MAK DATA P. LTD. versus COMMISSIONER OF INCOME TAX-II

Citation: [2013] 10 S.C.R. 570 · Decided: 30-10-2013 · Supreme Court of India · Bench: K.S. RADHAKRISHNAN · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2013) 10 S.C.R. 570 
MAK DATA P. LTD. 
V. 
COMMISSIONER OF INCOME TAX-II 
(Civil Appeal No. 9772 of 2013) 
OCTOBER 30, 2013 
[K.S. RADHAKRISHNAN AND A.K. SIKRI, JJ.] 
Income Tax Act, 1961 - s.271 rlw s.274 - Explanation 1 
to s.271(1)(c) - Scope of - Concealment of income - Penal 
C proceedings against appellant - Challenge to - Held: 
Explanation to s.271(1) raises a presumption of concealment, 
when a difference is noticed by the AO, between reported and 
assessed income - Burden is then on the assessee to show 
otherwise, by cogent and reliable evidence - When the initial 
D onus placed by the Explanation, is discharged by him, the 
onus shifts on the Revenue to show that the amount in 
question constituted the income and not otherwise - The law 
does not provide that when an assessee makes a voluntary 
disclosure of his concealed income, he had to be absolved 
E from penalty - On facts, the surrender of income by appellant-
assesse was not voluntary in the sense that the offer of 
surrender was made in view of detection made by the AO in 
the search conducted in the sister concern of the assessee -
Had it been the intention of the assessee to make full and 
F true disclosure of its income, it would have filed the retum 
declaring an income inclusive of the amount which was 
surrendered later during the course of the assessment 
proceedings - Clearly the assessee had no intention to 
declare its true income - The AO had recorded a categorical 
G finding that he was satisfied that the assessee had concealed 
true particulars of income and was liable for penalty 
proceedings under s.271 r/w s.274 - No illegality found in the 
department initiating penalty proceedings against the 
appel/ant-assessee. 
H 
570 
MAK DATA P. LTD. v. COMMISSIONER OF INCOME 571 
TAX-II 
The Appellant-assessee filed its return of income. A 
The case was selected for scrutiny and notices were 
Issued under Sections 143(2) and 142(1) of the Income 
Tax Act. The Assessing Officer (AO) issued show-cause 
notice seeking specific information regarding certain 
documents pertaining to share applications found In the 
B 
course of survey proceedings under Section 133A 
conducted in the case of a sister concern of the 
assessee. In reply to _.the show-cause notice, the 
assessee made offer to surrender a sum of Rs.40.74 lakhs 
with a view to avoid litigation and buy peace and to make c 
an amicable· settlement of the dispute. The AO after 
verifying the details and calculations of the share 
application money accepted by the appellant-Company 
completed the assessment, and a sum of Rs.40,74,000/-
was brought to tax, as "income from other sources" and 
D 
the total income was assessed at Rs.57,56,700/-. The 
department thereafter initiated penalty proceedings for 
concealment of income and not furnishing true 
particulars of its income under Section 271(1)(c) of the 
Income Tax Act. The AO imposed a penalty of 
Rs.14,~1,547/- under Section 217(1)(c) of the Act. The 
E 
Tribunal set aside the penalty order, holding that the 
am~t 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, imposition of penalty solely on 
F 
the basis of assessee's surrender could not be sustained. 
The High Court set aside the judgment of Tribunal holding 
that there was absolutely no explanation by the assessee 
for the concealed income of Rs.40,74,000/-; and in 
absence of any explanation in respect of the surrendered 
G 
income, the first part of clause (A) of Explanation 1 to 
Section 271(1)(c) of the Act was attracted. 
Dismissing the appeal, the Court 
H 
572 
SUPREME COURT REPORTS 
[2013} 10 S.C.R. 
A 
HELD: 1.1. The Tribunal has not properly understood 
\., 
or appreciated the scope of Explanation 1 to Section · 
271 (1 )(c) of the Income Tax Act. The AO should not be 
carried away by the plea of the assessee like "voluntary 
disclosure", "buy peace", "avoid litigation", "amicable 
B settlement", etc. to explain away its conduct. 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 
c 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 in

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