Whether Penalty under section 271(1)(c) is attracted on Declaration of additional income after being summoned by DIT(Inv.) if revised return is filed within period u/s 139(5)

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Whether Penalty under section 271(1)(c) is attracted on Declaration of additional income after being summoned by DIT(Inv.) if revised return is filed within period u/s 139(5)

Short Overview : Provisions of section 271(1)(c) are penal in nature and has to be strictly construed. These cannot be extended by way of liberal interpretation to include the cases, which otherwise, do not fall within the purview and scope of section 271(1)(c). In view of this, since income of Rs. 41 lakhs had already been declared in revised return, which was valid and filed within the limitation period prescribed for filing the same, hence, penalty in respect of aforesaid declared income was not leviable.

Assessee was summoned by DIT(Inv.) in respect of entry regarding long-term capital gains thereafter assessee filed revised return declaring said income of Rs. 41 lakhs shown in the original return as long-term capital gains, as ‘Income from other sources’ and paid due taxes thereon. AO took the view that had assessee been not summoned by investigation wing, assessee would not have revised his return to offer for taxation the aforesaid amount. AO further noticed that there was a difference of Rs. 2 lakhs between amount shown by assessee as received from share profits, which was further offered as ‘Income from other sources’ and the amount actually received in bank account of the assessee. Accordingly, AO made addition and levied penalty under section 271(1)(c).

It is held that  Provisions of section 271(1)(c) are penal in nature and has to be strictly construed. These cannot be extended by way of liberal interpretation to include the cases, which otherwise, do not fall within the purview and scope of section 271(1)(c). In view of this, since income of Rs. 41 lakhs had already been declared in revised return, which was valid and filed within the limitation period prescribed for filing the same, hence, penalty in respect of aforesaid income declared was not leviable. So far difference of Rs. 2 lakhs between income shown in revised return and the amount actually received in bank account of assessee was concerned, assessee could not address convincing arguments in this respect. Hence, there was concealment of income in respect of amount and penalty was rightly levied by AO.

Decision: Partly in assessee’s favour.

IN THE ITAT, CHANDIGARH BENCH

SANJAY GARG, J.M. & ANNAPURNA GUPTA, A.M.

Gajjan Singh Thind v. ACIT

ITA No. 1402/Chd/2018 (assessment year : 2014-15)

1 July, 2019

Assessee by: Ashwani Kumar, CA

Revenue by: Abhishek Pal Garg, Sr. Departmental Representative

ORDER

Sanjay Garg, J.M.

The present appeal has been preferred by the assessee against the order of the Commissioner (Appeals)3, Ludhiana ((hereinafter referred to as ‘Commissioner (Appeals)’), dated 24-8-2018, agitating the action of the Commissioner (Appeals) in confirming the penalty of Rs. 16,28,624 levied by the assessing officer (in short ‘A.O.’) under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘Act’).

  1. The brief facts relevant to the issue are that for the assessment year under consideration, the assessee filed original return of income on 31-7-2014 declaring a net taxable income of Rs. 98,36,430 and claimed an exempt income of Rs. 41,45,665 on account of Long Term Capital Gains. The assessee was summoned by the Deputy Director of Income Tax (Investigation) in respect of an entry regarding Long Term Capital Gains videLetter, dated 30-9-2015. Thereafter the assessee filed a revised return on 8-10-2015 declaring the said income of Rs. 41,55,876 shown in the original return as Long Term Capital Gains, as “income from other sources” and paid the due taxes thereupon. Thereafter the assessment under section 143(3) of the Act was carried out in the case of the assessee. During the assessment proceedings, the assessing officer observed that the aforesaid surrender of income of Rs. 41,55,876 as “income from other sources” in the revised return, was an “undisclosed income” of the assessee as the assessee in the original return, had claimed the same to be tax exempt. Had the assessee been not summoned by the Investigation Wing, the assessee would not have revised his return to offer for taxation the aforesaid amount of Rs. 41,55,876. The assessing officer further observed that though the assessee had surrendered the aforesaid amount of Rs. 41,55,876 in front of the DDIT (Investigation), Ludhiana but did not submit the return (ITR-V) online to the Central Processing Centre (CPC), Bangaluru but during scrutiny assessment proceedings, the assessee offered the said income for taxation. That since the assessee had filed the revised return after commencement of scrutiny assessment proceedings and also did not submit ITR-V online to CPC, Bangaluru, he, therefore, held that it was a case of concealment of income. The assessing officer further noticed that there was a difference of Rs. 2,00,015 between the amount shown by the assessee as received from share profits, which was further offered as ‘income from other sources’ and the amount actually received in the bank account of the assessee. On being asked to explain, the assessee accepted that the amount shown in computation was less and agreed to addition of the difference, amounting to Rs. 2,00,015. The assessing officer accordingly, made an addition of the aforesaid amount totaling Rs. 4,35,591 into the income of the assessee under section 68 of the Act. The assessing officer accordingly, initiated the penalty proceedings under section 271(1)(c) of the Act. In the penalty proceedings, the assessing officer held that in view of the above facts, the assessee had concealed the particulars of income amounting to Rs. 43,55,891 and levied the penalty @ 110% of the tax sought to be evaded of Rs. 16,28,624.
  2. The assessee preferred an appeal before the learned Commissioner (Appeals) but remained unsuccessful.
  3. Before us, the learned Counsel for the asssessee has submitted a chart showing the sequence of events, which is reproduced as under:–
Return of Income filed on declaring income at Rs. 98,36,430 31-7-2014
Notice under section 143(2) issued on Served on 19-9-2015 18-9-2015
Case transferred to other charge & Anr. notice under section 143(2) was received on 22-9-2015
Summons issued by DDIT, Ludhiana on 30-9-2015
Return was revised and declared income at Rs. 1,39,92,3107 (including Rs. 41,55,880 on account of profit on sale of Shares) 8-10-2015
Notice under section 142(1) issued on 1-4-2015
Reply to notice under section 142(1), dated 1-4-2016 filed on 11-4-2016
Notice under section 142(1) issued on 9-5-2016
Reply to notice under section 142(1), dated 9-5-2016 filed on 26-5-2016
Order under section 143(3) passed on 20-6-2016
After adding a sum of Rs. 2,00,020 on Account purchase price of shares) assessed at Rs. 1,41,92,330
  1. The assessee has also placed a copy of the ITR-V alongwith computerized acknowledgement of receipt of ITR-V from CPC, Bangaluru to show that the assessee had e-filed the revised return on 8-10-2015. The learned Counsel for the assessee has further invited our attention to the provisions of section 139(5) of the Act, as applicable in the assessment year under consideration, which read as under :–

“139(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.”

  1. The learned Counsel for the assessee, therefore, has submitted that as per the relevant provisions of section 139(5) of the Act, an assessee is entitled to file a revised return within the stipulated period as prescribed under the aforesaid provisions of section 139(5) of the Act, if he discovers any omission or any wrong statement in the return originally filed under section 139(1) of the Act. That in this case, the assessee has filed the revised return on 8-10-2015, which was within the limitation period prescribed for filing the revised return. Hence, the revised return filed by the assessee was a valid return and the assessing officer was supposed to make the assessment taking the revised return as the base return of the assessee. Since there was no addition made by the assessee in respect of the income of Rs. 41,55,876 shown in the revised return as “income from other sources” and due tax was paid thereupon, hence no addition was made by the assessing officer on this account. So far as the difference of Rs. 2,00,015 was concerned, the assessee had voluntarily offered the said difference for taxation. Hence, it was not a case of concealment of income to warrant levy of penalty under section 271(1)(c) of the Income Tax Act.
  2. The learned Departmental Representative, on the other hand, has submitted that since the revised return was filed by the assessee after the assessee was summoned by the Investigation Wing and even after the issuance of earlier notice under section 143(2) of the Act on 18-9-2015, hence the assessee declared the aforesaid income when he was show caused. That it was clear-cut case of concealment of income and furnishing of inaccurate particulars of income.
  3. We have considered the rival contentions and have also minutely perused the relevant provisions of the Act. In the case in hand, though the assessee had filed the revised return after an enquiry was initiated by the Investigation Wing of the Income Tax Department about the Long Term Capital Gains declared by the assessee, yet, the revised return filed by the assessee was within the stipulated period prescribed under the Act. As per the provisions of section 139(5) of the Act, there is no bar to file a revised income even during assessment proceedings but before completion of the assessment subject to the condition that the period prescribed for filing the same has not expired. Under these circumstances, the revised return filed by an assessee will be a valid return. The assessing officer under such circumstances neither can, nor is supposed to make further addition into the income of the assessee in respect of income which has already been declared by the assessee in the validly filed revised return. If there is no addition made to the income of the assessee, there will not be any tax sought to be evaded by an assessee. If there is no tax sought to be evaded, no penalty can be computed or levied under the provisions of section 271(1)(c) of the Act. The reliance in this respect can be placed on the decision of the Coordinate Bench of the Tribunal in the case of‘CIT v. Kulwant Singh’ (2019) 104 Taxmann.com 340 (Chandigarh–Trib.), wherein the following observations have been made by the Coordinate Chandigarh Bench of the Tribunal :–

“15. Before proceedings further, we deem it fit to first discuss the relevant provisions of section 271(1)(c) of the Act as they stood during the relevant period/assessment year under consideration.

“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–

…….

(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) or clause (d), 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 fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.

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

(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.

(Explanation 3.–Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1-4-1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the assessing officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.)

Explanation 4.–For the purposes of clause (iii) of this sub-section, the expression “the amount of tax sought to be evaded”,–

((a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income;

(b) in any case to which Explanation 3 applies, means the tax on the total income assessed (as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148;

(c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished.”

  1. A perusal of the above referred to section 271(1)(c) of the Act reveals that there are two parts of this section. The first part speaks about the charge which may invite penalty i.e. a person has concealed ‘particulars’ of his income or furnished inaccurate particulars of income, he may be directed to pay certain sum by way of penalty as penalty. Now, the second part speaks about the quantum of amount payable. As per clause (iii), the assessing officer may direct such a person against whom the above charge is established to pay in addition to the tax, if any, payable a sum which is not less than, but which shall not exceed three times, the amount of tax sought to the evaded by a reason of such concealment of particulars of income or furnishing of inaccurate particulars of income.
  2. Now, Explanation 1 strongly relied upon by the learned Departmental Representative speaks about of deeming fiction regarding the concealment of particulars of income which speaks that if a person fails to offer an ‘explanation’ or which is found by the concerned income tax authorities to be false or such person could not substantiate in respect of any fact material to the computation of his total income, then the amount added or disallowed in computing total income of such person as a result thereof, shall be deemed to represent the income in respect of which particulars have been concealed. Further, as per the Explanation 3, where a person fails to furnish within the stipulated period his return of income for any assessment year and thereafter, the concerned income tax authority, either the assessing officer or the Commissioner (Appeals) finds that in respect of such assessment year, such person has taxable income, then such person shall be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after expiry of the period aforesaid in pursuance of a notice under section 148 of the Act. Vide Explanation 4, the term “the amount of tax sought to be evaded” has been defined/explained for the purpose of computation of levy of penalty.
  3. A per clause (a) to Explanation 4, where the amount of income tax in respect of which particulars have been concealed or inaccurate particulars of income have been furnished, has the effect of reducing the loss declared in the return or converting that loss into taxable income, then the tax sought to be evaded will the amount which would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars of income have been furnished had such income been the total income; meaning thereby there should be a resultant effect of reducing the loss declared or converting that loss into income by the act or omission of the concerned person for concealment of income or furnishing of inaccurate particulars of income. Then as per the clause (b) of Explanation 4, wherein, in a case to which Explanation 3 applies i.e. where the concerned person fails to file within the stipulated period a return of income despite having taxable income, in that case, the tax sought to be evaded will be the tax on the total income assessed but reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148 of the Act.

As per the above said provision what is material is the evasion of the tax and in that scenario, if a person does not file a return and, hence, does not disclose his particulars of income and meaning thereby concealed his particulars of income but if he before the issuance of notice for the reopening of the assessment under section 148 of the Act, had deposited due taxes and the resultant addition after assessment does not create any liability to pay any further tax, there will be no tax sought to be evaded.

  1. Now coming to the relevant clause (c) to Explanation 4, which is residuary clause which speaks that in any other case, the difference between the total income assessed and the tax that would have been chargeable, had such total income been reduced by the amount of income in respect of which particulars have been concealed which means that the tax payable on the income in respect of which particulars have been concealed or inaccurate particulars of income furnished.
  2. A collective reading of all the three clauses reveal that for the calculation of the quantum of penalty, it is not the income in respect of which particulars have been concealed or furnished or inaccurate particulars of income furnished that is relevant but it is the resultant addition to the income of the assessee on account of such concealed particulars of income or furnishing of inaccurate particulars of income. If despite the detection of concealment of income or furnishing of inaccurate particulars of income, in the resultant effect, there is no addition into the income of the assessee or the assessee has already paid taxes on such income in respect of which particulars have been concealed or inaccurate particulars of income have been furnished, then, as per Explanation 4, there will be no tax sought to be evaded and thereby no penalty will be leviable under section 271(1)(c) of the Act. In our view, clause (c) to Explanation 4 is a residuary clause and can not be segregated and independently interpreted in divorce to clauses (a) or (b) of Explanation 4 to give giving it an entirely different meaning and any such an interpretation, will not be a correct interpretation of the statutory provision. A collective reading of the entire provisions of section 271(1)(c) of the Act reveal beyond doubt that what is material is the resultant addition to the taxable income of an assessee which may invite penalty under the relevant provisions of section 271(1)(c) of the Act. Though the words used in the first part, i.e. charging provision are ‘Particulars’ of income, however, for levy of penalty it is not the ‘Particulars’ of income but rather the ‘quantum of income itself, that is added to the taxable income of the assessee is relevant for the purpose of calculation of the amount of penalty leviable as per the aforesaid provision. Explanation 4 to section 271(1)(c) was introduced vide Taxation Law Amendment Act, 1975. The relevant part ofCircular No. 204, dated 24-7-1976giving explanatory note on the aforesaid inserted provisions reads as under :–

“61.11 New Explanation 4 defines ‘the amount of tax sought to be evaded’. According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure, ‘the tax sought to be evaded’ will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression ‘tax sought to be evaded’ given earlier is a case to which Explanation 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed.”

  1. Even in the Explanation 1, what is relevant is any fact material to computation of total income of any person regarding which such person fails to offer an ‘Explanation’ or Explanation which is found to be false by the Income Tax authorities or an Explanation which is not able to substantiate, then, the amount added or disallowed in computing total income of such person as a result thereof deemed to represent the income in respect of which particulars have been concealed. So, firstly what is relevant is the material fact to the computation of total income. The word ‘computation’ here is relevant which means that the fact must be material which has the effect of any addition or disallowance in the income to be computed after the assessment proceedings and it has also been provided that the amount added or disallowed into the self-assessed income represents the income, particulars of which has been concealed and further a combined reading of the sub-sections (a), (b) (c) and Explanation 4 would show that tax sought to be evaded is the tax payable on such amount in respect of which particulars have been concealed. The word ‘Explanation’ here is not to be applied broadly to include explanation regarding each and every fact or particulars of income such as the source of income, manner of earring of income etc., rather, the word ‘explanation’ here has a limited scope, whereby, it has restricted that the offering of explanation that the material fact which had been detected by the assessing officer has a result of addition of disallowance into the income of the assessee and the assessee has no explanation that why the same be not treated as taxable income of the assessee for that relevant year. The words ‘particulars of income’ though in general will have a wide and broader aspect as to of the relevant particulars such as the source of income, manner of earning of income and genuineness of transaction etc., however, the second part of this section 271(1)(c) of the Act has limited the above wider scope and for the purpose of computation of penalty, stress is given on the resultant addition of an amount to the income of the assessee. The tax thereupon represents the tax sought to be evaded and the penalty can be levied upon such concealed income equal to a sum which may be 100% of 300% of the amount of tax sought to be evaded.
  2. So far as the arguments of the learned Departmental Representative that such an interpretation would defeat the purpose of provisions of section 115BBE substituted by Taxation Law (2nd Amendment) Act, 2016 with effect from 1-4-2017 and section 271AAC of the Act with effect from 1-4-2017. In our view, the above contention of the learned Departmental Representative is not tenable. The relevant section 115 BBE and section 271AAC for the sake of convenience are reproduced as under;–

115BBE. (1) Where the total income of an assessee,–

(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or

(b) determined by the assessing officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a),

the income-tax payable shall be the aggregate of–

(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 16(or set off of any loss) shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) 16a(and clause (b)) of sub-section (1).”

Section 271AAC

“271AAC. (1) The assessing officer may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of ten per cent of the tax payable under clause (i) of sub-section (1) of section 115BBE :–

Provided that no penalty shall be levied in respect of income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D to the extent such income has been included by the assessee in the return of income furnished under section 139 and the tax in accordance with the provisions of clause (i) of sub-section (1) of section 115BBE has been paid on or before the end of the relevant previous year.

(2) No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of the income referred to in sub-section (1).

(3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section.”

  1. Prior to substitution of sub-section (1) of section 115BBE with effect from 1-4-2017, the section 115 BBE was inserted by Finance Act 2012 with effect from 1-4-2013, which reads as under :–

(1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of–

(a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and

(b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a).

  1. Inserted by Finance Act, 2016 with effect from , 1-4-2017

16a Inserted by Finance Act, 2018 with effect from 1-4-2017″

  1. It is pertinent to mention here that prior to 1-4-2013, there was no section 115BBE. Section 115 BBE was inserted vide Finance Act 2012 to tax the income referred to in section 68, 69, 69A, 69 B, 69 C or 69D at a flat rate of 30%. Prior to 1-4-2013, any unexplained income of the assessee either offered by himself or detected by the assessing officer are to be taxed as per the normal rate as prescribed from time to; time. However, during the period of demonetarization in the year 2017, it was noticed that the assessee’s had started taking benefit of the provisions of sections 68, 69, 69A and started depositing their unaccounted for/undisclosed income in the bank account declaring the same as their income of the assessment year under consideration in the return of income and paying taxes @ 30% as provided under section 115BBC of the Act, act of the assessee was taken as contributory factor in failure of the Voluntary Disclosure Scheme. Hence, to curb this practice, the government substituted sub-section (1) of section 115 BBE to provide that wherein in the return of income furnished by the assessee, the total income of an assessee includes an income referred to in sections 68, 69, 69A, 69B and 69 C or section 69D, or otherwise added or determined by the assessing officer during the assessment proceedings under the above provisions, then the tax at the flat rate of 60% will be payable on such an income disclosed or determined. Further to mark a difference between the self-declared income in the aforesaid provisions and the cases where the assessing officer determined/detected such income in the aforesaid sections 68, 69, 69A, 69B and 69 C or section 69D, the penalty provisions of section 271AAC comes into operation which provides that if such an income issuo motodeclared by the assessee in his return, then no penalty is leviable and if it is otherwise detected by the assessing officer, in addition to the tax payable under section 115BBC, such an assessee will be liable to pay penalty equal to a sum computed @ 10% of the tax payable on such unexplained income as per the provisions of section 115BBE of the Act. A cumulative reading of section 271(1)(c) read with section 115 BBE and 271AAC, would reveal that it is not barred under the Act for an assessee to declare an income in his return as an unexplained income. It may otherwise be detected or found by the assessing officer also during the assessment proceedings. Prior to 1-4-2013, the tax on such unexplained income either declared by the assessee or detected by the assessing officer was payable at a normal rates applicable. However, if such an unexplained income was declared by the assessee himself in a return filed under section 139(1) of the Act, and then no penalty was leviable. However, if such an unexplained income is determined by the assessing officer on account of concealment of material facts or on account of furnishing of inaccurate particulars of income relating to the computation of income which has the resultant effect of some addition into the taxable returned income then the penalty is liable to be imposed and computed taking into consideration the amount of tax so payable by the assessee on the such unexplained income detected or added by the income tax authorities.
  2. It is pertinent to mention here that even though, the Government noticed that the aforesaid provisions of sections 68, 69A, 69B, 69C and 69D can be misused by the assessees to circumvent the ‘Voluntary Disclosure Scheme’ and to get their income into rotation/accounted for by paying 30% tax and declaring the same under the aforesaid sections in the return of income yet, the Government still has not come with the penalty provisions in respect of such voluntarily declared income in the return of income, rather has chosen to enhance the tax rate form 30% to 60%. The penalty under section 271AAC of the Act is leviable only if such an income is not declared in the return of income. In view of our above discussion of the matter, since in these cases the assessee have decaled the income in question in the return of income itself, the tax at the maximum rate slab duly paid thereupon, the returned income accepted as such without any addition on this issue, hence, there was amount of tax sought to be evaded, hence, it cannot be said to be a fit case for levy of penalty under section 271(1)(c) of the Act.
  3. Even otherwise, a perusal of clause (iii) to section 271(1) reveals that as per the relevant provisions, the assessing officer may direct a person who as per clause (c) has concealed the particulars of income or furnished inaccurate particulars of such income to pay by way of penalty, 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. So as per the above provisions for the levy of penalty there must be some amount of tax sought to be evaded which should be by reason of the concealment of particulars of income or furnishing of inaccurate particulars of income of such income by the assessee. Hence, if there is no amount of tax sought to be evaded by reason of concealment of particulars of income or inaccurate particulars of income, the penalty cannot be computed or to say that the penalty under the provisions will be ‘Nil’. It is pertinent to mention here that Explanation–1 to section 271(1)(c) of the Act also provides that if a person fails to offer an explanation or explanation offered is found to be false by the Income Tax Authority or he fails to substantiate such explanation, and that fails to prove the such explanation isbona fide, then the amount added or disallowed in computing the total income of such person as a result thereof, shall for the purpose of clause (c) be deemed to represent the income in respect of which particulars have been concealed. It becomes clear from the reading of Explanation-1 that there must be some addition or disallowance in computing the total income of such person in respect to which it is deemed that he has evaded the payment of tax for computing the penalty so leviable.. However, if there is no addition to the income of the assessee either by way of the positive addition or by way of reducing the losses etc., then there may be no amount of tax which the assessee which can be said to be sought to be evaded by the assessee, then under the circumstances, there will not be any penalty leviable or payable by the assessee as per the provisions of the Act and in the circumstances, no penalty will be leviable under section 271(1)(c) of the Act.
  4. The provisions of section 271(1)(c) of the Act are penal in nature and they are required to be strictly construed. These cannot be extended by way of liberal interpretation to include the cases, which otherwise, do not fall within the purview and scope of the provisions of section 271(1)(c) of the Act. In view of this, since the income of Rs. 41,55,876 has already been declared in the revised return, which was valid and filed within the limitation period prescribed for filing the same, hence, in view of our discussion made above, the penalty in respect of the aforesaid income declared is not leviable and the same is accordingly ordered to be deleted.
  5. So far as the difference of an amount of Rs. 2,00,015 between the income shown in the revised return and the amount actually received in the bank account of the assessee is concerned, the learned Counsel for the assessee could not address convincing arguments in this respect. The said difference between the amount offered for taxation and the amount actually received by the assessee was found by the assessing officer during the assessment proceedings. Hence, there was concealment of income in respect of the aforesaid amount. Hence the penalty in respect of the income detected during scrutiny assessment proceedings amounting to Rs. 2,00,015 is confirmed @ 100% of the tax amount sought to be evaded on the said income. In view of our findings given above, the appeal of the assessee is treated as partly allowed.
  6. In the result, the appeal of the assessee is partly allowed.

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