|CORAM:||I. C. Sudhir (JM), Prashant Maharishi (AM)|
|CATCH WORDS:||concealment of income, concelment Penalty, furnishing inaccurate particulars of income|
|COUNSEL:||Prakash Chand Yadav|
|DATE:||September 19, 2016 (Date of pronouncement)|
|DATE:||October 8, 2016 (Date of publication)|
|AY:||2006-07 to 2010-11|
|FILE:||Click here to download the file in pdf format|
|S. 271(1)(c): Penalty cannot be imposed if the AO does not specify whether the penalty is for "concealment of income" or for "furnishing inaccurate particulars". Penalty cannot be imposed in respect of income surrendered by the assessee if the AO does not link the income to incriminating documents|
(i) Even at the time of initiation of penalty proceedings as well as at the time of levy of penalty, the assessing officer is not sure whether he is levying penalty for furnishing of inaccurate particulars of its in income or concealment of the income. The show cause notice issued u/s. 274 of the Act before imposing penalty does not specify as to whether the assessee is guilty of having “furnished inaccurate particulars of income” or of having “concealed particulars of such income”. The show cause notice does not strike out the irrelevant portion viz., “furnished inaccurate particulars of income” or “concealed particulars of such income”. In CIT v. Manjunatha Cotton & Ginning Factory (2013) 218 Taxman 423 (Kar.) it was held that if the show cause notice u/s. 274 of the Act does not specify as to the exact charge viz., whether the charge is that the assessee has “furnished inaccurate particulars of income” or “concealed particulars of income” by striking out the irrelevant portion of pointed show cause notice, then the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. The Hon’ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon’ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposing penalty have to be held as bad in law and liable to be quashed.
(ii) The income is offered by appellant on ad hoc basis without co-relating the amount of year wise disclosure without any corroborating evidence. The above disclosure has been accepted by assessing officer without referring to any incriminating material pertaining to respective years. The assessing officer as well as the 1st appellate authority has also not referred to any material based on which disclosure is made and assessed by the assessing officer. In view of this it is apparent that disclosure is without any material but merely on the statement of appellant. In our view, there may be several reasons for making surrender by an assessee and merely on this basis an inference beyond doubt cannot be drawn that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the surrendered income to attract penal provisions under sec. 271(1)(c) of the Act.
(iii) Immediately after the completion of search, the assessee offered a lump sum surrender of Rs.10 crores well before issuance of any summons, notice, questionnaire from the investigation wing of the Revenue, with this submission that the surrender was made to buy peace of mind as well as a gesture of cooperation towards the department and subject to the condition that no penal action under any provisions of the Income-tax Act, 1961 would be taken against the assessee.
(iv) The Assessing Officer has justified the levy of penalty under Section 271(1)(c) of the Act on the basis that the assessee had not disclosed the income suo motu but for the search, this income would not have been unearthed. It is thus evident from the assessment order itself that the additions in the assessments framed under section 153A of the Act have been made on the basis of the surrender made by the assessee without linking the additions surrendered with any incriminating documents or any corroborative evidence in support. The Assessing Officer was not justified in invoking the penal provisions under Section 271(1)(c) of the Act for the levy of penalty on the additions made by accepting the return of income filed by the assessee as in such a situation an inference beyond doubt cannot be drawn that there was concealment of particulars of income or furnishing of inaccurate particulars thereof on the part of the assessee towards the additions made by accepting the returns of income filed by the assessee. The Hon’ble Supreme Court in the case of CIT Vs. Suresh Chandra Mittal (supra) has been pleased to hold that once the revised returns have been regularized by Revenue the explanation of the assessee that he has declared additional income to buy peace and to come out of vexed litigation could be treated as bona fide and penalty under Section 271(1)(c) was not leviable, though the assessee had surrendered additional income by way of revised returns after persistent queries by the Assessing Officer. This decision also supports the case of present assessee, rather it is on better footing as the assessee in the present case had made surrender immediately after search and before issuance of any notice and had declared the surrendered income in the returns of income accepted by the Assessing Officer. Besides, the CBDT has time and again vide its Circulars No. 286 of 2003 and 286 of 2013 prohibited the assessing authorities to make assessment solely on the basis of confessional statements of the assessee and to concentrate on documentary evidence. The very purpose behind it is that in case of retraction from its statements by the assessee, the case of the Revenue should not fail.