* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 29.01.2018
Pronounced on: 20.02.2018
+ ITA 219/2017
PR. COMMISSIONER OF INCOME TAX-21
..... Appellant
Through: Mr. Zoheb Hossain, Sr.
Standing Counsel for Revenue.
versus
DR. VANDANA GUPTA ..... Respondent
Through: Mr. Abhinav Sharma,
Advocate.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT
%
1. The question of law framed for this appeal is as follows:
"Did the Income Tax Appellate Tribunal (ITAT) fall
into error in holding that the penalty of `67,98,000/-
imposed under Section 271(1)(c) of the Income Tax
Act was not leviable in the facts and circumstances of
the case?"
2. The brief facts are that the assessee an individual, filed her
return of income on 25.09.2009 in which she declared a total income
of `9,18,060/-. During the pendency of proceedings for that
assessment year, survey was conducted under Section 133A by the
Revenue at her business premises (B-1, Rohit Kunj, Pitampura, New
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Delhi) on 22.02.2010. In these search proceedings, the assessee who
is a Medical Practitioner, surrendered `2,00,00,000/- and filed a
revised return declaring that amount as additional income. The AO
completed scrutiny assessment, by assessing total of the two figures
i.e. `2,09,18,060/-. He initiated penalty proceedings, on the footing
that the assessee had concealed the income and filed inaccurate
particulars when she, in fact, filed the return on 25.09.2009. The
penalty order was subsequently made on 29.06.2012. The assessee
appealed to the CIT (A) against imposition of penalty contending that
she neither concealed particulars of income nor furnished inaccurate
particulars and that all material disclosures were made during the
assessment proceedings. The revised return merely reflected the
voluntary disclosures made by her.
3. In the appellate proceedings, the assessee also urged that during
survey, no documents or evidence was gathered by the Revenue
Department, establishing that she did not, in fact, conceal any
particulars of income. The disclosures were not related to any
incriminating document or material recovered or gathered during the
survey action. The assessee stated that she disclosed the amount to
buy peace of mind and avoid further proceedings. The assessee relied
upon the statement made by her in the course of the survey in this
regard.
4. The CIT (A) considered the contentions of the assessee as well
as the decisions cited before him (including the judgments of the
Supreme Court in Dilip & Shroff v. Joint Commissioner of Income Tax
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291 ITR 519 (SC); MAK Data Pvt. Ltd. v. Commissioner of Income
Tax (2014) 1 SCC 674 and observed as follows:
".......... I find that the appellant has disclosed the income
only after a survey was conducted by the Department.
Moreover, the disclosure was made as the appellant was
unable to produce the books of account for F.Y. 2008-09.
She admitted that part of the receipts had not been declared
for taxation while filing the Income Tax Return for A Y.
2009-10. This shows that the claim of the Appellant was not
bona fide. Therefore, the information furnished by the
appellant in the return of income was factually incorrect and
the appellant cannot escape the rigors of section 27l(l)(c) of
the LT. Act, 1961. The Hon'ble Delhi High Court in the case
of CIT vs. Escort Finance Ltd., 328 I.T.R. 44 has held that
even if there is no concealment of income or furnishing of
inaccurate particulars, but if a claim which is ex-facie bogus
is made, the same will still attract penalty provisions.
Similar views have been expressed by the Hon'ble Court in
the case of CIT vs. Zoom Communications (P) Ltd. holding
that very few returns are selected for scrutiny and therefore,
non- sustainable claims cannot be said to be bonafide."
5. The CIT (A) was of the opinion that the assessee could be said
to have concealed material particulars and filed inaccurate returns.
The ITAT- whom the revenue appealed to, held that since the assessee
disclosed the income in the revised return which was in consonance
with the voluntary statement made by her, the exercise of discretion in
assuming jurisdiction and imposing penalty was unwarranted. In so
concluding, the ITAT went by the decision of this Court in
Commissioner of Income Tax v. SAS Pharmaceuticals (2011) 335 ITR.
The ITAT was also of the opinion that the AO was wrong in invoking
jurisdiction without first premising the notice upon one or the other
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condition i.e. with respect to concealing of income or filing inaccurate
particulars. For these two reasons, the ITAT allowed the assessee's
appeal and granted the relief.
6. Counsel for the Revenue urges that the ITAT fell into error in
holding that Section 271(1)(c) was not attracted to the circumstances
of this case. It was pointed out that prior to the survey (on
22.02.2010), the assessee had filed a return, which failed to disclose
the true particulars. It was only during survey proceedings that she
surrendered income to the extent of `2,00,00,000/- and revised the
returns subsequently. The fact that she voluntarily revised the return,
would not absolve the assessee from liability to penalty. Learned
counsel submitted that the onus of proving that the returns were filed
accurately, in the circumstances shifted to the assessee. Once it was
shown that additional income was surrendered and a revised return
was filed, it was up to the assessee to establish that, in fact, the
omission was bona fide or that there was a cogent and reasonable
explanation. In this respect, learned counsel relied upon the
explanation inserted by the Finance Act, 1964 to Section 271(1)(c)
and also cited the judgment reported as Additional Commissioner of
Income Tax v. Jeevan Lal Shah 205 ITR 244. It was highlighted that
the object of omitting the expression "deliberately" from the provision
i.e. Section 271(1)(c) was to remove the requirement of a mental state
and shifting the burden of proof to the assessee. In support, the
Revenue relied upon Commissioner of Income Tax v. Musaddilal Ram
Bharose 165 ITR 14 (SC).
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7. Lastly, counsel relied upon the judgment of a Division Bench of
this Court in Commissioner of Income Tax v. Zoom Communications
Pvt. Ltd. (2010) 327 ITR 510. Counsel for the assessee argued that
Section 271(1)(c) plainly states that an act of concealment or
furnishing inaccurate particulars can relate only to a return. It is
submitted that in the present case, returns were filed and the mere
circumstance that the survey was conducted leading to further
disclosures that led to additions could not have legitimately led to the
Revenue authorities concluding that there was concealment of material
particulars. The assessee did all that she was expected to do when the
survey was conducted. Concededly, no material was seized; the
record bears testimony to the fact that she voluntarily offered
`2,00,00,000/-. Learned counsel placed heavy reliance upon the
judgment of this Court in SAS Pharmaceuticals (supra) and stated that
in that decision the Court in similar circumstances where additions
were made based upon disclosures during the survey, nevertheless
held that the initiation and imposition of penalty, would be based on
surmises unless there is some intentional omission. Learned counsel
also points out the decision of the Court in Commissioner of Income
Tax v. Mohandas Hassanand 141 ITR 203 in support of his
submission.
8. Learned counsel submitted that like in the facts of the present
case, penalty imposed in the cases of additional income surrendered
after survey were held to be unwarranted by different High Courts.
Reliance was placed upon the judgment of the Punjab & Haryana
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High Court in Commissioner of Income Tax v. Bharat Rice Mills 201
Taxation 633; Additional Commissioner of Income Tax v. Bharatiya
Bhandar (1979) 13 CTR 159 (MP) and Commissioner of Income Tax
v. SI Paripushpam 249 ITR 550 (Mad.).
9. Learned counsel contended that in the case of search
assessments, if the conditions spelt out in Explanation 5 to Section
271(1)(c) are satisfied, penalty cannot be levied. In the present case,
however, no search took place and; a mere survey was conducted.
Admittedly, no incriminating or damaging material or documents were
seized. The assessee of her own record and in order to buy peace,
surrendered `2,00,00,000/-. Without a finding that the returns
(subsequently revised in consonance with law) did not furnish material
particulars or were inaccurate in material facts, penalty could not have
been imposed. It was stated that for these reasons, the impugned order
is reasonable and does not call for interference.
10. The above factual background shows that when originally filed,
the assessee had not disclosed the income that she ultimately declared.
On 22.02.2010, during the course of survey, she voluntarily
surrendered `2,00,00,000/- and filed a revised return declaring that
amount as additional income. She later filed a revised return. Based on
it, the assessment was completed and accepted. The AO imposed and
the CIT (A) affirmed penalty under Section 271 (1) (c) of the Act. The
ITAT, professing to follow certain decisions of this court, held that
there was no concealment of income or filing of inaccurate particulars.
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11. In SAS Pharmaceuticals (supra) relied upon by the assessee and
ITAT, in this case, it was observed as follows:
"15. It necessarily follows that concealment of particulars of
income or furnishing of inaccurate particular of income by
the assessee has to be in the income tax return filed by it.
There is sufficient indication of this in the judgment of
this Court in the case of Commissioner of Income Tax,
Delhi-I Vs. Mohan Das Hassa Nand 141 ITR 203 and in
Reliance Petroproducts Pvt. Ltd. (supra), the Supreme Court
has clinched this aspect, viz., the assessee can furnish the
particulars of income in his return and everything would
depend upon the income tax return filed by the assessee.
This view gets supported by Explanation 4 as well as 5 and
5A of Section 271 of the Act as contended by the learned
counsel for the Respondent.
16. No doubt, the discrepancies were found during the
survey.
17. This has yielded income from the assessee in the form
of amount surrendered by the assessee. Presently, we are
not concerned with the assessment of income, but the moot
question is to whether this would attract penalty upon the
assessee under the provisions of Section 271 (1) (c) of the
Act. Obviously, no penalty can be imposed unless the
conditions stipulated in the said provisions are duly and
unambiguously satisfied. Since the assessee was exposed
during survey, may be, it would have not disclosed the
income but for the said survey. However, there cannot be
any penalty only on surmises, conjectures and
possibilities. Section 271 (1) (c) of the Act has to be
construed strictly. Unless it is found that there is actually a
concealment or non-disclosure of the particulars of income,
penalty cannot be imposed. There is no such concealment or
non-disclosure as the assessee had made a complete
disclosure in the income tax return and offered the
surrendered amount for the purposes of tax."
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12. It is instructive at this stage to notice that after SAS
Pharmaceuticals (supra) was decided, the Supreme Court rendered its
ruling in MAK Data Private Ltd v Commissioner of Income Tax
(supra). The facts there are interesting; they bear a close comparison
with the circumstances of this case. During scrutiny assessment of the
assessee, survey of its sister concerns was done; the assessee at that
stage volunteered and surrendered some amounts, based on the
following statement:
"The offer of surrender is by way of voluntary disclosu re of without
admitting any concealment whatsoever or with any intention to
conceal and subject to non-initiation of penalty proceedings and
prosecution." All the appellate authorities and the High Court upheld
throughout the ensuing penalty. Rejecting the assessee's appeal, the
Supreme Court observed as follows:
"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.
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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
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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 v Dharmendra
Textile Processors (2008) 13 SCC 369 and CIT v 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."
13. In the present case too, the assessee merely made a voluntary
surrender; she did not offer any explanation as to the nature of income
or its source. The observations in MAK Data (supra) are that the
authorities are not really concerned with the statement- whether
voluntarily or otherwise and have to see whether there was any non
disclosure of material facts, or income. The complete failure to furnish
any details with respect to the income, which if given could have been
the only reasonable basis for deletion of penalty, in the opinion of the
court, reinforced the views of the AO and CIT (A) that the revised
return was an afterthought, based on the subsequent event of
disclosure of `2,00,00,000/-. The court further notices that by reason
of Explanation 1 to Section 271(1)(c), an assessee is not absolved of
penalty, if she or he "offers an explanation which he is not able to
substantiate and fails to prove that such explanation is bona fide and
ITA 219/2017 Page 10 of 11
that all the facts relating to the same and material to the computation
of his total income have been disclosed by him". The mere offer
therefore, of the amount during the search in the absence of any
explanation for the source of income, renders the assessee's argument
insubstantial in the totality of circumstances.
14. For the foregoing reasons, the question framed is answered
against the assessee and in favour of the revenue; the appeal is
therefore allowed but without order on costs.
S. RAVINDRA BHAT
(JUDGE)
A.K. CHAWLA
(JUDGE)
FEBRUARY 20, 2018
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