Undisclosed Source of Income

Tax queries 3138 views 4 replies

Yogesh Shah

Managing Corporate Finance

1051 Points Joined March 2009

Hye to all my professional friends,

Before going to my question, I would like to brush up subject knowledge

Section 68 – Cash Credits

Section 69 – Unexplained Investments

Section 69C – Unexplained Expenditures

In respect of above sections, after reading ICAI module, I feel the provisions are OK since an assessee has made some expenses / investments & it is considered as an Income. Hence, it is like a penalty.

BUT MY QUESTION IS IN RESPECT OF –

SECTION 69A – UNEXPLAINED MONEY ETC.

IS THERE ANY PROVISION OF PENALTY IN RESPECT OF SECTION 69A ?

Consider an example of Mr. A ---

(IF IT IS ASSUMED THERE IS NO PENALTY IN RESPECT OF SEC. 69A)

Mr. A got Rs. 10,000/- which he didn’t disclose. Two situations would happen –

Situation 1) Assessing Officer doesn’t disclose that amount – In this situation Mr. A would enjoy the amount without any tax.

Situation 2) Assessing Officer disclose that amount – He will treat that amount as an Income, which in any way Mr. A could do. So, what is harm to Mr. A here ?

If he is enough fortunate, he will enjoy the amount without tax. But, even if is unfortunate & got trapped, he will be left with actual income he has earned with no penalty.

SO, WILL ANYBODY TELL ME WHETHER THERE IS ANY PENALTY KINDA PROVISION IN RESPECT OF SECTION 69A ?

Replies (4)

Vijay Karra

Chartered Accountant

33 Points Joined July 2008

THE PENALTY U/S.271(1)(c) IF IT PROVED THAT THE ASSESSEE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT HAS TO BE PROVED THAT MENS REA EXISTS IN RESPECT OF CIRCUMSTANCES IN THE CASE I.E. THE ASSESSEE HAD INTENTION TO CONCEAL THE INCOME AND IT WAS NOT BONAFIDE MISTAKE.

HOWEVER, RECENTLY IN INDIRECT TAXATION, IN THE CASE OF DHARMENDRA TEXTILE, IT WAS FOLLOWED THAT EVEN IF THE ASSESSEE HAD NOT ANY INTENTION OF CONCEALING THE INCOME, THE PENALTY CAN BE LEVIED AS THE PENALTY IS IN RESPECT OF BREACH OF LAW WHICH IS CIVIL LIABILITY AND NOT CRIMINAL IN WHICH MENS REA HAS TO BE PROVED FOR PROSECUTION.

HOWEVER, IN MY VIEW, SINCE SECTION 271(1)(c) SPEAKS OF CONCEALMENT WHICH ITSELF MEANS "INTENTION TO HIDE SOMETHING" , PENALTY CAN NOT BE LEVIED IN RESPECT OF BONAFIDE MISTAKE MADE.

kapil kumar agrawal

Chartered Accountant

169 Points Joined August 2009

I think there will be penalty for concealment of income and assesseee shall be liable to par penalty equal to amount of tax sought to be evaded...

Mens Rea concept in Direct tax law specifies that assessee had intention to do contravention.. court always assume that assessee had wrong intention even if such non disclosure is due to bonafide mistake...

Assessee has to prove that he has no wrong intention..

so assessee shall be liable to pay penalty along with interest u/s 234

Thanx

Rajeev

www.rkmco.com

985 Points Joined September 2009

It will be treated as concealment and provisons of 271(1)(c) is attracted . First amount will be added to income , tax to be paid on that , and 100% to 300% penalty . The concealor doesnt look that fortunate :)

You cant even hide u/s 273B in this type of concealment and penalty will definitely be levied

Yogesh Shah

Managing Corporate Finance

1051 Points Joined March 2009

Originally posted by :Rajeev
"	It will be treated as concealment and provisons of 271(1)(c) is attracted . First amount will be added to income , tax to be paid on that , and 100% to 300% penalty . The concealor doesnt look that fortunate :) You cant even hide u/s 273B in this type of concealment and penalty will definitely be levied	"