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| DATE: | January 29, 2013 (Date of publication) |
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| Click here to download the judgement (mak_data_surrender_income_concealment_penalty.pdf) |
S. 271(1)(c): Surrender of income without explanation attracts penalty
A survey u/s 133A was conducted on the assessee’s premises in the course of which certain documents belonged to certain entities who had applied for shares in the assessee company were found. The AO called upon the assessee to prove the nature and source of the monies received as share capital, the creditworthiness of the applicants and the genuineness of the transactions. The assessee offered Rs. 40.74 lakhs as income from other sources “to avoid litigation and to buy peace“. It was made clear that in making the surrender, there was no admission of concealment. The AO completed the assessment by adding the said sum and levied penalty u/s 271(1)(c) for furnishing inaccurate particulars of income u/s 271(1)(c). This was upheld by the CIT(A) though reversed by the Tribunal (included in file) on the ground that there was no material to show any concealment and even in the penalty order it was not specified as to the particular credit in respect of which the penalty was being imposed. It was also emphasized by the Tribunal that the assessee had made it clear while surrendering that there was no admission of concealment and that the offer was made in a spirit of settlement. On appeal by the Department to the High Court, HELD reversing the Tribunal:
When the AO called upon the assessee to produce evidence as to the nature and source of the amount received as share capital, the creditworthiness of the applicants and the genuineness of the transactions the assessee simply folded up and surrendered the sum of Rs. 40.74 lakhs by merely stating that it wanted to “buy peace“. In the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 to s. 271(1)(c) is attracted because the nature and source of the amount surrendered are facts material to the computation of total income. The absence of any explanation regarding the receipt of the money, which is in the exclusive knowledge of the assessee leads to an adverse inference against the assessee and is statutorily considered as amounting to concealment of income under the first part of clause (A) of the Explanation to s. 271(1)(c) and penalty has to be levied.
Agree with ct. as the assessee did not choose to give explanation. True, AO did a lot od spade work and so the Assessee also need to prove that he had not deliberately concealed but due to ignorance and if ignorance is proved, then question of concealment does not arise.
Concealment is a deliberate act with intention to conceal but ignorance if led to unintended concealment if well proved by explanations , then it is no concealment, after all definitions of every word in every Act/Statute means differently and it is humanly not possible for every assessee to know what is what due to a lot of implosions of different connotations as simplicity is no where today, so in PWC v CIT error occurred , the SC did give a benefit of doubt to the kind of mens rea in that case. so it is vital , as truth is always stranger than fiction.
In the instant case Delhi HC is right that does not make all AO’s imposing penalty on assumptions or presumptions cannot be said that high courts’ will okay that every AO need to know so he has to tread very carefully by adi alteram principle that will get at the grain from the chaff, is my view.
It is said, an argument is reason offered in proof, to induce belief or convince mind. Sole object of all argument in court is the elucidation of the truth,which is greatly aided in matters of fact, as well as in matters of law by a full and fair forensic discussion. As applied to trials before a court of law the term is commonly used to denote a discussion by counsel for the respective parties of their contentions on the law and facts in hand in order to aid judge or jury in arriving at a correct and just conclusion is always the view in American Courts. I do not see anything wrong with such perception Sirs!!
Sir Edward Coke said ‘Reason is the life of Law;nay, the common law is nothing else but (sound) reason…The Law, which is perfection of reason’. i believe in such statements as law cannot stand without reason at all if so that is no law at all!
Sir Edward Coke said ‘Reason is the life of Law;nay, the common law is nothing else but (sound) reason…The Law, which is perfection of reason’. i believe in such statements as law cannot stand without reason at all if so, that is no law at all sans reason!