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TMI Blog2025 (5) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act 1961 ignoring the fact that the Notice U/s 274 did not specify reason whether concealment of Income or furnishing of inaccurate particulars. Appellant prays that therefore the levy of penalty is bad at law and may please be deleted. GROUND II A. On the facts and circumstances of the case, Commissioner of Income Tax Appeals (the CIT Appeals) erred in confirming the penalty of Rs. 9,91,029/- u/s 271(1)(c) of the Income Tax Act 1961. B. The CIT Appeals erred in confirming the penalty ignoring the fact that the revised returned income was accepted offering the additional income to tax without the Income Tax Officer finding out any cogent material. C. Your appellant prays that the penalty levied may please be deleted." 4. The ld. AR for the assessee during the appellate proceedings prayed that the ground no. 1 of the present appeal may be treated as additional ground which challenges the penalty proceeding on the legality of the notice issued u/s. 274 of the Act, which is without striking of the irrelevant limb as to whether the same is for concealment of income or for furnishing of inaccurate particulars. As the additional ground raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Mohammad Farhan Shaikh vs. Deputy Commissioner of Income Tax, 320 CTR 26 (Bombay HC) and Omprakash T. Mehta vs. Income Tax Officer, (Bombay HC), 316 CTR 280. 9. The learned Departmental Representative (ld. DR for short) on the other hand controverted the said fact and stated that there was no prejudice caused to the assessee and relied on the decision of the lower authorities. 10. We have heard the rival submissions and perused the materials available on record. The only moot question to be decided in this is whether the impugned penalty notice issued u/s. 274 r.w.s. 271 of the Act, is liable to be quashed on the ground that there was non-application of mind by the ld. AO for non-striking of the irrelevant limb and whether the same violates the principles of natural justice. It is observed that the impugned notice issued by the ld. AO is no doubt without striking the irrelevant limb as to whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. This issue is no longer res integra, where the full bench of the Hon'ble Jurisdictional High Court in the case of Mohammad Farhan Shaikh (supra) has held that not striking of the ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 366/Mum/2025, where in the impugned notice dated 20.01.2005, the ld. AO has not struck off the irrelevant limb, the finding given in ITA No. 366/Mum/2025 will apply mutatis mutandis to this appeal also. 14. In the result, the appeal filed by the assessee is allowed. ITA No. 367/Mum/2025, A.Y. 2001-02 15. The present appeal filed by the assessee challenges the penalty levied u/s. 271(1)(c) of the Act amounting to Rs. 12,12,237/- by the ld. AO and upheld by the ld. CIT(A). Though the assessee has raised the legal ground on non-striking of the irrelevant limb in the notice u/s. 274 r.w.s. 271 of the Act, during the appellate proceeding, the ld. AR for the assessee fairly agreed that the copy of the impugned notice was not available with the assessee and in the absence of the same, we declined to decide the issue on the legal ground. We therefore proceed to decide this issue on the merits of the case which is challenged vide ground no. II raised by the assessee. 16. Briefly stated, the assessee filed its return of income dated 30.10.2001, declaring total income at Rs. 94,31,670/- and the same was processed u/s. 143(1) of the Act. Pursuant to a survey action conducted u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., ITA No. 1101 of 2016, order dated 09.01.2019 and decision of Hon'ble Delhi High Court in the case of CIT vs. SAS Pharmaceuticals, order dated 08.04.2011, (2011) 335 ITR 259 (Del.). 21. The ld. DR on the other hand vehemently opposed to the contentions of the ld. AR and stated that had there been no survey action, the assessee would not have declared the additional income. The ld. DR further stated that the additional income was part of the bogus transaction availed by the assessee which was unearthed during the survey action. The ld. DR hence contended that it was an intentional case of concealment and not a bonafide mistake on the part of the assessee. The ld. DR relied on the decision of the Hon'ble Calcutta High Court in the case of CIT Balarampur Chini Milks Ltd. [2015] 64 taxmann.com 91 (Calcutta), where on identical facts the Hon'ble High Court upheld the penalty levied on the assessee. The ld. DR also relied on the decision of the Hon'ble Apex Court in the case of MAK Data Pvt. Ltd. vs. CIT, [2013] 38 taxmann.com 448 (SC), where it was held that voluntary disclosure during search action does not amount to non-concealment of income. The ld. DR relied on the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease of reference: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue 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." 23. We would also draw support from the decision of the Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax - 21vs. DR. Vandana Gupta (2018) 92 taxmann.com 229 (Delhi) (dated 20.02.2018), wherein it was held that voluntary surrender of income during the survey without substantiating the source would attract penalty for concealment. It also held that the explanation 1 to 271(1)(c) does not recognize such kind of defense, even if the assessee contends that the surrender of income was to avoid litigation, buy peace or for amicable settlement with the department. 24. It is also observed that the explanation 1 to Section 271(1) raises a presumption of concealment, where the assessee if fails to offer an explanation or the explanation offered by him is considered to be false or fails to substantiate that the explanation is bonafide, to the satisfaction of the ld. AO, then it is deemed that the said income has been conc ..... 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