2009 (5) TMI 130 - AT - Income Tax

Income Tax Penalty Dismissed: Tribunal Finds No Intent to Conceal Income; Voluntary Surrender Upheld.

Addl. CIT Versus Prem Chand Garg

Addl. CIT Versus Prem Chand Garg - TTJ 123, 433, [2009] 31 SOT 97 (DELHI) (TM) Issues Involved:1. Search and Seizure Operation2. Issuance of Notice under Section 153A3. Filing of Return and Declaration of Income4. Initiation of Penalty Proceedings under Section 271(1)(c)5. Explanation and Substantiation by the Assessee6. Applicability of Judicial Precedents7. Determination of Voluntary Surrender and Detection by Revenue8. Mens Rea and Civil Liability in Penalty Proceedings9. Difference of Opinion Between Judicial and Accountant MembersDetailed Analysis:1. Search and Seizure Operation:The judgment begins by detailing a search and seizure operation conducted under Section 132(1) of the Income-tax Act, 1961, at the residence of the assessee on 18.06.2003. This operation led to the issuance of a notice under Section 153A, requiring the assessee to file returns for the assessment years 2003-04 and 2004-05.2. Issuance of Notice under Section 153A:Following the search, a notice under Section 153A was issued on 05.01.2006. The assessee responded by requesting that the previously filed returns be considered as filed under this provision. The returns initially declared incomes of Rs. 1,22,820/- and Rs. 1,36,860/- for the respective years.3. Filing of Return and Declaration of Income:During the assessment proceedings, the assessee disclosed gifts amounting to Rs. 14.31 lakh and Rs. 1,15,11,748/- for the years 2003-04 and 2004-05, respectively. These amounts were surrendered for taxation, leading to revised assessments of Rs. 15,53,820/- and Rs. 1,16,48,608/-.4. Initiation of Penalty Proceedings under Section 271(1)(c):The Assessing Officer initiated penalty proceedings under Section 271(1)(c), alleging that the assessee had furnished inaccurate particulars of income and concealed income. The assessee contended that the additional incomes were voluntarily offered before any detection by the Assessing Officer.5. Explanation and Substantiation by the Assessee:The assessee argued that the gifts were disclosed voluntarily to avoid harassment and that the gifts were genuine, supported by gift deeds and banking channels. The Assessing Officer, however, held that the surrender was not voluntary and occurred only after detailed questionnaires were issued.6. Applicability of Judicial Precedents:The Assessing Officer referenced the Supreme Court's decision in K.P. Madhusudhanan v. CIT, which held that the Explanation to Section 271(1)(c) is part of the section, and the burden of proof lies with the assessee to substantiate their explanation. The CIT(A) and the Judicial Member, however, relied on the decision in K.C. Builders and Anr. v. ACIT, which emphasized the element of mens rea in concealment.7. Determination of Voluntary Surrender and Detection by Revenue:The CIT(A) concluded that there was no evidence of non-genuineness of the gifts found during the search. The surrender was made to avoid litigation and was not a result of detection by the Assessing Officer. The Judicial Member supported this view, stating that mere inquiry does not equate to detection.8. Mens Rea and Civil Liability in Penalty Proceedings:The Judicial Member emphasized that the penalty proceedings are penal in nature and require proof of mens rea. The Accountant Member, however, argued that the conduct of the assessee indicated awareness of the non-genuine nature of the gifts, making the penalty justified.9. Difference of Opinion Between Judicial and Accountant Members:The Judicial Member proposed deleting the penalty, highlighting the voluntary nature of the surrender and lack of specific detection by the Revenue. The Accountant Member disagreed, asserting that the surrender was not voluntary and the gifts were not substantiated, thus justifying the penalty.Conclusion by the Third Member:The Third Member sided with the view that the surrender was voluntary and made to avoid litigation, with no specific detection by the Revenue. The CIT(A)'s order was affirmed, and the appeals by the Revenue were dismissed, emphasizing that the mere omission from the return does not amount to concealment unless there is evidence of intent to hide income.