2017 (11) TMI 1824 - AT - Income Tax

Tax Tribunal upholds penalty for concealing income under Income Tax Act, rejects revised return claim.

The Tribunal upheld the penalty under Section 271(1)(c) of the Income Tax Act, 1961, for concealing income particulars. It rejected the claim that the ... Levy of penalty u/s. 271(1)(c) - whether the ‘revision’ by the assessee of her return of income, admitting additional income is voluntary or not? - HELD THAT:- Both in the assessment and the penalty proceedings, the assessee explained that her act was voluntary and guided only by her intent to purchase peace and avoid litigation. How, then, one may ask, can under the circumstances it be said that the assessee is not communicated or aware of the basis or the ground on which penalty is proposed to be levied, or the same are not known to her. There is, however, no explanation on merits, much less substantiated. And, in-as-much as the revision is prompted by the unearthing of the unexplained investment in the company, the same cannot be regarded as voluntary. Assessee is bound to explain the additional income per her ‘revised return’ or, per contra, the omission of the said disclosure per her original return, satisfying the conditions of Explanation 1 to s. 271(1)(c), The plea as to ‘by peace’ or ‘avoid litigation’, etc., cannot be countenanced, even as explained in Mak Data [2013 (11) TMI 14 - SUPREME COURT] which is clearly applicable in the facts of the case. Reference in this context also be made to the recent decision in CIT v. Usha International Ltd. [2012 (11) TMI 589 - DELHI HIGH COURT] - Decided against assessee. Issues Involved:1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Genuineness of share application money and its treatment as unexplained investment.3. Voluntariness of the revised return filed by the assessee.4. Validity of the notice under Section 274 for initiating penalty proceedings.Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The primary issue in this case is the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2010-11. The penalty was levied on the assessee for concealing particulars of income or furnishing inaccurate particulars of income. The assessee's argument that the revised return was filed voluntarily to purchase peace with the IT Department was rejected. The Tribunal noted that the burden of proof to establish the genuineness of the credits and the capacity of the creditors was on the company, which failed to do so. The Tribunal upheld the penalty, stating that the assessee's conduct indicated an attempt to pre-empt the inclusion of the amount in the company's assessment.2. Genuineness of Share Application Money:The case involved Surya Balaji Investment (P.) Ltd., where the assessee is a director. During a survey under Section 133A, it was found that the company had credited Rs. 4.30 crore as share application money, out of which Rs. 1.62 crore was unexplained. The company admitted this amount as unexplained investment. The Tribunal observed that the company could not establish the identity and capacity of the share applicants, save for two individuals. The assessee's admission of Rs. 1.02 crore as unexplained investment was seen as an attempt to avoid its inclusion in the company's assessment, indicating that the money had flown to the company in the name of benamis or name lenders.3. Voluntariness of the Revised Return:The assessee claimed that the revised return filed on 23.12.2013, admitting Rs. 1.02 crore as income, was voluntary. However, the Tribunal found this claim to be misconstrued. The revised return was filed after the survey and initiation of reassessment proceedings, indicating that it was not voluntary. The Tribunal emphasized that the default occurred when the original return was filed without disclosing the impugned sum. The Tribunal cited the Supreme Court's decision in Mak Data v. CIT, which clarified that explanations like 'voluntary disclosure' or 'buy peace' do not absolve the assessee from the burden of proof.4. Validity of Notice under Section 274:The assessee argued that the penalty notice under Section 274 was defective as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal rejected this argument, stating that the assessee was aware of the charges and the basis for the penalty. The Tribunal referred to the decisions in CIT v. Mithila Motors and CIT v. Smt. Kaushalya, which held that a mistake in the notice does not invalidate penalty proceedings if no prejudice is caused to the assessee. The Tribunal concluded that the assessee was well aware of the nature of the charge and that the penalty was justified.Conclusion:The Tribunal dismissed the assessee's appeal, upholding the penalty under Section 271(1)(c) for concealing particulars of income or furnishing inaccurate particulars of income. The Tribunal found that the revised return was not voluntary and that the assessee failed to explain the omission of the impugned sum in the original return. The Tribunal also held that the penalty notice under Section 274 was valid, as the assessee was aware of the charges and the basis for the penalty. The decision was pronounced on November 01, 2017, in Chennai.