Mak Data P. Ltd., vs. CIT (2013) 358 ITR 593 (SC)
Penalty – Concealment of Income – The Assessing Officer during the assessment proceedings, is not required to record his satisfaction for initiation of penalty proceeding in a particular manner.
The appellant-assessee filed his return of income for the assessement year 2004-05 on 27th October, 2004, declaring an income of Rs. 16,17,040 along with tax audit report. The case was selected for scrutiny and notices were issued u/s. 143(2) and 142(1) of the Income-tax Act, 1961.
During the course of the assessment proceedings, it was noticed by the Assessing Officer that certain documents comprising 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 had been impounded. These documents had been found in the course of survey proceedings u/s. 133A conducted on 16th December, 2003, in the case of M/s. Marketing Services (a sister concern of the assessee). The Assessing Officer then proceeded to seek information from the assessee and issued a show-cause notice dated 26th October, 2006. By the showcause notice, the Assessing Officer sought specific information regarding the documents pertaining to share applications found in the course of survey, particularly, blank transfer deeds signed by persons, who has applied for the shares. Reply to the show-cause notice was filed on 22nd November, 2006, in which the assessee made an offer to surrender a sum of Rs. 40.74 lakh with a view to avoid litigation and buy peace and to make an amicable settlement of the dispute. Following were the words used by the assessee :
“The offer of surrender is by way of voluntary disclosure and without admitting any concealment whatsoever or any intention to conceal, and subject to non-initiation of penalty proceedings and prosecution”
The Assessing Officer after verifying the details and calculation of the share application money accepted by the company completed the assessment on 29th December, 2006 and a sum of Rs. 40,74,000 was brought to tax, as “income from other sources” and the total income was assessed at Rs. 57,56,700.
The Department initiated penalty proceedings for concealment of income and not furnishing true particulars of its income u/s. 271(1)(c) of the Income-tax Act. During the course of the hearing, the assessee contended that penalty proceedings are not maintainable on the ground that the Assessing Officer has not recorded his satisfaction to the effect that there has been concealment of income/furnishing of inaccurate particulars of income by the assessee and that the surrender of income was a conditional surrender before any investigation in the matter. The Assessing Officer did not accept those contentions and imposed a penalty of Rs. 14,61,547 u/s. 271(1)(c) of the Act. The assessee challenged that the order before the Commissioner of Income-tax (Appeals), which was dismissed.
The assessee filed as appeal before the Income-tax Appellant Tribunal, Delhi. The Tribunal recorded the following findings:
“The assessee’s letter dated November 22, 2006, clearly mentions that the offer of the surrender is without admitting any concealment whatsoever or any intention to conceal.”
The Tribunal took the view that the amount of Rs. 40,74,000 was surrendered to settle the dispute with the Department and since the assessee, for one reason or the other, agreed or surrendered certain amounts for assessment, the imposition of penalty solely on the basis of the assessee’s surrender could not be sustained. The Tribunal, therefore, allowed the appeal and set aside the penalty order.
The Revenue took up the matter in appeal before the High Court. The High Court accepted the plea of the Revenue that there was absolutely no explanation by the assessee for the concealed income of Rs. 40,74,000. The High Court took the view that in the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 was attracted.
On appeal to the Supreme Court by the assessee, the Supreme Court fully concurred with the view of the High Court that the Tribunal has not properly understood or appreciated the scope of Explanation 1 to section 271(1)(c) of the Act.
According to the Supreme Court, the Assessing Officer should 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. The Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence., that income was not concealed or inaccurate particulars were not furnished. 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.
The 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 channelise the energy and resources towards productive work and to make amicable settlement with the Income-tax Department. The statute does not recognise those types of defences under Explanation 1 to section 271(1)(c) of the Act. It is a trite law that the voluntary disclosures do 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.
The Supreme Court was of the view that the surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection made by the Assessing Officer in a survey conducted 0n the sister concern of the assessee. In that situation, it could not be said that the surrender of income was voluntary. The Assessing Officer during the course of assessment proceedings has noticed that certain documents comprising 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, had been impounded in the course of survey proceedings u/s. 133A conducted on 16th December, 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 return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it was 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. In the opinion of the Supreme Court, the Assessing Officer, had recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and was liable for penalty proceedings u/s. 271 read with section 274 of the Income-tax Act, 1961.
According to the Supreme Court, the Assessing Officer has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the Assessing Officer is not required to record his satisfaction in a particular manner or reduce it into writing.
