Case Law Details
RELEVANT PARAGRAPH
15. Though a search and seizure operation was conducted on 31.05.2003, but no indiscrirninating material was found therein. It seems that consequent upon the search in response to a notice under section 153A the assessee opted that the original return be taken as a return under the aforesaid provision. Thereafter, a questionnaire was issued requiring the assessee to inter-alia file the details of loans and gifts given or taken in this year. The assessee furnished the details of the gifts from NRI persons, furnished copies of gift deed. The receipt of gifts is through banking channel. The course of event narrated above showed that the Assessing Officer .did not have any-information to -come to the conclusion that the gifts were not genuine so as to treat them as undisclosed income of the assessee. Until this stage there was nothing on record about the gifts and within four days of the receipt of this notice, the assessee offered the amounts of gifts for taxation by way of a letter. The assessments were completed on the basis of the returns and the surrender made by the assessee without further going into any details of the gifts. This fact, by itself, it is true, may not lead to a conclusion that the assessee had not furnished inaccurate particulars of income in the returns filed by him but cannot be lost sight of in the light of the fact that there is no material on record also to suggest that assessee concealed particulars of income, there being no mention of the impugned gifts in the returns or as addition by way of capital annexed with the returns. The position regarding genuineness or otherwise of the gifts remained the same at the time of filing the return and after receipt of the questionnaires. By offer made by the assessee, one may infer that at all times the assessee was aware that something was amiss with regard to gifts. But in view of the affidavits and the gift deeds filed it might not be concluded that it was sure case of in genuineness of the gifts. It cannot be said that he would not be able to discharge the initial burden cast on him under section 68 of the Act. In any case the assessee could be said to have substantiated its explanation as regards to Explanation to section 271(1)(c) of the Act. The gifts are surrendered to be taxed in order to buy peace and to avoid litigation in the matter. It was made subject to the condition that penalty proceedings be not initiated. Therefore, the decision in the case of K.P. Madhusudhanan (Supra) was not applicable, on the contrary CIT v/s Suresh Chandra Mittal 251 ITR 9 (SC) would be squarely applicable.
16. It is true that letter of surrender does not obliterate the original return and suppression of income therein but when the surrender was made before detection or without any material on record suggesting income withheld, it would be a case of voluntary offer and would in that case be not a concealment of income by the assessee. It is true that the assessments cannot be made by bargaining and the Assessing Officer is within his right to consider the whole issue as per law for initiation and levy of the penalty, but on the basis of material on record.
17. After the insertion of Explanation in 1976 the decision in the case of Sir Shadilal Sugar and General Mills Ltd. may no longer be a good law as held by the Supreme Court in the case of K.P. Madhusudhanan (Supra), but the fact remains that it was an voluntary action of the assessee to come forward and state its true income and therefore it would not be a case of concealment by the assessee at the time when the assessment was taken up.
18. After the Full Bench decision of the Supreme court in Dharmendra there is no requirement of mens rea to be established and it is only a civil liability and therefore K C Builders decision of the Supreme Court holding that the word “concealment” inherently involves the mental condition of the assessee with regard to the default may not be a good law. However, that does not mean that the provision contained in Explanation 1 are given a complete go bye and are not applicable. The surrender of the amount after receipt- of the questionnaire cannot lead to an inference that it was not voluntary in absence of any material on record suggesting it to be bogus or untrue or the income the assessee before such surrender.
19. The fact, whether there is concealment of income or whether inaccurate particulars thereof have been furnished is essentially a question of fact. To find out that or to decide which, all the attending circumstances have to be taken into account. The question is at what point of time this material feet is to be found out. Generally it is with reference to the return of income and at that time it is to be seen whether there was concealment of income from or finishing of inaccurate particulars thereof in the return of income chargeable to tax. But there may be cases, where an income is not declared in the return or the particulars of income shown inaccurately in the return but assessee on realization of mistake, omission or misdeed rectifies that and correct himself and cleans his breast can he still be accused of concealment though in the return there has been the omission? By the time the AO takes up the issue and comes across the information in his possession, if the assessee makes up the deficiency and offers the income or furnishes accurate particulars he, in our opinion, cannot be held guilty of concealment of income or furnishing of inaccurate particulars of his income. Any action rectified relates back to original act and to the date and time of filing the return. When the AO starts scrutiny of the return and initiate assessment proceedings there is nothing concealed and the inaccuracy, if any, disappeared. Therefore the assessee cannot be held guilty of concealment Section 271(l)(c) fixes the charge of concealment and it states :
“271. (1) If the Assessing Officer or the Commissioner (Appeals)or the Commissioner in the course of any proceedings under this Act, is satisfied that any person
(a) *******
(b)*******
(c) has concealed the particulars of his income or furnished inaccurate
particulars of such income, or…….
he may direct that such person shall pay by way of penalty,—…. ….
(iii) in the cases referred to in clause (c)……… .. in addition to tax, if any, payable
by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of
particulars of his income…… …… or the furnishing of inaccurate particulars of such
income.
Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,—
(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the. Commissioner (Appeals) or the Commissioner to be false, or
(&) such person 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,
then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed.”
20. A perusal of this provision clearly show that it is in the course of any proceedings under the Act, assessment proceedings in this case, that the AO is to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It is thus to judged at this stage and if at this stage he has declared the correct income and/or furnished accurate particulars of his income then there is no scope, in our opinion, to arrive at the satisfaction by the AO because at that stage there in no such concealment. It disappeared by an action of the AO. In this case the assessee has no doubt did not show the amounts received as alleged gifts as his income, but no details of loans are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the AO requiring him to furnish details of any loans/gifts, if any, the assessee offered the amounts received as alleged gifts as his income and before it could be detection by the AO. There was thus no concealment of the particulars of his income nor there remained furnishing of any inaccurate particulars of his income. It vanished before it could be detected.
21. The correct and accurate disclosure may be by filing the revised return or by furnishing the particulars of such income before the detection by the AO. The mere fact that the assessee had not revised returns or that the offer was by letter to avoid harassment to the assessee and the donors who were non-resident persons, it cannot convert an offer to tax as concealment of income. Therefore, in my opinion the assessee has not furnished inaccurate particulars of the income in the returns before detection by the Revenue.
22. Therefore, mere omission of the surrendered income from the return of an item of receipt does neither amount to concealment” nor furnishing of inaccurate particulars of income unless and until there is some evidence to show exist or some circumstances found from which it can be gathered that the omission was attributable to an intention or a desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. Apart from the surrender there was nothing more on record to hold the assessee guilty of offering the said amount on detection of the concealment. Even in assessment order there is nothing of that sort. In the assessment proceedings the A.O. has raised some specific question not based upon information in the possession of the Revenue. These are:
Sr.No.4 “Bank Statement of all bank accounts maintained by you individually or jointly with any other person during the financial year along with narration of each debit/credit entry.
Sr. No. 9 Cash Flow statement for the financial year under consideration.
Sr.No. 10 Had you taken/given any loan/gift during the financial year under consideration? If yes, please furnish details.”
23. On a perusal of the questionnaire, it is evident, is general in nature without specifying the names of the donor or any other such details on the basis which it could be presumed that the A.O. had information to call for specific information. The query “Had you taken/given any loan/gift during the financial year under consideration? ” itself suggests that the Revenue was not sure enough whether any gift was there, Mere asking of a question or simply raising, of-an enquiry without anything further does not tantamount to detection of concealment. There was neither any detection, nor any information in the possession of the Revenue, nor the manner of its communication to the assessee which might lead to a detection of concealment.
