Surrender of Income when Assessee couldn’t prove Bonafide Claim is not ‘Voluntary Disclosure’: ITAT confirms Penalty [Read Order]

The New Delhi bench of ITAT in the case of Varshney Bandhu Foods Pvt. Ltd vs. DCIT has recently confirmed a penalty order, has held that surrender of income when assessee couldn’t prove bonafide Claim is not voluntary disclosure under the Income Tax Act, 1961.

The bench comprising B.P. Jain, Accountant Member, and Sudhanshu Srivastava, Judicial Member were held so while considering the assessee’s appeal against the order of the CIT (A), New Delhi wherein confirmed the imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008- 09.

In instant case, the assessee is in trading and manufacture of Milk Powder and Desi Ghee, who filed his return by declaring loss of 45 lakhs. During an investigation in respect of alleged bogus accommodation entries provided by one Aseem Kumar Gupta, the assessee’s case was reopened u/s 147 of the Act as the name of the assessee figured in the list of beneficiaries of the alleged bogus accommodation entries.

After the investigation, it was found that a sum of Rs 65 lakh was found out of which 55 lakh was surrendered in order to avoid the litigation and for peace of mind. Accordingly, AO imposed a penalty which was also confirmed by the Commissioner of Income Tax (A).

Before the ITAT, Amit Jain, the advocate of Revenue contended that assessee had surrendered the amount during the course of reassessment proceedings and the same was not a voluntary surrender as the impugned transactions had come to the knowledge of the Income Tax Department on receipt of information from the Directorate of Investigation.

The Tribunal observed that “the factual matrix indicates that the assessee made the surrender when it had no explanation to offer. Thus, the assessee could not prove the bona fide of its claim”

The Tribunal bench had a considered opinion that assessee in instant case cannot escape from the penalty as it has failed to offer any explanation and has also failed to lead any cogent or reliable evidence.

To Read the full text of the Order CLICK HERE