be voluntary
disclosure, because it was made under the constraint of exposure to adverse
14 ITA No.918/Del./2012
action by the Department. But it cannot be held as a principle of law that the
disclosure of income made after the search/raid cannot be voluntary. It is a
question which has to be decided by the Department in each case on the
basis of the material on the record. If on record there is incriminating
material with regard to the disclosed income, the disclosure cannot be
voluntary. But if the Department has no incriminating material with regard
to the income disclosed, the disclosure is liable to be treated as voluntary
having been made without any compulsion or constraint of exposure to
adverse action by the Department. In a case where the assessee has
disclosed not only the income regarding which the Department has
incriminating material, but has 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."
6.8 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 in the aforesaid account of the two parties, surrender
cannot held to be voluntarily. Surrender of income after the department has
collected incriminating material with regard to the income so disclosed, cannot be
voluntary surrender , because it was made under the constraint of exposure to
adverse action by the Department. In the present case, the Department has
collected sufficient material against the assessee and only after incriminating
material collected by the Department was brought to the knowledge of the
assessee, the surrender was, thus, made by the assessee under the constraint
of exposure to adverse action by the AO. We totally agree with the conclusion
of the ld. CIT(A) that the surrender was made only after the detection of
concealment by the AO and the assessee had nothing to rebut the evidence
gathered by the department and the assessee miserably failed to discharge the
15 ITA No.918/Del./2012
initial onus laid down upon the assessee in terms of explanation 1 to sec. 271(1)
(c) of the Act.
7. As regards view taken in decision in Sir Shadilal Sugar & General Mills Ltd.
& another (supra) relied upon by the ld. AR, Hon'ble Apex Court in
K.P.Madhusudanan(supra) discarded the said view . As pointed out by
the ld. CIT(A),facts in the decisions relied upon by the assessee before him,
were altogether different. The ld. AR has not demonstrated before us as to how
these decisions help the case of the assessee.. Even otherwise decision in Sir
Shadilal Sugar & General Mills Ltd. is no longer good law after the insertion of
explanation as held by the Hon'ble Supreme Court in the case of K.P.
Madhusudhanan v. CIT [2001] 251 ITR 99.. In the case of CIT v. C. Ananthan
Chettiar [2005] 273 ITR 401, the Hon'ble Madras High Court was considering a
similar issue & concluded as under:
"Learned counsel for the revenue submitted that the order of the Tribunal is not in
accordance with law, as it has ignored the Explanation to section 271(1)(c) of the
Act. Learned counsel also placed reliance on the decision in the case of K.P.
Madhusudhanan v. CIT [2001] 251 ITR 99 (SC), wherein it was held that the law
declared by the Court in the case of Sir Shadilal Sugar & General Mills Ltd. v.
CIT [1987] 168 ITR 705 (SC) was no longer applicable by reason of the addition
of the Explanation to section 271. That Explanation casts a burden on the
assessee to show that the additional income that had not been disclosed was not
due to fraud or neglect.
In this case, the assessee offered no explanation at all except to assert that he
disclosed the income only to buy peace with the Department and what was
disclosed, in fact, was additional income. The reason for not having disclosed the
income earlier was not stated. In these circumstances, the ITAT was in error in
setting aside the penalty. The question is answered in favour of the Revenue and
against the assessee, in 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."
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
16 ITA No.918/Del./2012
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 in the
instant case 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 cogent explanation at all before the AO during the penalty
proceedings nor even attempted to reconcile the differences pointed out by
the AO during the course of assessment proceedings in 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.
Therefore, we have no hesitation in upholding the order of the ld. CIT(A) in
confirming the penalty imposed by the AO under s. 271(1)(c) of the Act .
Consequently, ground raised in the appeal is dismissed.
10 No other plea or argument was made before us.
11. In the result, appeal is dismissed.
Order pronounced in open Court
Sd/- Sd/-
( HARI OM MARATHA) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
Copy of the Order forwarded to:-
1. Assessee
2. A.C.I.T.,Circle 25(1),New Delhi
3. CIT concerned.
4. CIT(A)-XXIV, New Delhi
5. DR, ITAT,'A' Bench, New Delhi
17 ITA No.918/Del./2012
6. Guard File.
By Order,
Deputy/Asstt.Registrar
ITAT, Delhi
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