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Case Law Details

Case Name : Ajay Jain Vs A.C.I.T. (ITAT Delhi)
Appeal Number : IT Appeal No. 918 (DELHI) Of 2012
Date of Judgement/Order : 01/10/2012
Related Assessment Year : 2007- 08

ITAT DELHI BENCH ‘A’

Ajay Jain

versus

Assistant Commissioner of Income-tax

IT APPEAL NO. 918 (DELHI) OF 2012
[ASSESSMENT YEAR 2007-08]

OCTOBER 1, 2012

ORDER

A. N. Pahuja, Accountant Member

This appeal filed on February 24, 2012, by the assessee against an order, dated February 13, 2012, of the learned Commissioner of Income-tax (Appeals)-XXIV, New Delhi, raises the following grounds :

“1. That under the facts and circumstances, the lower authorities erred in law and on merits in levying and sustaining penalty of Rs. 48,413, Rs. 45,073 under section 271(1)(c) of the Income-tax Act.”

2. The facts, in brief, as per relevant orders are that return declaring income of Rs. 7,22,300 for the assessment year 2007-08 filed on October 22, 2007 by the assessee, engaged in the business of manufacturing and wholesale trading of hydraulic, mechanical presses, machines and hydroclave machines besides trading in iron and steel in the name of Hi-tech Industries, was selected for scrutiny with the service of a notice under section 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act). During the course of assessment proceedings, the Assessing Officer (AO in short) after obtaining details of creditors, issued notice under section 133(6) of the Act to M/s. N. K. Jain and Co. and M/s. GTM Sales Corporation. In the light of the details reflected in the copy of account of the assessee received from the said parties vis-a-vis the books of account of the assessee, the Assessing Officer noticed the following differences :

As per Hi-tech

As per N. K. Jain

Difference

Rs. 1,00,000

nil

Rs. 1,00,000

As per Hi-tech

As per GTM

Difference

Rs. 2,99,715

Rs. 2,52,395

Rs. 47,320

3. To a query by the Assessing Officer, the assessee replied as under :

“In N. K. Jain and Co. Rs. 1 lakh is the opening as well as closing balance of this creditor which is coming from earlier years. In GTM Sales Corporation, there remains a difference of Rs. 47,320 after reconciliation. These creditors and difference is fully explainable. However, due to paucity of time and the matter becoming time barred, therefore, to purchase peace of mind and to bring an end to the issue, these two amounts may be added as income.”

4. Accordingly, in terms of the aforesaid surrender of the amount, the Assessing Officer added the amount of Rs. 1,47,320 and initiated penalty proceedings under section 271(1)(c) of the Act.

5. Subsequently, in response to a show cause notice issued before levy of penalty, the assessee while relying upon the decisions in the case of Ms. Madhushree Gupta v. Union of India [2009] 317 ITR 107; Padma Ram Bharali v. CIT [1977] 110 ITR 54 (Gau.) ; Jain Brothers v. Union of India [1970] 77 ITR 107 (SC) and CIT v. Chetan Dass Lachman Dass [1995] 214 ITR 726, submitted that the amount of Rs. 1 lakh in the account of M/s. N. K. Jain and Co. was opening as well as closing balance of creditor, which was coming from earlier years. In GTM Sales Corporation, difference of Rs. 1,47,320 remained after reconciliation. Due to paucity of time and the matter becoming time barred, the assessee surrendered the amount to purchase peace of mind. However, this surrender was made subject to no penalty. In these circumstances, the learned authorized representative pleaded that there was no concealment. However, the Assessing Officer did not accept the submissions of the assessee on the ground that the aforesaid submissions of the assessee were devoid of any merit. Accordingly, while relying upon Explanation 1 to section 271(1)(c) of the Act, the Assessing Officer imposed a penalty of Rs. 48,413 at 100 per cent. tax sought to be evaded on the aforesaid amount of Rs. 1,47,320.

6. On appeal, the learned Commissioner of Income-tax (Appeals) upheld the levy of penalty as under :

“4.2 As regards ground Nos. 2 and 3, the issue of recording of satisfaction of concealment in the assessment order as well as the issue that the penalty order is without jurisdiction, have been adequately dealt with by the Assessing Officer in the body of penalty order itself. I have carefully considered the contentions made by the appellant as well as the penalty order passed by the Assessing Officer. It is absolutely clear from the penalty order that the appellant surrendered the amounts standing in the name of two creditors only after detection of concealment by the Assessing Officer as there were discrepancies in the balances mentioned by the appellant and by the creditors. Putting conditions on such surrenders after one has been found out, has no meaning whatsoever. I agree with the stand taken by the Assessing Officer in the penalty order and therefore, grounds Nos. 2 and 3 stand dismissed.

4.3 As regards ground No. 4, it is seen that notice under section 274 read with section 271 was issued on December 30, 2009, to which a reply was, given by the appellant on January 6, 2010. Another notice under section 274 read with section 271 was issued to the appellant on June 2, 2010, which was replied by him on June 11, 2010. Therefore, it would not be proper to say that reasonable opportunities were not provided to the appellant before passing the impugned order of penalty. The ground taken by the appellant is therefore dismissed.

4.4 In ground Nos. 5 and 6, the appellant has impugned the penalty on merits and has submitted that in view of letters dated January 6, 2010 and June 11, 2010, no penalty should have been levied. I have perused the penalty order as well as the justification given by the appellant. Regarding creditor Sh. N. K. Jain, the opening and closing balance as per books of accounts of the appellant is Rs. 1 lakh. However, as per information called from Sh. N. K. Jain by the Assessing Officer under section 133(6) of the Act, the closing balance is nil. The appellant submitted that it is an old reconciliation which was pending on the part of the appellant in this case and the appellant still admits his liability which has not been written off in his books. As regards the closing balance of the creditor M/s. GTM Sales Corporation, it was Rs. 2,99,715 as per the books of account of the appellant, while as per information received by the Assessing Officer under section 133(6) of the Act, it was Rs. 2,52,395. Thus there was a difference of Rs. 47,320. The appellant submitted that without admitting any concealment or furnishing of inaccurate particulars of income, he had offered this amount for taxation to purchase peace of mind and to close the assessment proceedings. The appellant has relied on the following case laws :

(a) Addl. CIT v. Prem Chand Garg [2009] 123 TTJ (Delhi) (TM) 433 ;

(b) Smt. Sandhya Verma v. ITO [2009] 30 SOT 29 (Delhi) (URO) ;

(c) CIT v. Harsh Talwar [2011] 335 ITR 200 (Delhi) ;

(d) CIT v. Ashok Taker [2008] 170 Taxman 471 (Delhi) ; and

(e) Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC).

In my opinion, none of these above referred cases is of any support to the appellant for two reasons :

(a) The appellant did not have any evidence or corroborating proof to explain the discrepancies in his books of account with regards to these two creditors, and

(b) The Assessing Officer was in possession of independent material gathered by him under section 133(6) of the Act which conclusively proved concealment and filing of inaccurate particulars by the appellant.

When the appellant found himself totally cornered by the Assessing Officer, he indulged in misplaced magnanimity and surrendered the amount with the condition of no penalty. Unfortunately, the benevolent action of the appellant was too late.

In my opinion, the case of the appellant is clearly covered by the judgments pronounced by the hon’ble Supreme Court of India in the cases of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) and Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC). Therefore, these two grounds of appeal taken by the appellant are dismissed.”

7. The assessee is now in appeal before us against the aforesaid findings of the learned Commissioner of Income-tax (Appeals). The learned authorized representative on behalf of the assessee while carrying us through the impugned order contended that the amount of Rs. 1 lakh was offered to tax as income in terms of the provisions of section 41(1) of the Act in the assessment year 2009-10. While reiterating the decisions relied upon before the learned Commissioner of Income-tax (Appeals), the learned authorized representative contended that the learned Commissioner of Income-tax (Appeals) was not justified in upholding the levy of penalty. To a query by the Bench, as to when the credit in the account of M/s. N. K. Jain and Co. originated the learned authorized representative cold not furnish the exact date of credit or even nature of credit. On the other hand, the learned Departmental representative supported the order of the learned Commissioner of Income-tax (Appeals).

8. We have heard both parties and gone through the facts of the case. Admittedly, the assessee did not reconcile the accounts of the year under consideration in the light of information received under section 133(6) of the Act in the form of copy of account of the assessee from the said parties M/s. N. K. Jain and Co. and GTM Sales Corporation vis-a-vis the assessee’s books and accordingly, vide his letter dated December 7, 2009 surrendered the two amounts as income of the year under consideration to purchase peace of mind. Subsequently, in response to a show-cause notice before levy of penalty, the assessee reiterated that amount of Rs. one lakh in the account of N. K. Jain and Co. was brought forward while difference in the account of GTM Sales Corporation remained irreconciled. Apparently, the assessee did not improve upon his case in the penalty proceedings. In any case, the Assessing Officer did not accept the submissions of the assessee and imposed a penalty of Rs. 48,413 under section 271(1)(c) of the Act. The assessee claimed that penalty imposable worked out to be Rs. 45,073. Admittedly, the assessee did not reconcile the difference either at the assessment stage or even in penalty proceedings. Even before us, no attempt was made to reconcile the difference nor even any material, establishing bona fide of the explanation of the assessee, has been placed before us. Before proceeding further, we may have a look at the relevant provisions of section 271(1)(c) of the Act, which read as under :

“271. Failure to furnish returns, comply with notices, concealment of income, etc. (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,-. . .

(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 any tax 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 Deputy Commissioner (Appeals) or the Commissioner (Appeals) to be false, or

(B) 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 sub-section, be deemed to represent the income in respect of which particulars have been concealed.”

9. As is evident from the aforesaid clause (c) of section 271(1) of the Act, the words used are “has concealed the particulars of his income” or furnished “inaccurate particulars of such income”. Thus, both in case of concealment and inaccuracy, the phrase “particulars of income” has been used. The Legislature has not used the words “concealed his income”. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words “particulars of income” refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which if filed is not accurate, then the assessee would be liable to penalty under section 271(1)(c) of the Act. The expression “has concealed the particulars of income” and “has furnished inaccurate particulars of income” have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word “conceal” means :

“to hide or keep secret. The word ‘conceal’ is con+celare which implies to hide. It means to hide or withdraw from observation ; to cover or keep from sight ; to prevent the discovery of ; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities.”

In Webster’s Dictionary, ‘inaccurate’ has been defined as :

‘not accurate, not exact or correct ; not according to truth ; erroneous ; as an inaccurate statement, copy or transcript.”

10. If the disclosure of facts is incorrect or false to the knowledge of the assessee and it is established, then such disclosure cannot take it out from the purview of the act of concealment of particulars or furnishing inaccurate particulars thereof for the purpose of levy of penalty. The penalty under section 271(1)(c) of the Act is leviable if the Assessing Officer is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In this context, the Honorable Gujarat High Court in the case of A. M. Shah & Co. v. CIT [1999] 238 ITR 415 observed that (page 433) :

“There cannot be a straight jacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and inaccurate particulars of income may at times overlap, as for example when half of the income under a particular head is not at all disclosed, that would be concealed to that extent while the remaining half which is in fact disclosed would, not being his complete disclosure amount to inaccurate particulars of income as regards that constituent item of the return. By the very nature of the assessment proceedings the Income-tax Officer while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the Income-tax Officer, who on being satisfied about such concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. The opportunity of hearing given by the notice under section 271(1)(c), obviously is against such concealment and inaccuracy as is detected in the assessment proceedings.”

11. Indisputably, as a result of inquiries made by the Assessing Officer, the assessee did not reconcile the difference in the account of the aforesaid two parties and instead surrendered the amount as income of the year under consideration. In the course of penalty proceedings, the assessee did not bring any material before the Assessing Officer to rebut the inferences drawn by the Assessing Officer in the course of assessment proceedings. In terms of provisions of section 271(1)(c) of the Act read with Explanation 1 thereto and the judicial pronouncements in the case of B.A. Balasubramaniam and Bros. Co. v. CIT [1999] 236 ITR 977, CIT v. B. A. Balasubramaniam & Bros. Co. [1985] 152 ITR 529, CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14; CIT v. K. R. Sadayappan [1990] 185 ITR 49; Addl. CIT v. Jeevan Lal Sah [1994] 205 ITR 244 and K. P. Madhusudhanan v. CIT [2001] 251 ITR 99, it is well established that whenever there is difference between the returned and assessed income, there is inference of concealment. Explanation 1 to section 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The absence of explanation itself would attract penalty. In the case of New Bijli Foundry v. CIT [1982] 135 ITR 593 (Punj. & Har.), the Honorable Punjab and Haryana High Court have held that the findings recorded in the assessment proceedings are certainly relevant in the penalty proceedings. In the absence of any fresh material during the course of penalty proceedings, specially when the assessee failed to establish that the aforesaid findings of the Assessing Officer during the course of assessment proceedings were based on improper facts or wrong appreciation of the facts, we are afraid that in the penalty proceedings we are unable to take a different view. The onus laid down upon the assessee to rebut the presumption raised under Explanation 1 would not be discharged by any fantastic or fanciful Explanation. It is not the law that any and every Explanation has to be accepted. In our considered view, the provisions of clause (B) of Explanation 1 to section 271(1)(c) of the Act, are clearly attracted and the assessee miserably failed to discharge the onus laid down in this Explanation. In such circumstances, we have no hesitation in upholding the levy of penalty.

12. We find that the legal position is squarely covered by the decision of the Honorable apex court in K. P. Madhusudhanan (supra), wherein, the Honorable court affirmed the decision of the Kerala High Court in CIT v. K. P. Madhusudanan [2000] 246 ITR 218. Considering the effect of the addition of the Explanation to section 271(1) of the Act and the amendment to section 271(1)(c) of the Act by deletion of the word “deliberately”, the Honorable Kerala High Court came to the conclusion that penalty was liable to be imposed in a case where the assessee could offer no acceptable explanation for the income not disclosed or the inaccurate particulars he had furnished in his return, had to be examined and if found unacceptable, penalty was liable to be imposed. The Honorable Kerala High Court observed as follows (head note) :

“Section 271(1)(c) of the Income-tax Act, 1961, is attracted where, in the course of any proceedings under the Act, the Assessing Officer or the first appellate authority is satisfied that :

(a) any person has concealed the particulars of his income ; or

(b) has furnished inaccurate particulars of such income. The expressions ‘has concealed’ and ‘has furnished inaccurate particulars’ have not been defined either in the section or elsewhere in the Act. However, notwithstanding differences in the two circumstances, they lead to the same effect, viz., keeping off a certain portion of income. The former is direct while the latter may be indirect in its execution.

A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanations makes it clear that the statute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation (both after 1964 and 1976) is a rule of evidence.

Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. Explanation 1 automatically comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provision of Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment. The Assessing Officer is not obliged to intimate the assessee that Explanation 1 to section 271(1)(c) is proposed to be applied. The scheme of the provisions does not provide for such a requirement either directly or inferentially. In Sir Shadilal Sugar and General Mills Ltd.’s case [1987] 168 ITR 705 (SC), what the Supreme Court observed was that there may be several reasons for which the assessee may have offered an amount for addition, but that itself is not sufficient to infer concealment. It has not laid down as a rule of general application that whenever such is the case, penalty cannot be imposed. On the contrary, in such cases also the assessee is required to discharge the burden placed by the Explanation appended to section 271(1)(c). In case an explanation is offered, the Assessing Officer is to examine it and find out whether the assessee has been able to establish that there was no concealment.

Held, that in the case at hand, no explanation worth the name was offered by the assessee. The statement made by the assessee was to the effect that hand loans were obtained which were intended to be refunded immediately and, therefore, the entries were not made, but, later on, the arrangement did not work out. Therefore, the amount was offered for taxation. There was a clear admission that the entries were not made on the relevant dates. It was not a case where entries were made on the relevant dates and the source of money was omitted. The entries on the contrary were made on dates when there was sufficient cash balance. The intention to hide the actual state of affairs was clear. The explanation offered was fanciful and vague. The imposition of penalty was valid and the Tribunal erred in cancelling it.”

13. The Honorable Supreme court in the case of K. P. Madhusudhanan (supra) while affirming the aforesaid view held that (page 103) :

“We find it difficult to accept as correct the two judgments aforementioned. The Explanation to section 271(1)(c) is a part of section 271. When the Income-tax Officer or the Appellate Assistant Commissioner issues to an assessee a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent. of the total income assessed under section 143 or 144 or 147, reduced to the extent therein provided, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to the penalty provided by that section. No express invocation of the Explanation to section 271 in the notice under section 271 is, in our view, necessary before the provisions of the Explanation therein are applied. The High Court at Bombay was, therefore, in error in the view that it took and the Division Bench in the impugned judgment was right.”

14. Therefore, in view of the facts and circumstances and in the light of abovenoted authoritative pronouncements, when the assessee failed to discharge the onus laid down upon him in terms of Explanation 1 to section 271(1)(c) of the Act and failed to establish the bona fide of his explanation nor even attempted to reconcile the differences in the aforesaid two accounts even during the penalty proceedings, we have no option but to uphold the findings of the learned Commissioner of Income-tax (Appeals), confirming the levy of penalty. Even otherwise the breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI v. Shriram Mutual Fund [2006] 68 SCL 216 (SC). This view has been reiterated by the Honorable Supreme Court in their decision dated September 29, 2008 in the case of Union of India v. Dharamendra Textile Processors[2008] 306 ITR 277, in Civil Appeal Nos. 10289 to 10303 of 2003. Blameworthiness attached to the assessee with reference to the original return cannot be avoided by accepting the addition proposed by the Assessing Officer after concealment was detected by the assessing authority. Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. The very word “omission” connotes an intentional act. The factual position is the surrender was a veiled attempt to present a mitigating circumstance. That being the position, the surrender of concealed income does not constitute a mitigating circumstance and penalty has been rightly levied. This view is supported by the decision in P. C. Joseph & Bros. v. CIT [2000] 243 ITR 818.

15. In the instant case, the assessee claimed before the Assessing Officer and the learned Commissioner of Income-tax (Appeals) that the addition of Rs. 1,47,320 was accepted in order to purchase peace of mind and to bring an end to the issue. But this explanation was tendered only after the Assessing Officer confronted the evidence in the form of copies of account of the assessee in the books of the aforesaid two parties. Apparently, only when the assessee was cornered, the assessee surrendered the amount. We are of the opinion that the surrender was not at all voluntary. Here, we may have a look at the meaning of word “Voluntary”. The meaning of word “voluntarily” has been deliberated upon by the Honorable Allahabad High Court in the case of CIT v. Rakesh Suri [2011] 331 ITR 458 as under (page 469) :

“41. A Full Bench of the Allahabad High Court in the case reported in Bhairav Lal Verma v. Union of India [1998] 230 ITR 855 (All), while interpreting the word voluntarily given in section 273A of the Act held that ‘voluntarily’ means out of free will without any compulsion. When the assessee concealed the incriminating material with regard to income so disclosed cannot be held to be voluntarily. It shall be appropriate to reproduce the relevant portion from the judgment of Bhairav Lal Verma as under (page 862) :

‘The position thus settled is that the word “voluntarily” in section 273A of the Act means out of free will without any compulsion. Disclosure of concealed income after the Department has seized the incriminating material with regard to the income so disclosed, cannot be voluntary disclosure, because it was made under the constraint of exposure to adverse action by the Department. But it cannot be held as a principle of law that the disclosure of income made after the search/raid cannot be voluntary. It is a question which has to be decided by the Department in each case on the basis of the material on the record. If on record there is incriminating material with regard to the disclosed income, the disclosure cannot be voluntary. But if the Department has no incriminating material with regard to the income disclosed, the disclosure is liable to be treated as voluntary having been made without any compulsion or constraint of exposure to adverse action by the Department. In a case where the assessee has disclosed not only the income regarding which the Department has incriminating material, but has also disclosed the income with regard to which no incriminating material was seized by the Department, the disclosure of the income with regard to which the Department has no incriminating material, is liable to be treated as voluntary. For example, if an assessee is having five accounts and the Department has incriminating material with regard to one of those accounts only, the disclosure of income relating to four accounts with regard to which the Department has no incriminating material, is voluntary, because it was made without any constraint or compulsion, even though the disclosure of the income relating to the account regarding which the Department has incriminating material, is liable to be treated as non voluntary.'”

16. From the said decision it is, thus, clear that voluntarily means out of free will without any compulsion. When the assessee concealed incriminating material in the form of transactions in the aforesaid account of the two parties, surrender cannot held to be voluntarily. Surrender of income after the department has collected incriminating material with regard to the income so disclosed, cannot be voluntary surrender, because it was made under the constraint of exposure to adverse action by the Department. In the present case, the Department has collected sufficient material against the assessee and only after incriminating material collected by the Department was brought to the knowledge of the assessee, the surrender was, thus, made by the assessee under the constraint of exposure to adverse action by the Assessing Officer. We totally agree with the conclusion of the learned Commissioner of Income-tax (Appeals) that the surrender was made only after the detection of concealment by the Assessing Officer and the assessee had nothing to rebut the evidence gathered by the Department and the assessee miserably failed to discharge the initial onus laid down upon the assessee in terms of Explanation 1 to section 271(1)(c) of the Act.

17. As regards the view taken in the decision in Sir Shadlal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705 relied upon by the learned authorized representative, the hon’ble apex court in K. P. Madhusudhanan (supra). discarded the said view. As pointed out by the learned Commissioner of Income-tax (Appeals), facts in the decisions relied upon by the assessee before him, were altogether different. The learned authorized representative has not demonstrated before us as to how these decisions help the case of the assessee. Even otherwise, the decision in Sir Shadi Lal Sugar & General Mills Ltd. (supra) is no longer good law after the insertion of the Explanation as held by the Honorable Supreme Court in the case of K. P. Madhusudhanan (supra). In the case of CIT v. C. Ananthan Chettiar [2005] 273 ITR 401, the hon’ble Madras High Court was considering a similar issue and concluded as under (page 403) :

“Learned counsel for the Revenue submitted that the order of the Tribunal is not in accordance with law, as it has ignored the Explanation to section 271(1)(c) of the Act. Learned counsel also placed reliance on the decision in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC), wherein it was held that the law declared by the court in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 (SC) was no longer applicable by reason of the addition of the Explanation to section 271. That Explanation casts a burden on the assessee to show that the additional income that had not been disclosed was not due to fraud or neglect.

In this case, the assessee offered no explanation at all except to assert that he disclosed the income only to buy peace with the Department and what was disclosed, in fact, was additional income. The reason for not having disclosed the income earlier was not stated. In these circumstances, the Income-tax Appellate Tribunal was in error in setting aside the penalty. The question is answered in favour of the Revenue and against the assessee, in the light of the later decision of the three judge Bench of the Supreme Court in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC).”

18. The Honorable jurisdictional High Court in Jaswant Rai v. CBDT [1982] 133 ITR 19 held that the subsequent act of disclosure of an income would not make any difference and it cannot be said that the assessee had not concealed particulars of their income or had not furnished inaccurate particulars of such income.

19. A very heavy onus was placed on the assessee to explain the difference between the assessed income and the returned income and the assessee in the instant case did not discharge the said onus. In the light of the discussion made above and conduct of the assessee, it is thus clear that all the material facts and particulars relating to the assessee’s computation of income were never disclosed by the assessee, and it is further clear that the assessee did not offer any cogent explanation at all before the Assessing Officer during the penalty proceedings nor even attempted to reconcile the differences pointed out by the Assessing Officer during the course of assessment proceedings in the penalty proceedings. In these circumstances and in the light of the decisions of the Honorable Supreme Court and jurisdictional High Court referred to above, we are of the opinion that the assessee has not been able to discharge the burden that lay upon them by Explanation 1 to section 271(1)(c) of the Act. Therefore, we have no hesitation in upholding the order of the learned Commissioner of Income-tax (Appeals) in confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act. Consequently, ground raised in the appeal is dismissed.

20. No other plea or argument was made before us.

21. In the result, appeal is dismissed.

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