Back
2014 Supreme(Mad) 2720
High Court of Judicature at Madras
R. SUDHAKAR & G.M. AKBAR ALI, JJ.
S. Sathyanarayanan
Versus
The Assistant Commissioner of Income Tax
Tax Case (Appeal) Nos.608 to 613 of 2013 & Connected M.Ps.
Decided on: 25-08-2014
For the Appellant:S. Sridhar, Advocate.
For the Respondent: T.R. Senthil Kumar, Standing Counsel.
The burden is on the assessee to provide a cogent and reliable explanation for undisclosed income, and the absence of such explanation can lead to the presumption of concealment, justifying penalty proceedings under Section 271(1)(c) of the Income Tax Act.
Headnote:
Penalty - Income Tax - Section 271(1)(c) - 2002-03, 2003-04, 2003-04, 2004-05, 2004-05, 2005-06 - The court upheld the penalty under Section 271(1)(c) of the Income Tax Act, considering the lack of proper explanation for undisclosed income and the absence of justification by the assessee, as well as the findings of the authorities and the precedent set by the Supreme Court.
Fact of the Case:
The assessee filed appeals against the order of the Income Tax Appellate Tribunal for the assessment years 2002-03, 2003-04, 2003-04, 2004-05, 2004-05, and 2005-06, challenging the levy of penalty under Section 271(1)(c) of the Income Tax Act. The Assessing Officer made additions as undisclosed income and initiated penalty proceedings based on unexplained cash deposits.
Finding of the Court:
The court found that the assessee failed to provide a proper explanation for the undisclosed income and did not justify the cash deposits, as well as not disclosing the income in the return filed. The court upheld the penalty under Section 271(1)(c) of the Income Tax Act, considering the lack of proper explanation and the findings of the authorities.
Issues: The issues revolved around the sustainability of the penalty under Section 271(1)(c) of the Income Tax Act, overlooking the distinction between the acceptability of the explanation offered for the additions made in the computation of taxable total income and the reasonableness of such explanation in the penalty proceedings, as well as the binding precedents cited by the assessee.
Ratio Decidendi: The court's decision was influenced by the lack of proper explanation for the undisclosed income, the absence of justification by the assessee, and the findings of the authorities, as well as the precedent set by the Supreme Court, which raised a presumption of concealment when a difference was noticed between reported and assessed income, shifting the burden to the assessee to provide cogent and reliable evidence.
Final Decision: The court upheld the penalty under Section 271(1)(c) of the Income Tax Act for the assessment years 2002-03, 2003-04, 2003-04, 2004-05, 2004-05, and 2005-06, and disposed of the appeals accordingly.
R. Sudhakar, J.
1. The above Tax Case (Appeals) are filed by the assessee as against the order of the Income Tax Appellate Tribunal for the assessment years 2002-03, 2003-04, 2003-04, 2004-05, 2004-05 and 2005-06 raising the following substantial questions of law:
"1. Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty under Section 271(1)(c) of the Act overlooking the distinction between the acceptability of the explanation offered for the additions made in the computation of taxable total income which formed part of the assessment orders passed by the respondent as against the reasonableness of such explanation in the penalty proceedings and further overlooking the explanation 1 below the Section 271(1)(c) of the Act?
2. Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty under Section 271(1)(c) of the Act overlooking the binding precedents cited including the decisions of Supreme Court as well as this Hon'ble Court wherein the levy of penalty under similar circumstances was held to be not automatic?"
2. The brief facts are as follows:
In the course of search conducted under Section 132 of the Income Tax Act in the business premises and the residential premises of K. Sundararaj, father of the assessee on 21.09.2005, certain amount of cash, books of accounts and documents in respect of the assessee were seized. Hence, the Assessing Officer issued notices to the assessee under Section 153C of the Income Tax Act on various dates. In response to the same, the assessee filed his return of income disclosing certain income. The Assessing Officer scrutinized the assessment and in respect of each assessment year, the Assessing Officer made additions as undisclosed income and initiated penalty proceedings. The details of the various bank deposits, which according to the Assessing Officer remained unexplained, are as follows:
Assessment Year Additions on which penalty levied quantum of penalty levied
2002-03 unexplained investment in banks - Rs.3,00,000/- Rs.83,807/-
2003-04 unexplained investment in banks - Rs.2,50,000/- Rs.71,464/-
2003-04 unexplained investment in banks - Rs.11,00,000/- Rs.3,30,000/-
2004-05 unexplained investment in banks - Rs.10,40,000/- Rs.3,18,716/-
2004-05 unexplained investment in banks - Rs.2,00,000/- Rs.60,000/-
2005-06 unexplained investment in banks - Rs.14,90,000/- Rs.5,13,785/-
In one case, more particularly, for the assessment year 2003-04, after finalising the assessment proceedings notice to reopen the assessment was issued on 26.3.2008 to the assessee on the ground that in the previous year relevant to the impugned assessment year, the assessee had made cash deposit of Rs.11.00 lakhs in the Indian Overseas Bank, Santhome Branch. The Assessing Officer held that though the assessee had stated that he had received the amount from the entity, namely, S&S Foundations (P) Ltd., the cash book of the said entity did not show any such payment. This was the finding in respect of all the cash deposits referred to above. Hence, the Assessing Officer imposed penalty under Section 271(1)(c) of the Income Tax Act holding that there has been concealment of particulars of income and also furnishing of inaccurate particulars for such income. As against the said order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who upheld the order of the Assessing Officer.
3. As against the said order, the assessee preferred further appeal before the Income Tax Appellate Tribunal. The Tribunal, after following the decision of the Delhi High Courtin ITA No.415/2012 dated 21.01.2013 titled as CIT v. MAK Data Ltd, observed that the assessee had not given any proper explanation with regard to the source of income and confirmed the penalty proceedings initiated by the Assessing Officer. Aggrieved by the said order, the assessee preferred the present Tax Case (Appeals) raising the above-mentioned substantial questions of law.
4
