Mere Voluntary Surrender of Income without Disclosing Its’ Source would not avoid Penalty: Delhi HC [Read Order]

A division bench of the Delhi High Court, last day held that mere voluntary surrender of income without disclosing its source cannot rescue assessee from facing penal consequences under the Income Tax Act.

The assessee, in the instant case, is a Medical Practitioner. She surrendered 2,00,00,000/- during search proceedings and filed a revised return declaring that amount as additional income. After the completion of proceedings, the Assessing Officer imposed a penalty on the assessee stating that she had furnished inaccurate particulars of income.

Before the appellate authorities, the assessee submitted that she neither concealed particulars of income or furnished inaccurate particulars and that all material disclosures were made during the assessment proceedings.

The ITAT concluded the matter in favor of the assessee by holding that since the assessee disclosed the income in the revised return which was in consonance with the voluntary statement made by her, the exercise of discretion in assuming jurisdiction and imposing the penalty was unwarranted.

A bench comprising Justices Ravindra Bhatt and A K Chawla held that in the present case, the explanation as to the nature of income or its source has not been explained by the assessee.

Allowing the Revenue’s appeal against the order of the ITAT, the bench said that “the complete failure to furnish any details with respect to the income, which is given could have been the only reasonable basis for deletion of penalty, in the opinion of the court, reinforced the views of the AO and CIT (A) that the revised return was an afterthought, based on the subsequent event of disclosure of `2,00,00,000/-. The court further notices that by reason of Explanation 1 to Section 271(1)(c), an assessee is not absolved of penalty, if she or he “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”. The mere offer, therefore, of the amount during the search in the absence of any explanation for the source of income, renders the assessee’s argument insubstantial in the totality of circumstances.”