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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 ..... ereto shall be initiated against him. The appellant's gesture of surrender was to safeguard the interest of the revenue and to maintain cordial relations with the department. 3) That in confirming the action of the Assessing Officer, the learned CIT(A) has failed to take cognizance of the fact that the appellant offer was duly accepted and acted upon by the Assessing Officer. 4) That the learned CIT(A) summarily brushed aside the appellant's contentions without even making a mention of a catena of judicial pronouncements relied upon by the appellant. She simply made an observation in the order under appeal that none of the case laws cited by the appellant apply without reasoning out as to why the appellant's case was distinguishable on facts. 5) The appellant craves leave to add, alter, amend or vary any of the grounds of appeal at or before the time of hearing of appeal." 2. Facts, in brief, as per relevant orders are that return declaring income of Rs.2,61,180/- filed on 30.10.2006 by the assessee, trading in bearings in the name and style of a proprietorship concern M/s Modern Associates,, was selected for scrutiny with the service of a notice u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the AO concluded that net profit estimated @10% amounting to Rs.5,22,795/- and closing balance of Rs.1,16,150/- were not reflected in the books of account. Accordingly, the AO show caused the assessee as to why addition of Rs.9 lacs be not made. In response, the assessee replied vide letter dated 29th December, 2008 as under:- "Apropos of the captioned subject and in continuation of the earlier submissions, it is submitted that in terms of para 3 of letter dated 26.12.2008, it was stated that the assessee had made a profit of Rs.1,28,009/- from the business transactions effected through his savings account No.11011976 maintained with Centurion Bank of Punjab Ltd., Connaught Place Branch, New Delhi and a sum of Rs.Rs.1,30,000/- in lump sum was offered for taxation. However, after discussion with your goodself and without prejudice to the submissions made vide letter dated 26.12.2008, the assessee expresses his desire to buy peace, avoid protracted litigation and maintain harmonious and good relations with the department. As such, to safeguard the interest of the revenue and purchase peace, the assessee offers to surrender a sum of Rs.Rs.9 lacs for taxation subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer was not dependent upon the appellant agreeing to it. 3.5 Further, the so called condition (that the Assessing Officer should not levy penalty if the additions were accepted) referred by the appellant is beyond the provisions of the Act and in fact seeks to re-write the same in his own context, which is clearly not permissible in law. The Assessing Officer cannot be constrained by any such offers/conditions, as he is entrusted with the task of applying the provisions of the Act, as passed by the legislature. 3.6 Since the appellant readily admitted to the unreported bank account maintained by him, the Assessing Officer was not required to correlate any independent finding/evidence with admitted facs during the penalty proceedings. The appellant's contention that the addition of Rs.Rs.9 lacs was accepted in order to safeguard the interest of revenue, purchase peace, avoid protracted litigation and maintain harmonious and good relations with the department is an exercise in futility to duck the rigours of penalty. Maintenance of hidden accounts and carrying out unaccounted transactions does not further the lofty goals cited by the appellant. 3.7 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions before the ld. CIT(A). Inter alia, the ld. AR relied upon decisions in Sir Shadilal Sugar & General Mills Ltd. & another Vs. CIT, 168 ITR 705 (SC);CIT Vs. Aggarwal Pipe Co. 240 ITR 880 (Delhi);CIT Vs. Ashok Taker, 170 Taxman 471 (Delhi);Girdharilal Soni Vs. CIT, (Cal.);CIT Vs. D&H Secheron Electrodes Ltd., 157 Taxman 463 (MP);Harnam Singh Bishan Singh Jewellers (P) Ltd. Vs. Asstt. CIT, 69 TTJ 14 (Delhi);CIT Vs. M. George & Brothers, 160 ITR 511 (Ker.);Celebrity Stores Vs. Income-tax Officer, 33 ITD 41 (Delhi)(TM);Ninth Income-tax Officer Vs. V.R. Bendre & Co., 34 ITD 480 (Bombay);Kishan Gupta Vs. Income-tax Officer, 31 ITD 448 (Delhi) & Hindustan Steel Ltd. Vs. State of Orissa, 83 ITR 26 (SC) besides decision in CIT Vs. Reliance Petro Products Pvt. Ltd.; 322 ITR 158 (SC) as also in Rajasthan Spinning Mills ,224CTR1(SC) 5. On the other hand, the ld. DR supported the findings of the ld. CIT(A) while relying upon decisions in Polo Singh & Co. vs. CIT,98 ITR 564 (Delhi); CIT vs. Krishna & Co,120 ITR 144 (Madras);CIT vs. Dr. R.C.Gupta & Co.122 ITR 567 (Rajasthan); and PC Joseph & Bros. vs. CIT,240 ITR 818 (Ker.) 6. We have heard both the parties and gone thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal 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 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 failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, particularly when no explanation has been submitted before the AO during the penalty proceedings. 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 (A ) of explanation 1 to section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 did not offer any explanation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minating 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 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 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted voluntarily." Abdul Salam V. Union of India, AIR 1969 All. 223 at 228. [Citizenship Rules (1956) R. 30]" 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 bank account with regard to the income disclosed by the assessee, 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 assessee had no option and nothing to rebut the evidence gathered by the department. In such circumstances, levy of penalty is justified. In fact, as already me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order was not questioned in appeal by the Revenue and the same thus attained finality. In these circumstances, the Tribunal while upholding the order of CIT(A) quashed the penalty which was imposed by the AO on the assessee for the assessment year. On appeal, Hon'ble High Court while relying on decision in Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705,followed in Girdharilal Soni vs. CIT (1990) 82 CTR (Cal) 73 : (1989) 179 ITR 111 (Cal),upheld the findings of the ITAT. However, facts in the instant case are altogether different. In this case, incriminating material in the form of undisclosed bank account was gathered and the result of enquiries was confronted to the assessee. When confronted with the transactions in the undisclosed bank account, the assessee surrendered the amount of Rs.Rs.9 lacs in the assessment proceedings before the AO,. 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 conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the cash credits by the assessee, during the course of assessment proceedings, was bona fide and merely because the said amount has been included in the total income of the assessee, it does not follow as a necessary corollary that the assessee has admitted the same to be its concealed income, to bring it within the ambit of section 271(1)(c) read with the Explanation thereto. Similar were the facts and circumstances in Ashok Taker(supra). In Harnam Singh Bishan Singh Jewellers (P) Ltd.(supra), as a result of material detected during the survey relevant for the AY 1992-93, the assessee made a proposal agreeing to disclose additional income of Rs. 6 lacs for asst. yr. 1991-92. The AO did not mention in the assessment order any material as to why the income of Rs. 6 lacs, was included in the income of the assessee on the basis except the admission. In these circumstances, the ITAT cancelled the penalty, having been imposed without any objective material and accepting only a part of the offer of the assessee. The decision in M. George & Brothers(supra) related to AY 1969-70 i.e before the insertion of explanation 1 in its present from.Based on this decision, ITAT cancelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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