By TIOL News Service

NEW DELHI, MAR 06, 2018: THE issue is - Whether mere making of a voluntary surrender of additional income by filing revised return during survey proceedings, will not absolve assessee from levy of penalty, in absence of any explanation for the source of income. YES IS THE VERDICT.

Facts of the case:

The Assessee, a medical practitioner by profession, filed her return declaring total income of Rs. 9,18,060/-. During the pendency of its assessment, a survey was conducted by the Revenue at assessee's business premises, consequent to which she surrendered an additional income of Rs. 2,00,00,000/-. This resulted in initiation of penalty proceedings. On appeal, the CIT(A) opined that the assessee could not be said to have concealed material particulars and filed inaccurate returns. On further appeal, the ITAT held that since the assessee disclosed the income in the revised return which was in consonance with the voluntary statement made by her, the exercise of discretion in assuming jurisdiction and imposing penalty was unwarranted. The ITAT was also of the opinion that the AO was wrong in invoking jurisdiction without first premising the notice upon one or the other condition i.e. with respect to concealing of income or filing inaccurate particulars.

High Court held that,

++ it is seen that in the present case, the assessee has merely made a voluntary surrender but did not offer any explanation as to the nature of income or its source. The observations in MAK Data case are that the authorities are not really concerned with the statement, whether voluntarily or otherwise and have to see whether there was any non disclosure of material facts, or income. The complete failure to furnish any details with respect to the income, which if given could have been the only reasonable basis for deletion of penalty, in the opinion of the court, reinforced the views of the AO and CIT(A) that the revised return was an afterthought, based on the subsequent event of disclosure of Rs. 2,00,00,000/-. The court further notices that by reason of Explanation 1 to Section 271(1)(c), an assessee is not absolved of penalty, if she or he "offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him". The mere offer therefore, of the amount during the search in the absence of any explanation for the source of income, renders the assessee’s argument insubstantial in the totality of circumstances.

(See 2018-TIOL-388-HC-DEL-IT)