If assessee offers income or furnishes accurate particulars of income before the AO takes up the issue and comes across information, then there was no concealment of income or furnishing of inaccurate particulars of income.

Addl. CIT v. Prem Chand Garg

A.Ys. : 2003-04 and 2004-05

Dated : 11-5-2009

S. 271(1)(c) r.w. S. 68 :

(a) If assessee offers income or furnishes accurate
particulars of income before the AO takes up the issue and comes across
information, then there was no concealment of income or furnishing of
inaccurate particulars of income.

(b) Mere omission of surrendered amount from the
return of income is neither concealment of income nor furnishing of
inaccurate particulars of income unless and until there is some evidence to
show or some circumstances are found from which it can be gathered that
omission was attributable to an intention or a desire on part of assessee to
hide or conceal income so as to avoid imposition of tax thereon.

During the previous years relevant to the assessment years
in question, the assessee had received two gifts. Consequent upon the search,
a notice u/s.153A was issued to the assessee. In response to the said notice,
the assessee replied that the original returns filed be taken as returns under
the aforesaid provision. Thereafter, the assessee offered/surrendered the
amount of gifts within four days of the receipt of the notice u/s.153A for
taxation by way of a letter. The Assessing Officer held that the assessee had
furnished inaccurate particulars of income and concealed the particulars of
income in both the years and he levied penalty u/s.271(1)(c). The CIT(A)
deleted the penalty on the following grounds :

•  No evidence was found in the course of search
  indicating that these gifts were not genuine.

•  The only question asked by the Assessing Officer in the
  course of assessment proceedings was whether the assessee had taken or given
  any loan or gift in the period under consideration and to give details
  thereof.

•  The assessee furnished the details of the gifts from
  NRIs, furnished copies of gift deeds and also mentioned that the gifts were
  surrendered for taxation to buy peace and to avoid dispute in the matter;
  that the surrender was made subject to the condition that penalty
  proceedings would not be initiated.

•  The course of events narrated above showed that the AO
  did not have any information to hold that the gifts were not genuine or that
  they formed part of the total income of the assessee.

Since there was a difference of opinion between the
Members, the matter was referred to the Third Member u/s.255(4).

The Third Member upheld the order of the CIT(A) deleting
the penalty. The Third Member noted as under :

(1) It was true that the letter of surrender did not
obliterate the original return and suppression of income therein, but when
the surrender was made before detection or without any material on record
suggesting that income was withheld, it would be a case of voluntary offer
and, in that case, there would not be concealment of income by the assessee.

(2) The surrender of the amount after receipt of the
questionnaire could not lead to an inference that it was not voluntary in
absence of any material on record suggesting it to be bogus or untrue.

(3) The question, whether there is concealment of income
or whether inaccurate particulars thereof have been furnished, is
essentially a question of fact. To find out or to decide the same, all the
attending circumstances have to be taken into account. The question is at
what point of time this material fact is to be found out. Generally, it is
with reference to the return of income and at that time it is to be seen
whether there was concealment of income or furnishing of inaccurate
particulars thereof in the return of income chargeable to tax. By the time
the Assessing Officer takes up the issue and comes across the information in
his possession, if the assessee makes up the deficiency and offers the
income or furnishes accurate particulars thereof, he cannot be held guilty
of concealment of income or furnishing of inaccurate particular of his
income. Any action rectified relates back to the original act and to the
date and time of filing the return. When the Assessing Officer started
scrutiny of the return and initiated assessment proceedings there was
nothing concealed and the inaccuracy, if any, disappeared. Therefore, the
assessee could not be held guilty of concealment.

(4) The correct and accurate disclosure may be made by
filing the revised return or by furnishing the particulars of such income
before the detection by the Assessing Officer. The mere fact that the
assessee had not revised his returns or that the offer was made by letter to
avoid harassment to the assessee and the donors who were non-resident
persons, it could not convert an offer to tax as concealment of income.
Therefore, the assessee had not furnished inaccurate particulars of the
income in the returns before detection by the Revenue.

(5) Apart from the surrender, there was nothing more on
record to hold the assessee guilty of offering the said amount on detection
of the concealment. Even in the assessment order there was nothing of that
sort. On a perusal of the questionnaire, it was evident that it was general
in nature, without specifying the name of the donors or any other such
details. On the basis of the questionnaire, it could not be presumed that
the AO had information to call for specific information. There was neither
any detection nor any information in the possession of the Revenue nor in
the manner of its communication to the assessee, which might lead to a
detection of concealment.

(6) On the face of the evidence in the shape of
confirmation letters, bank accounts, passports, etc., in the hands of the
assessee, it might be valid gift that would have convinced a reasonably
minded person, specially a person exercising a judicial function. The
accepted position of law is that merely because an assessee had agreed to
the assessment, it cannot bring in automatic levy of penalty.

(7) Therefore, the CIT(A) was right in deleting the
penalty and his order was to be affirmed.