By TIOL News Service

BANGALORE, APR 05, 2016: THE issue is - Whether revised returns showing FDs as well as interest earned on them is to be construed as voluntary disclosure even if assessee was informed of such concealment by issuance of notices u/s 148. NO is the answer.

Facts of the case

The assessee is an individual who is partner in several firms and Director and shareholder in several companies. He is also doing business in Lubricants. For the A.Y 2011-12, he filed his return declaring total income as Rs.4,13,85,792/-, which was subsequently revised to Rs.4,03,00,431/- after claiming refund of Rs.4,08,421/-. The AO in the meanwhile received letter from Director of Income Tax (Intelligence) that the assessee had made fixed deposit of Rs.9,62,00,000/- in Tumkur Grain Merchant Co-Operative Bank Ltd. Consequent to the same, an enquiry was initiated wherein it was detected that the assessee had made fixed deposit of Rs.9.62 Crores in Tumkur Grain Merchant Co-operative Bank Ltd. in various branches at Bangalore. It was also detected that for the A.Y 2011-12, the assessee had earned income by way of interest on the fixed deposit amounting to Rs.68,21,469/-. Resultantly, the AO was of the view that the assessee had willfully hidden the fixed deposit of Rs.9.62 Crores and the income earned on it by way of interest. As such, a notice u/s 148 was issued for reopening the assessment along with summons u/s 131. The AO after recording the statement of assessee, made an addition of Rs.68,21,469/- on account of interest earned on undisclosed investment, on the ground that the assessee had committed offences punishable u/s 276C(1) and 277 of I-T Act.

Having heard the parties, the High Court held that,

++ it is stated that the assessee is a partner in various firms, he is also a shareholder in various companies. Therefore, as rightly submitted by the counsel for Revenue, it is impossible to accept that the assessee was not aware of fixed deposit of Rs.9.62 Crores made by him in various branches of Tumkur Grain Merchant Co-Operative Bank Limited at Bangalore or for that matter he had no intention or motive to evade tax. The modus operandi in taking the fixed deposit receipts by showing his three different names also speaks his culpable mental state. There is presumption u/s 278E as to culpable mental state on the part of the assessee while doing so though it is a defence for the accused to prove the fact that he had no such mental state which includes intention, motive or knowledge. He cannot say that he had no knowledge about the fixed deposits of Rs.9 crores and odd for filing returns three years. He cannot plead ignorance about Rs.9 crores deposited in fixed deposits. Though he claims that immediately after coming to know about the mistake he filed revised returns disclosing the fixed deposits and interest earned and paid the income tax, he did so only after the department detected the concealment. In fact, he was informed of the concealment of fixed deposits by issuance of notices. Revised returns filed by him showing fixed deposits and interest earned on fixed deposits cannot be called as voluntary disclosure. Had it not been detected by the income tax authorities, the said income would not have come to limelight. Be that as it may, the Magistrate has taken cognizance for the offences u/s 276C(1) and 277 of I-T Act. The assessee appeared before the Magistrate, the evidence has commenced. If at all the assessee has to establish his innocence during the course of the trial. Therefore, it cannot be said that the continuation of the proceedings would amount to abuse of process of the Court.

(See 2016-TIOL-673-HC-KAR-IT)