Voluntary disclosure does not release assessee from the mischief of penal proceedings - SC
IN an income tax case, during the course of investigation, an assesse made an offer to surrender a sum of Rs.40.74 lakhs with a view to avoid litigation and buy peace and to make an amicable settlement of the dispute, subject to the condition that there would be no initiation of penalty proceedings and prosecution. The AO completed the assessment by adding this amount as “income from other sources”. Then the Department initiated penalty proceedings under which the AO imposed a penalty of Rs. 14.61 lakhs, which the CIT(A) confirmed. On further appeal, the Tribunal held that the amount of Rs.40,74,000/- was surrendered to settle the dispute with the department and since the assessee, for one reason or the other, agreed or surrendered certain amounts for assessment, the imposition of penalty solely on the basis of assessee's surrender could not be sustained.
This time, the Revenue took the matter in appeal to the High Court, which set aside the Tribunal's order and allowed the Revenue appeal. Now, the assesse is before the Supreme Court.
In a judgement delivered yesterday, the Supreme Court held,
The AO shall not be carried away by the plea of the assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”, “amicable settlement”, etc. to explain away its conduct.
The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income.
Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise.
Assessee has only stated that he had surrendered the additional sum of Rs.40,74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department.
Statute does not recognize those types of defences under the explanation 1 to Section 271(1)(c) of the Act.
It is trite law that the voluntary disclosure does not release the Appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty.
So, the Supreme Court dismissed the appeal.