By TIOL News Service

CHENNAI, FEB 05, 2015: THE issue before the Bench is - Whether assessee is liable to pay penalty when their is concealment of income in the original return, which is later on disclosed in the revised return for purchasing peace. YES is the answer.

Facts of the case

The assessee is an individual carrying on business in cloth and readymade garments as a proprietary concern. The assessee filed his return. During assessment process, AO noticed that the assessee received certain NRE gifts from various parties. Since the assessee was not able to prove the genuineness of the NRE gifts received, proceedings were initiated u/s 147 of the Act by issuing notice. In response to the said notice, the assessee filed his return. The assessee also furnished the details of the persons from whom he received the said NRE gifts. Since the assessee concealed the income in the original return filed, the AO initiated penalty proceedings by issuing notice to the assessee. AO completed the assessment u/s 143(3) read with Section 147 of the Act accepting the income disclosed in the return filed subsequently and levied penalty u/s 271(1)(c) of the Act. Aggrieved by the said penalty proceedings, the assessee preferred an appeal before the CIT(A), who allowed the appeal, thereby cancelled the penalty proceedings. Against the said order of the CIT(A), Revenue preferred an appeal before the Tribunal, who by following the decision in the case of K.P.Madhusudhanan V. CIT allowed the appeal filed by the Revenue restoring the penalty proceedings initiated by the AO holding that when the assessee had admitted the income only after being questioned during the course of survey, the onus was on the assessee to establish that the assessee had not concealed any income. Aggrieved by the said order of the Tribunal, the assessee filed appeal before HC.

After hearing both parties, HC held that,

++ This Court had an occasion to consider the issue on the levy of penalty in the decisions reported M.S.Mohammed Marzook (Late) and another V. Income Tax Officer, M.Shahul Hameed Batcha V. Income Tax Officer, and M.Sajjanraj Nahar V. Commissioner of Income Tax, wherein, this Court had elaborately considered the case law on the subject and pointed out to the decision of the Supreme Court in the case of K.P.Madhusudhanan V. CIT reported in (2001) 251 ITR 99, rendered after the introduction of Explanation to Section 271(1)(c) of the Income Tax Act. This Court held that when the concealment of the income was with reference to the original return and there was no explanation at all as regards the non-disclosure, the mere claim that the income was offered in the revised return, as a matter of purchasing peace, by itself, would not exonerate the assessee from the culpability. Having regard to the fact that the assessee had not disclosed any reason for the omission in the original return and that the revised return was filed only after the search, this Court held that penalty was leviable. The facts herein are no different from the above said decisions. As seen from the narration in the order of the Tribunal as well as that of the other authorities, the assessee filed the revised return only after survey operation in the business premises of the assessee. The conduct of the assessee, hence, assumes significance in coming forward to disclose the income. When there is no satisfactory explanation as regards its non-disclosure of the income in the original return and that the undisclosed income came to be shown only in the revised return, rightly the Tribunal applied the law as declared by the Apex Court and by this Court. In the circumstances, we do not find any justification to cancel the penalty levied by the Assessing Officer, which is admittedly a minimum penalty.

(See 2015-TIOL-271-HC-MAD-IT)