ITAT confirms Penalty for Deliberate Concealment of Income u/s 271(1)(c) [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) recently confirmed the penalty for deliberate income concealment under Section 271(1)(c) of the Income Tax Act.

The assessee Shavva Sudheer Reddy, an individual, filed his Return of Income for Assessment Year 2015-16 admitting a total income of Rs.8,50,600/-.

A search and seizure operation under Section 132 of the Income Tax Act was conducted in the case of Mytrah Energy group wherein the assessee was also covered under Section 132 of the Income Tax Act. Accordingly, a  notice under Section 153A was issued to the assessee.

In response to the notice issued under Section 153A, the assessee filed his return of income admitting a total income of Rs.58,00,600/-.

Assessment under Section 143(3) read with Section  53A of the Income Tax Act was completed by making an addition of undisclosed investment under Section 69B of the Income Tax Act of Rs.36,50,000/- thereby assessing total income at Rs.94,50,000/-.

The Assessing Officer had gone through the facts and circumstances of the case and since the assessee had admitted the undisclosed investment of Rs.36,50,000/- in the sworn statements recorded under Section  131 during the course of assessment proceedings, the Assessing Officer held that the assessee is liable to levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for concealment of income and accordingly passed the penalty order under Section 271(1)(c) of the Income Tax Act determining the penalty of Rs.11,27,850/-.

The CIT(A) upheld the penalty imposed by the Assessing Officer under section 271(1) (C) of the Income Tax Act, 1961. The counsel for the assessee argued that the assessee initially declared an income of Rs. 8,50,600/- in the original return, but after a search was conducted.

The assessee had filed a revised return in response to a notice under Section 153A of the Act, declaring an income of Rs. 58,00,600/-.

The Assessing Officer completed the assessment and determined the total income as Rs. 94,50,600/-, making an addition of Rs. 36,50,000/-, which was admitted by the assessee during the assessment proceedings. This addition consisted of an undisclosed investment of Rs. 30,50,000/- towards the purchase of a property in Bangalore and Rs. 6,00,000/- towards the renovation of a villa in Kondapur.

The counsel further argued that the undisclosed investment was only offered to tax to resolve the issues and avoid prolonged litigation. The counsel referred to a letter from M/s. Trident Constructions, placed in the paper book on page 64, stated that the assessee had paid only Rs. 19,50,000/- and not Rs. 50 lakhs as mentioned in the found papers.

He added that the seller also confirmed that they did not receive any amount exceeding Rs. 19,50,000/-. The counsel contended that although a confirmation letter from the seller was submitted to the Assessing Officer, the seller was never called for examination.

The counsel further argued that the penalty proceedings and assessment proceedings are separate and distinct, allowing the assessee to make a new claim before the authorities during the penalty proceedings.

The counsel for the revenue contended that the CIT(A) had found that even if the property was registered for a lower amount, the assessee had already paid the seller Rs. 50 lakhs, which was undisputed.

Additionally, since the confirmation letter provided by the assessee was undated, CIT(A) did not consider it valid.

The Bench consisting of Judicial Member Laliet Kumar and Accountant Member R.K. Panda observed that the assessee had failed to explain the source of the undisclosed investment of Rs. 30,50,000/- for property purchase and Rs. 6 lakhs for villa interiors.

The explanation of the assessee was that the undisclosed investment offered to avoid litigation was rejected since it was a result of the search and incriminating evidence.

The confirmation from M/s. Trident Constructions was deemed unhelpful due to its updated nature and the fact that the assessee had already paid Rs. 50 lakhs without explaining the source, the tribunal bench noted.

The Bench further added that the additions made under Section 69B of the Income Tax Act were not voluntary but based on seized material during the assessment proceedings.

Therefore, the penalty imposed by the Assessing Officer and upheld by the CIT(A) was observed to be justifiable by the tribunal.

As a result, the appeal filed by the assessee was dismissed by the ITAT.

To Read the full text of the Order CLICK HERE

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