TaxTMI 
TaxTMI 
2016 (10) TMI 881
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....filed his income-tax return on 17.6.2014 and declared total income at Rs. 12,78,530/-. This return included a sum of Rs. 12,20,000/- deposited in the saving bank account. The ld.AO has passed an assessment order on 30.6.2014 and determined the taxable income of the assessee equivalent to one declared by him. The ld.AO initiated penalty proceedings under section 271(1)(c) of the Act. He imposed penalty of Rs. 2,50,000/-. The stand of the department was that, had the department not initiated proceedings under section 148, the assessee would not have disclosed the income ? and therefore, he deserved to be visited with penalty for concealment. Appeal to the CIT(A) did not bring any relief to the assessee. 4. The ld.counsel for the assessee, while impugning the orders of the Revenue authorities raised two fold submissions. He contended that as far as visiting the assessee with penalty with help of Explanation 1 to section 271(1)(c) is concerned, that will not be applicable, because, the AO could not find any irregularities or illegality in the facts disclosed by the assessee. The AO has accepted return filed by the assessee, and he did not find any deficiencies in furnishing of such ....
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....ting to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." Explanation 2.-Where the source of any receipt, deposit, outgoing or investment in any assessment year is claimed by any person to be an amount which had been added in computing the income or deducted in computing the loss in the assessment of such person for any earlier assessment year or years but in respect of which no penalty under clause (iii) of this sub-section had been levied, that part of the amount so added or deducted in such earlier assessment year immediately preceding the year in which the receipt, deposit, outgoing or investment appears (such earlier assessment year hereafter in this Explanation referred to as the first preceding year) which is sufficient to cover the amount represented by such receipt, deposit or outgoing or value of such investment (such amount or value hereafter in this Explanation referred to as the util....
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....arding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation-1 to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of....
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.... till the expiry of the said period, he will be treated to have concealed his income and penalty will be leviable on him accordingly if he is later found to have had taxable income in that year. Thus, for the purpose of falling within the purview of Expln. 3, firstly, a person should not have been previously assessed (that is, a new assessee); secondly, he should have failed without reasonable cause, to furnish return of income for asst. yr. 1989-90 or any year subsequent thereto within two years from the end of the assessment year concerned; thirdly, that no notice should have been issued to him under s. 142(1) or s. 148 of the Act till the expiry of the two year period; and lastly, the concerned officer is satisfied that in respect of such assessment year, such person had taxable income. In such cases, Expln. 3 provides that such person shall be deemed to have concealed the particulars of his income within the meaning of cl. (c) of s. 271(1) of the Act for such assessment year. In such an eventuality, even if the person concerned files a return after the expiry of the said period of two years in pursuance of a notice under s. 148 of the Act, the deeming provision of Expln. 3 shal....