2015 (12) TMI 1610 - AT - Income Tax

Tribunal upholds penalty for undisclosed income in tax case

Ashtavinayaka Construction Versus ACIT, Circle 22 (3), Mumbai

The Tribunal upheld the penalty under section 271(1)(c) against the appellant for offering remission of liability u/s 41(1) for A.Y. 2009-10. The ... Penalty u/s 271(1)(c) - addition on account of remission of liability u/s 41(1)- Held that:- Assessee has admitted in its written submissions before the authorities below that, there was no likely hood of these payments being made to the suppliers(creditors). The assessee therefore, has surrendered, in view of detection made by the Ld.AO. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount, which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271(1) (c ). We therefore following the ratio in the case of MAK Data Pvt. Ltd. (2013 (11) TMI 14 - SUPREME COURT ), uphold the view of the Ld.CIT(A) that, in the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 is attracted. - Decided against assessee Issues involved:Penalty under section 271(1)(c) for offering remission of liability u/s 41(1) - Whether penalty justifiedRs.Analysis:1. The appellant filed an appeal against the order of the CIT(A) confirming the penalty of Rs. 20,95,224 under section 271(1)(c) for offering remission of liability u/s 41(1) for A.Y. 2009-10.2. The Assessing Officer initiated penalty proceedings based on the addition of Rs. 61,64,239 on account of remission of liability u/s 41(1) as the appellant did not disclose the offer of income voluntarily.3. The appellant contended that the penalty was wrongly initiated, as the income was surrendered to avoid punitive action and buy peace, but failed to substantiate this claim with necessary evidence or materials.4. The CIT(A) upheld the penalty, stating that the appellant furnished inaccurate particulars deliberately or due to gross negligence, as no evidence was provided regarding the nature of transactions or identities of creditors.5. The appellant appealed the CIT(A)'s decision, arguing that the liability existed as of 31/03/2009, and no accurate particulars could be filed regarding the disputed amount.6. The Tribunal considered the Explanation 1 to Section 271(1)(c), which presumes concealment of income when the reported and assessed income differ, shifting the burden to the assessee to prove otherwise with reliable evidence.7. The Tribunal found that the voluntary disclosure of income does not absolve the assessee from penalty, especially when there was no intention to declare the true income initially.8. Relying on the judgment of the Supreme Court in a similar case, the Tribunal upheld the CIT(A)'s decision, as the appellant failed to provide any explanation for the surrendered income, attracting the provisions of Explanation 1 to Section 271(1)(c).9. Ultimately, the Tribunal dismissed the appeal, affirming the penalty under section 271(1)(c) for offering remission of liability u/s 41(1) without adequate explanation or evidence.This detailed analysis covers the issues involved in the legal judgment comprehensively, outlining the arguments presented by the parties and the reasoning behind the final decision.