1997 (2) TMI 178 - AT - Income Tax

Penalties upheld for non-voluntary revised returns post-search operations, affirming income concealment.

The Tribunal upheld penalties imposed by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) for the assessment years 1986-87, ... Assessing Officer, Assessment Year, Revised Returns Issues Involved:1. Imposition of penalty under section 271(1)(c) for concealment of income.2. Validity of revised returns filed by the assessee post-search operations.3. Arguments and evidence provided by the assessee against the penalty.4. Legal precedents and their applicability to the case.Issue-wise Analysis:1. Imposition of Penalty under Section 271(1)(c) for Concealment of Income:The Assessing Officer (AO) imposed penalties under section 271(1)(c) for the assessment years 1986-87, 1987-88, and 1988-89 due to concealment of income. The penalties were confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee filed original returns with lower income and revised returns post-search operations, admitting higher income. The AO initiated penalty proceedings as the revised returns revealed concealed income.2. Validity of Revised Returns Filed by the Assessee Post-Search Operations:The assessee argued that the revised returns were filed voluntarily to settle tax matters and purchase peace. However, the AO and CIT(A) concluded that the revised returns were filed only after the search operations, indicating that the assessee would not have disclosed the higher income otherwise. The revised returns did not fall under section 139(5) and were considered a result of the search operations, not a voluntary act.3. Arguments and Evidence Provided by the Assessee Against the Penalty:The assessee claimed the additional income was disclosed under 'Other sources' due to difficulties in proving the genuineness of liabilities and borrowings. The AO found the explanation false as the assessee did not admit any undisclosed income in the statement recorded under section 132(4). The AO concluded that the advances and investments were made from the income earned from the business of purchasing and selling coconuts, not from borrowed funds.4. Legal Precedents and Their Applicability to the Case:Several legal precedents were considered to determine the liability for penalty under section 271(1)(c):- S.S. Ratanchand Bholanath v. CIT: The Madhya Pradesh High Court held that penalty is justified if the assessee admits suppression of income during reassessment.- Tube Fabrico (I.) Ltd. v. CIT: The Delhi High Court ruled that filing revised returns post-search operations indicates concealment of income.- H. V. Venugopal Chettiar v. CIT: The Madras High Court stated that admission of suppression of income during reassessment proceedings justifies penalty.- Banaras Chemical Factory v. CIT: The Allahabad High Court held that voluntary disclosure of concealed income does not absolve the assessee from penalty.- Hakam Singh v. CIT: The Allahabad High Court explained that returns filed under the constraint of exposure to adverse action are not voluntary.- CIT v. K. Mahim: The Kerala High Court ruled that filing a revised return during ongoing investigations does not exonerate the assessee from penalty.- CIT v. Dr. R.C. Gupta & Co.: The Rajasthan High Court held that admission of income in revised returns indicates concealment.- CIT v. J. K. A. Subramania Chettiar: The Madras High Court ruled that revised returns filed before detection by the department are irrelevant for penalty under section 271(1)(c).Conclusion:The Tribunal upheld the penalties imposed by the AO and confirmed by the CIT(A) for the assessment years 1986-87, 1987-88, and 1988-89. The revised returns filed post-search operations were not considered voluntary, and the assessee was found to have concealed income in the original returns. The Tribunal dismissed the appeals for all three years, affirming the penalties under section 271(1)(c).