Bright India Body Builders v. ITO

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The Tax Publishers2013 TaxPub(DT) 0598 (Del-Trib) : (2013) 051 (II) ITCL 0179 : (2013) 152 TTJ 0033 : (2013) 082 DTR 0186 INCOME TAX ACT, 1961 --Penalty under section 271(1)(c), Explanation 1--Concealment Burden of proof--As unexplained cash the assessing officer made addition of cash introduced in the name of assessee's two partners name being Rs. 30,00,000. The assessee did not explain the source of cash introduced in the name of partners instead surrender the amount to tax. According to assessing officer added the same on non-furnishing explanation/onus to prove cash surrendered as such, the assessing officer levied penalty under section 271(1)(c) Explanation 1. Commissioner (Appeals) upheld the penalty. *Held:* Rightly so. Penalty under section 271(1)(c) was validly levied where assessee surrendered the income credited in books of account in the name of two partners, as the same was remain unexplained and burden of proof was not discharged by the assessee which day upon it. The surrender was made only when assessee was cornered. As is evident from clause (c) of section 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under section 271(1)(c) of the Act. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. [Para 5.1] If the disclosure of facts is incorrect or false to the knowledge of the assessee and it is established, then such disclosure cannot take it out from the purview of the act of concealment of particulars or furnishing inaccurate particulars thereof for the purpose of levy of penalty. The penalty under s. 271(1)(c) of the Act is leviable if the assessing officer is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. [Para 5.2] Indisputably, as a result of enquiries made by the assessing officer , the assessee did not furnish any evidence of cash deposited in the books of the firm in the names of aforesaid two partners and instead surrendered the amount as income of the year under consideration. In the course of penalty proceedings, the assessee did not bring any material before the assessing officer to rebut the inferences drawn by the assessing officer in the course of assessment proceedings. In terms of provisions of section 271(1)(c) of the Act read with Explanation 1 thereto. It is well established that whenever there is difference between the returned and assessed income, there is inference of concealment. The Explanation 1 to section 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The absence of explanation itself would attract penalty. The onus laid down upon the assessee to rebut the presumption raised under Explanation 1 would not be discharged by any fantastic or fanciful explanation. It is not the law that any and every explanation has to be accepted. In the absence of any explanation regarding source of cash, apparently the assessee miserably failed to discharge the onus laid down in this Explanation. In such circumstances, we have no hesitation in upholding the levy of penalty. [Paras 5.3] Therefore, in view of the facts and circumstances and in the light of above noted authoritative pronouncements, when the assessee failed to discharge the onus laid down upon him in terms of Explanation 1 to section 271(1)(c) and nor even attempted to explain the source of cash credited in the books of the firm in the name of aforesaid two partners even during the penalty proceedings, we have no option but to uphold the findings of the Commissioner (Appeals), confirming the levy of penalty. Even otherwise the breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman SEBI v. Shriram Mutual Fund (2006) 131 Comp Cas 591 (SC). Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. The very word 'omission' connotes an intentional act. The factual position is that the surrender was a veiled attempt to present a mitigating circumstance. That being the position, the surrender of concealed income does not constitute a mitigating circumstance and penalty has been rightly levied. [Para 5.6] In the instant case, the assessee claimed before the assessing officer and the Commissioner (Appeals) that there was no tax liability in their case and, therefore, penalty could not be levied. [Para 5.6] In the absence of any evidence of source of cash, the assessee had no alternative but to surrender the amount introduced in cash in the books of the firm in the name of two partners. Apparently, only when the assessee was cornered, the assessee surrendered the amount. the surrender was not at all voluntary. [Para 5.7] Voluntarily means out of free will without any compulsion. When the assessee concealed incriminating material in the form of transactions of cash in the names of two partners, surrender cannot held to be voluntarily. In the instant case also the assessee's explanation has not been found to be bona fide and it failed to furnish all relevant material particulars relating to the concealed income and to discharge its burden that lay upon it under Explanation 1 to section 271(1)(c). [Para 5.8] A very heavy onus is placed on the assessee to explain the difference between the assessed income and returned income and the assessee in the instant case did not discharge the said onus. In the light of the discussion made above and conduct of the assessee, it is thus clear that all the material facts and particulars relating to the assessee's computation of income were never disclosed by the assessee, and it is further clear that the assessee did not offer any cogent explanation at all before the assessing officer during the assessment proceedings and even during the penalty proceedings, in respect of the aforesaid amount of Rs. 30 lacs credited in the books of the assessee, which amount was later surrendered by the assessee as income of the year under consideration. The assessee has not been able to discharge the burden that lay upon them by Explanation 1 to section 271(1)(c). Therefore, there is no hesitation in upholding the order of the learned Commissioner (Appeals) in confirming the penalty imposed by the assessing officer under section 271(1)(c). [Para 6] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0598 (Del-Trib) : (2013) 051 (II) ITCL 0179 : (2013) 152 TTJ 0033 : (2013) 082 DTR 0186

INCOME TAX ACT, 1961

--Penalty under section 271(1)(c), Explanation 1--Concealment Burden of proof--As unexplained cash the assessing officer made addition of cash introduced in the name of assessee's two partners name being Rs. 30,00,000. The assessee did not explain the source of cash introduced in the name of partners instead surrender the amount to tax. According to assessing officer added the same on non-furnishing explanation/onus to prove cash surrendered as such, the assessing officer levied penalty under section 271(1)(c) Explanation 1. Commissioner (Appeals) upheld the penalty. Held: Rightly so. Penalty under section 271(1)(c) was validly levied where assessee surrendered the income credited in books of account in the name of two partners, as the same was remain unexplained and burden of proof was not discharged by the assessee which day upon it. The surrender was made only when assessee was cornered.

As is evident from clause (c) of section 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under section 271(1)(c) of the Act. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. [Para 5.1] If the disclosure of facts is incorrect or false to the knowledge of the assessee and it is established, then such disclosure cannot take it out from the purview of the act of concealment of particulars or furnishing inaccurate particulars thereof for the purpose of levy of penalty. The penalty under s. 271(1)(c) of the Act is leviable if the assessing officer is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. [Para 5.2] Indisputably, as a result of enquiries made by the assessing officer , the assessee did not furnish any evidence of cash deposited in the books of the firm in the names of aforesaid two partners and instead surrendered the amount as income of the year under consideration. In the course of penalty proceedings, the assessee did not bring any material before the assessing officer to rebut the inferences drawn by the assessing officer in the course of assessment proceedings. In terms of provisions of section 271(1)(c) of the Act read with Explanation 1 thereto. It is well established that whenever there is difference between the returned and assessed income, there is inference of concealment. The Explanation 1 to section 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The absence of explanation itself would attract penalty. The onus laid down upon the assessee to rebut the presumption raised under Explanation 1 would not be discharged by any fantastic or fanciful explanation. It is not the law that any and every explanation has to be accepted. In the absence of any explanation regarding source of cash, apparently the assessee miserably failed to discharge the onus laid down in this Explanation. In such circumstances, we have no hesitation in upholding the levy of penalty. [Paras 5.3] Therefore, in view of the facts and circumstances and in the light of above noted authoritative pronouncements, when the assessee failed to discharge the onus laid down upon him in terms of Explanation 1 to section 271(1)(c) and nor even attempted to explain the source of cash credited in the books of the firm in the name of aforesaid two partners even during the penalty proceedings, we have no option but to uphold the findings of the Commissioner (Appeals), confirming the levy of penalty. Even otherwise the breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman SEBI v. Shriram Mutual Fund (2006) 131 Comp Cas 591 (SC). Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. The very word 'omission' connotes an intentional act. The factual position is that the surrender was a veiled attempt to present a mitigating circumstance. That being the position, the surrender of concealed income does not constitute a mitigating circumstance and penalty has been rightly levied. [Para 5.6] In the instant case, the assessee claimed before the assessing officer and the Commissioner (Appeals) that there was no tax liability in their case and, therefore, penalty could not be levied. [Para 5.6] In the absence of any evidence of source of cash, the assessee had no alternative but to surrender the amount introduced in cash in the books of the firm in the name of two partners. Apparently, only when the assessee was cornered, the assessee surrendered the amount. the surrender was not at all voluntary. [Para 5.7] Voluntarily means out of free will without any compulsion. When the assessee concealed incriminating material in the form of transactions of cash in the names of two partners, surrender cannot held to be voluntarily. In the instant case also the assessee's explanation has not been found to be bona fide and it failed to furnish all relevant material particulars relating to the concealed income and to discharge its burden that lay upon it under Explanation 1 to section 271(1)(c). [Para 5.8] A very heavy onus is placed on the assessee to explain the difference between the assessed income and returned income and the assessee in the instant case did not discharge the said onus. In the light of the discussion made above and conduct of the assessee, it is thus clear that all the material facts and particulars relating to the assessee's computation of income were never disclosed by the assessee, and it is further clear that the assessee did not offer any cogent explanation at all before the assessing officer during the assessment proceedings and even during the penalty proceedings, in respect of the aforesaid amount of Rs. 30 lacs credited in the books of the assessee, which amount was later surrendered by the assessee as income of the year under consideration. The assessee has not been able to discharge the burden that lay upon them by Explanation 1 to section 271(1)(c). Therefore, there is no hesitation in upholding the order of the learned Commissioner (Appeals) in confirming the penalty imposed by the assessing officer under section 271(1)(c). [Para 6]