Penalty u/s 271(1)(c) will be applicable even though assessee declared additional income voluntarily but failed to offer any explanation as to the nature of income or its source
Commissioner of Income Tax
Dr. Vandana Gupta
20th February, 2018
The assessee filed her return of income for declaring a total income of R9.18 lakhs. A survey was conducted under Section 133A at the business premises of assessee and the assessee surrendered R2 crores and filed a revised return declaring this amount as an additional income. The AO initiated penalty proceedings for concealment of income which was affirmed by the CIT(A). ITAT ruled in favour of assessee holding that assessee disclosed this income in the revised return based on voluntary statement made by her. Aggrieved, Revenue filed an appeal before the High Court.
High Court referred to SC ruling in MAK Data Pvt. Ltd. [(2014) 1 SCC 674] and noted that the facts of that case had a close bearing with facts of this case. The SC had held that “The AO, in our view, shall not be carried away by the plea of the assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”, “amicable settlement”, etc. to explain away its conduct…. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted”.
High Court observed the assessee merely made a voluntary surrender and had not offered any explanation as to the nature of income or its source. There was complete failure to furnish any details with respect to the nature of income, and had the assessee given the same, that could have become a reasonable basis for deletion of penalty. High Court thus upheld the stand of Revenue that the revised return was an afterthought, based on the subsequent event of disclosure of R2 crores.
High Court analysed Explanation 1 to Section 271(1)(c) and observed that an assessee was not absolved of penalty, if he “offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him”. Thus, mere offer of the amount during the search in theabsence of any explanation for the source of income rendered the assessee’s argument insubstantial.
Thus, High Court delivered the ruling in Revenue’s favour.