REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 9772 OF 2013 (Arising out of Special Leave Petition (Civil) No.18389 of 2013) MAK Data P. Ltd. Appellant Versus Commissioner of Income Tax-II Respondent JUDGMENT K.S. Radhakrishnan, J. 1. Leave granted. 2. Appellant-assessee filed his return of income for assessment year 2004-05 on 27th October, 2004, declaring income of Rs.16,17,040/- along with Tax Audit Report. case was selected for scrutiny and notices were issued under Sections 143(2) and 142(1) of Income Tax Act. During course of assessment proceedings, it was noticed by Page 1 2 Assessing Officer (AO) that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed had been impounded. These documents had been found in course of survey proceedings under Section 133A conducted on 16.12.2003 in case of M/s Marketing Services (a sister concern of assessee). AO then proceeded to seek information from assessee and issued show-cause notice dated 26.10.2006. By show-cause notice, AO sought specific information regarding documents pertaining to share applications found in course of survey, particularly, bank transfer deeds signed by persons, who had applied for shares. Reply to show-cause notice was filed on 22.11.2006, in which assessee made offer to surrender sum of Rs.40.74 lakhs with view to avoid litigation and buy peace and to make amicable settlement of dispute. Following are words used by assessee:- Page 2 3 offer of surrender is by way of voluntary disclosure of without admitting any concealment whatsoever or with any intention to conceal and subject to non-initiation of penalty proceedings and prosecution. 3. AO after verifying details and calculations of share application money accepted by Company completed assessment on 29.12.2006 and sum of Rs.40,74,000/- was brought to tax, as income from other sources and total income was assessed at Rs.57,56,700/-. 4. department initiated penalty proceedings for concealment of income and not furnishing true particulars of its income under Section 271(1)(c) of Income Tax Act. During course of hearing, assessee contended that penalty proceedings are not maintainable on ground that AO had not recorded his satisfaction to effect that there has been concealment of income/furnishing of inaccurate particulars of income by assessee and that surrender of income was conditional surrender before any investigation in matter. AO did not accept those Page 3 4 contentions and imposed penalty of Rs.14,61,547/- under Section 217(1)(c) of Act. assessee challenged that order before Commissioner of Income Tax (Appeals) by filing Appeal No.2/07-08, which was dismissed vide order dated 17.2.2010. assessee filed appeal being ITA No.1896/Del/10 before Income Tax Appellate Tribunal, Delhi. Tribunal recorded following findings :- assessee s letter dated 22.11.2006 clearly mentions that offer of surrender is without admitting any concealment whatsoever or any intention to conceal. Tribunal took view that amount of Rs.40,74,000/- was surrendered to settle dispute with department and since assessee, for one reason or other, agreed or surrendered certain amounts for assessment, imposition of penalty solely on basis of assessee s surrender could not be sustained. Tribunal, therefore, allowed appeal and set aside penalty order. 5. Revenue took up matter in appeal before High Court by filing ITA No.415 of 2012. High Court Page 4 5 accepted plea of Revenue that there was absolutely no explanation by assessee for concealed income of Rs.40,74,000/-. High Court took view that in absence of any explanation in respect of surrendered income, first part of clause (A) of Explanation 1 is attracted. Holding so, judgment of Tribunal was set aside and appeal filed by Revenue was allowed. 6. We have heard counsel on either side. We fully concur with view of High Court that Tribunal has not properly understood or appreciated scope of Explanation 1 to Section 271(1)(c) of Act, which reads as follows :- Explanation 1 Where in respect of any facts material to computation of total income of any person under this Act, -- (A) Such person fails to offer explanation or offers explanation which is found by Assessing Officer or Commissioner (Appeals) or Commissioner to be false, or (B) Such person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to same and material to computation of his total income have been disclosed by him, then amount added or disallowed in computing total income of Page 5 6 such person as result thereof shall, for purposes of clause (c) of this sub-section, be deemed to represent income in respect of which particulars have been concealed. 7. AO, in our view, shall not be carried away by plea of assessee like voluntary disclosure , buy peace , avoid litigation , amicable settlement , etc. to explain away its conduct. question is whether assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises presumption of concealment, when difference is noticed by AO, between reported and assessed income. burden is then on assessee to show otherwise, by cogent and reliable evidence. When initial onus placed by explanation, has been discharged by him, onus shifts on Revenue to show that amount in question constituted income and not otherwise. 8. Assessee has only stated that he had surrendered additional sum of Rs.40,74,000/- with view to avoid Page 6 7 litigation, buy peace and to channelize energy and resources towards productive work and to make amicable settlement with income tax department. Statute does not recognize those types of defences under explanation 1 to Section 271(1)(c) of Act. It is trite law that voluntary disclosure does not release Appellant-assessee from mischief of penal proceedings. law does not provide that when assessee makes voluntary disclosure of his concealed income, he had to be absolved from penalty. 9. We are of view that surrender of income in this case is not voluntary in sense that offer of surrender was made in view of detection made by AO in search conducted in sister concern of assessee. In that situation, it cannot be said that surrender of income was voluntary. AO during course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer Page 7 8 deeds duly signed, have been impounded in course of survey proceedings under Section 133A conducted on 16.12.2003, in case of sister concern of assessee. survey was conducted more than 10 months before assessee filed its return of income. Had it been intention of assessee to make full and true disclosure of its income, it would have filed return declaring income inclusive of amount which was surrendered later during course of assessment proceedings. Consequently, it is clear that assessee had no intention to declare its true income. It is statutory duty of assessee to record all its transactions in books of account, to explain source of payments made by it and to declare its true income in return of income filed by it from year to year. AO, in our view, has recorded categorical finding that he was satisfied that assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of Income Tax Act, 1961. Page 8 9 10. AO has to satisfy whether penalty proceedings be initiated or not during course of assessment proceedings and AO is not required to record his satisfaction in particular manner or reduce it into writing. scope of Section 271(1)(c) has also been elaborately discussed by this Court in Union of India vs. Dharmendra Textile Processors (2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589. 11. principle laid down by this Court, in our view, has been correctly followed by Revenue and we find no illegality in department initiating penalty proceedings in instant case. We, therefore, fully agree with view of High Court. Hence, appeal lacks merit and is dismissed. There shall be no order as to costs. .. ..J. (K.S. Radhakrishnan) J. (A.K. Sikri) New Delhi, Page 9 10 October 30, 2013. Page 10 MAK Data P. Ltd. v. Commissioner of Income-tax-II