By TIOL News Service

CHANDIGARH, DEC 05, 2013: THE issue before the Bench is - Whether omission of facts furnished consistently in several assessment years cannot be construed as innocuous and does warrant impositon of penalty. And the reference is answered in favour of the Revenue.

Facts of the case

Assessee is a firm. Premises of father of the partners of assessee firm were raided on 16.7.1987 and account books pertaining to transactions for the period ranging from 1978 to 1987 were seized. In September 1987, assessee approached the CIT with a proposal of settlement offering additional income of Rs.29 lacs for the AYs 1982-83 to 1986-87. However, when the assessee got information that the Department was issuing notices u/s 148, assessee worked overtime and filed revised returns for the year 1982-83 to 1986-87. Notices u/s 148, however, was served upon the assessee for all these AYs. The notices had also been issued for initiation of penalty proceedings. Assessee had filed an application u/s 273 seeking waiver of penalty on the ground that it had voluntarily offered additional amount and further that there was no detection by the revenue and, thus, no concealment could be attributed to it. Notwithstanding the case of the assessee having been recommended by the authorities below, plea of the assessee was not accepted; neither waiver was granted by the CBST nor by CIT (Central) to whom application had been moved u/s 273(4). Contention of the assessee before HC was that disclosure had been made by it voluntarily and there was no detection by the revenue. It was claimed that such disclosure should not have automatically resulted into initiation of proceedings u/s 148, resulting in revised assessment and consequent imposition of penalty u/s 271(1)(c). On the other hand, Revenue's counsel had contended that exercise of power u/s 271(1)(c) was statutory in nature and income of the assessee having escaped assessment due to concealment and furnishing of inaccurate particulars in its returns by the assessee, such power had rightly been exercised by the AO. Recommendations of the Tribunal were challenged.

Held that,

++ when rival contentions of the parties are evaluated, it becomes clear that it was not an innocuous omission on the part of the assessee but was a deliberate act of concealment of income by furnishing inaccurate particulars in its returns for the assessment years 1982-83 to 1986-87. Had it been a case of single year, plea of the assessee that it was merely an omission and there was no mens-rea, could possibly be considered. Furnishing of inaccurate particulars was clearly with a view to conceal income consecutively for five assessment years. It speaks volumes of contrivance by the assessee with apparent element of mens-rea. Thus authority cited by the assessee, reported as Dilip N. Shroff v. JCIT, Mumbai and another, (2007-TIOL-96-SC-IT), wherein it was held that for imposition of penalty, an element of mens-rea is needed, does not support the case of the assessee;

++ looking the matter from another angle, the assessee itself had filed revised returns giving fresh particulars of its income but it was only when the assessee was cornered consequent upon search and seizure proceedings and had received disturbing information of initiation of proceedings u/s 148 being contemplated against it. Thus, by no means, was it a voluntary exercise of furnishing of fresh particulars by way of revised returns for all these years. When there is no explanation offered by the assessee for having furnished inaccurate particulars of its income (in original assessment framed against it) resulting in concealment of income which had escaped assessment, authority cited by the assessee as The CIT, West Bengal v. Anwar Ali, (2002-TIOL-190-SC-IT), holding that there should be sufficiency of grounds for rejection of assessee's explanation as false in assessment proceedings, does not come to the rescue of assessee. Thus, on these facts and circumstances projected by CIT(A), there remains no doubt that it was not only a case of furnishing of inaccurate particulars in earlier assessments but is also a case of concealment of income which thus had escaped assessment. Sequelly, evenwhen strict compliance in terms of CIT, Ahmedabad v. Reliance Petroproducts Private Limited,(2010-TIOL-21-SC-IT) sought by the assessee is made of the provisions of Section 271(1)(c) of the Act, it is clearly a case of concealment of income and by no means can be said to be a disclosure made voluntarily or bona fide. Considerations for adjudication of an application/petition under Section 273 of the Act for waiver of penalty and interest are that stand of the assessee should be of voluntary disclosure in good faith and that cooperation was extended by it to the income tax authorities and further that the tax due on the basis of returned income had already been paid and it was case of genuine hardship. However, in the present case, these facts are lacking;

++ it has already been noticed that surrender of additional income of Rs.29.00 lacs and action of filing of fresh returns by the assessee for the assessment years 1982-83 to 1986-87 was neither a voluntary affair nor was made in good faith much less by extending cooperation to the authorities. Rather, this entire exercise by the assessee was preceded by search and seizure operations resulting in seizure of books of account of the assessee which had positively suggested concealment of income which had earlier escaped assessment. It has already been noticed in this context that proceedings for escapement, viz, under Section 148 of the Act had been initiated against the assessee. Chain of events and concomitant conduct of the assessee is a clear indicator that there was complete absence of good faith and when the the assessee was placed in a very tight and rather vulnerable position, only then additional income had been disclosed by him. Assessee had rather conducted unfairly. In short, had there been no search and consequent seizure of account books disclosing concealment of huge income, the assessee was sitting pretty since 1982 and had already got finalized its assessments for the year 1982-83 to 1986-87 clearly by furnishing inaccurate particulars and concealing correct and real income. Claim of the assessee that it was an honest move made by it in good faith while extending cooperation to the authorities and that it was rather a case of genuine hardship to the assessee is a farce. When faced with facts, the assessee has not been able to support and sustain this stand; conduct of the assessee rather is entirely the other way round and belies the case of claimed good faith and alleged genuine hardship;

++ in the said authority, it was a case of voluntary disclosure scheme and the assessee had made the disclosure prior to the coming into force of the said scheme and long before the Department could initiate any coercive action in respect of the concealed income of the assessee. However, the facts of the case in hand are entirely different as it is not a case of voluntary disclosure scheme; rather, it is a case of search and seizure and as a sequel thereto, accounts were sealed and large scale concealment of income was detected. Circumstances in which revised returns for five years were submitted, when notice under Section 148 had been issued to the assessee etc., have been dealt with in detail in earlier part of the judgment. Consequently, the authority cited by the petitioner does not come to the rescue of the petitioner. In the present writ petition, no fault in order Annexure P-16 could be successfully pointed out to make out a case of genuine hardship. Sequelly, the writ petition having no merit, is dismissed. It is further held that the Tribunal was wrong in cancelling the penalty imposed on the assessee under Section 271(1)(c) of the Income Tax Act, 1961. Thus, the references on their own merits and circumstances are answered in favour of the revenue and against the assessee.

(See 2013-TIOL-979-HC-P&H-IT)