Case Law Details
P.V. Ramana Reddy Vs. ITO (ITAT Hyderabad)- Assessing Officer is vested with a discretionary power to levy or not to levy any penalty in a deserving case. In the case of Hindustan Steel Ltd Vs. State of Orissa (83 ITR 26) (SC), held that penalty should not be imposed merely because it is lawful to do so. The Assessing Officer has to exercise his discretion judiciously. If an assessee files the revised return though at a later stage or disclosed true income, penalty need not be levied. No doubt, merely offering additional income will not automatically protect the assessee from levy of penalty but in a given case where the assessee’s case, came forward with additional income though after deduction on account of that the assessee was not in a position to explain properly, the seized material and express remorse, in his conduct un-hesitantly, the Assessing Officer might have to exercise the discretion in favor of such assessee as otherwise the expression ‘may’ in section 271(1)(c) of the Act remains redundant. If it is to be understood that in a case of admitted concealment penalty is not automatic. The discretion vested in the officer should be used not to levy the penalty. In our opinion, the case before us is most befitting case to exercise such discretion, particularly there is divergent of opinion among the lower authorities as well as the Tribunal while deleting or sustaining the addition. It shows that there is no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. Further as seen from the facts of the case, to avoid litigation the assessee accepted the additions or made fresh offer in the course of the proceedings before the lower authorities. After the Assessing Officer had the clinching evidence of concealment then the offer may not have been accepted and the same should have been proceeded on the basis of material available on record. The lower authorities relied on proceedings before assessing officer for levying the penalty. The same do not constitute admission for the purpose of levying penalty. The addition made on the basis of more or less on the offer made by the assessee and the Assessing Officer not brought enough incriminating material for concealment and there is no material for establishing the concealment independently in the given facts and circumstances of the penalty is not leviable and the same is deleted.
INCOME TAX APPELLATE TRIBUNAL, HYDERABAD
I.T.A. No. 1852/Hyd/2011 : A.Y. 1999- 00
I.T.A. No. 1853/Hyd/2011 : A.Y. 2000-01
I.T.A. No. 1854/Hyd/2011 : A.Y. 2001-02
I.T.A. No. 1855/Hyd/2011 : A.Y. 2002-03
I.T.A. No. 1856/Hyd/2011 : A.Y. 2003-04
I.T.A. No. 1857/Hyd/2011 : A.Y. 2005-06
Shri P.V. Ramana Reddy
vs.
Income Tax Officer
Date of pronouncement: 06.01.2012
O R D E R
PER CHANDRA POOJARI, AM:
These six appeals by the assessee are directed against the different orders of the CIT(A)-IV, Hyderabad dated 22.9.2011 for the assessment year 1999- 2000 to 2003- 04 and A.Y. 2005- 06. Since all these appeals belong to same assessee and the issue involved in all these appeals being identical, they were heard together and are being disposed of by this common order for the sake of convenience.
2. The grievance of the assessee in these appeals is with regard to levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961.
3. Brief facts of the issue are that there was a search operation conducted in this along with the persons and concerns related to Sujana Group of companies on 7th October, 2004. Consequent to the search, notice u/s. 153A of the Act was issued. In response, returns of income for A.Ys. 1999- 2000 to 2003- 04 and A.Y. 2005- 06 were filed on 13.12.2006 declaring incomes as under:
A.Y. Income returned (Rs.)
1999-00 2,25,000
2000-01 1,95,400
2001-02 1,95,400
2002-03 1,90,400
2003-04 1,85,400
2004-05 9,22,000
2005-06 9,54,040
3.1 During the course of search and seizure operation, documents identified as A/PVR/1 to A/PVR/7 were seized from the residence of the assessee. These seized documents along with a document identified as A/SUIL/100 seized from the premises of M/s. Sujana Universal Industries Ltd., have been considered by the Assessing Officer for computing undisclosed income in the same of the assessee. During the course of search and post search investigations, statements under oath were recorded. The statements were recorded on 7.10.2004 and 1.12.2004 u/s. 132(4) of the Act during the course of search and subsequently on 14.2.2004 u/s. 131 of the Act.
3.2 On the basis of seized documents A/PVR/1 to A/PVR/4, additions have been made for A.Ys. 1999-2000, 2000-01 and 2001-02 for amounts of Rs. 36,00,000, Rs. 1,05,00,000 and Rs. 2,03,00,000, respectively. On the basis of A/PVR/5 to A/PVR/7 substantial amounts added as undisclosed income consisting of original amounts and interest as narrated in the grounds of appeal. A show cause letter was issued on 28.9.2006 by the Assessing Officer wherein various issues were raised and additions proposed on the basis of A/PVR/5 to A/PVR/7 and A/SUIL/100. The details of additions on the basis of A/PVR/1 to A/PVR/4 and A/PVR/5 to A/PVR/7 are as under:
A/PVR/1 to A/PVR/4
| A.Y. | Amount(Rs.) |
| 1999-2000 | 36,00,000 |
| 2000-2001 | 1,05,00,000 |
| 2001-2002 | 2,03,00,000 |
The above amounts have been held by the Assessing Officer as interest paid.
3.3 A/PVR/5 to A/PVR/7
| A.Y. | Principal (Rs.) | Interest (Rs.) | Total (Rs.) |
| 2002-03 | 2,38,59,880 | 57,26,371 | 2,95,86,251 |
| 2003-04 | 64,95,120 | 72,85,200 | 1,37,80,320 |
| 2004-05 | 84,94,920 | 93,23,980 | 1,78,18,900 |
| 2005-06 | 1,18,35,0800 | 1,21,64,280 | 2,39,98,380 |
The above additions have been made since the amounts mobilised from groups as PVRR and VR1 remain unexplained.
3.4 A/PVR/5 to A/PVR/7
| A.Y. | Amount (Rs.) |
| 2002-03 | 3,36,00,000 |
| 2002-04 | 3,36,00,000 |
| 2004-05 | 3,36,00,000 |
| 2005-06 | 3,36,00,000 |
3.5 While making the above additions on account of interests, the Assessing Officer has observed that based on loose sheet bundles A/PVR/7, average interest payment per month comes to Rs. 28,00,000. The Assessing Officer noted that particulars of interest payment were available for eight months i.e., for September 2004, August 2004, July 2004, October 2002, September 2002, November 2001, September 02 and July 2003. Accordingly, the Assessing Officer estimated unaccounted interest payment for above assessment year at Rs. 3,36,00,000 @ Rs. 28,00,000 per month.
3.6 Further during the course of search, statement of Sri P.V. Ramana Reddy was recorded where he stated that the relevant transactions relate to Sujana Group and other investment companies belong to Sujana Group. However, here also it was stated that he had no interest in the Sujana Group of companies and no knowledge of the contents of the loose documents in A/PVR/5 to A/PVR/7. His answers recorded on 7.10.2004 vide question Nos. 13 to 15 are extracted as under:
Q. No. 13 In the course of the search at your residential premises, certain documents have been found and the same details have been inventoried. Your attention is invited to the documents found and inventoried as Annexure A/PVR/7 (45 loose sheets). Please go through this bundle and explain the transactions recorded on each of these sheets:
Answer – Sheet Nos. 39 to 45, these sheets contain rough calculations of the amounts mobilized by me on behalf of Sujana Group of companies towards share application money. The details in these sheets are in my own hand writing. I must have mobilized approximately a crore of rupees for and on behalf of Sujana Group of companies. I shall compile the actual details of the funds mobilized towards share application money and also towards unsecured loans and hand loans and submit the list by 11.10.2004.
Q. No. 14 – Your attention is again invited to the transactions noted on sheet Nos. 35, 33, 29, 27, 2, 20, 19, 15, 14, 11, 10, 8, 4 and 3 which contain the transactions marked against your name (VR1, VR2, VR & PVRR). Please explain the transactions marked against your name in these sheets:
Answer – The transactions marked against VR1, summary (on page Nos.) in the above sheets give the details of the funds mobilised by me for the Sujana Group. However, only a part of the funds shown against VR1 has actually been mobilized by me. Part of the transactions/funds have not been mobilised by me in this account. The funds shown in VR2 account for the months July, August and September shown as mobilised by me have not actually been mobilised by me. The Sujana Group just have mentioned my name.
Q. No. 15 – I am showing you loose documents found during the course of search in your residence. The loose sheets numbering 1 to 100 are summarized as Annexure A/PVR/6. Please go through the documents and explain the same.
Answer – Sheet Nos. 29 to 36 and 37 relate to share application money collected for various group companies for September 2002 of Sujana Group by different persons … Page Nos. 41 to 49 relate to share application money collected for various group companies of Sujana Group for October 2002 by different persons. page Nos. 50 to 55 relate to November, 2001 collection of share application money by Sujana Group…
Q. No. 16 – I am showing you sheet No. 36 of Annexure A/PVR/6. In the said sheet at Sl. No. 3 initials PVRR are mentioned. Do you agree whether PVRR refers to your name?
Answer – Yes, PVRR refers my name.
3.7 Similarly he has also explained relevant documents in his statements dated 1.12.2004 u/s. 132(4) of the I.T. Act. The relevant extract is taken as under:
Q. No. 11 Please peruse reply to Q. No. 14 wherein you had stated that a part of the funds were mobilised by you. Do you confirm?
Answer – Yes, I do confirm.
Q. No. 12 Please identify VR 1?
Answer – VR-1 stands for funds mobilised between 1995 to 1997. VR-2 represents funds mobilized prior to 1995.
Q. No. 13 Can you identify the persons from whom the funds were mobilized.
Answer – No.
3.8 The above extracts only shows that assessee is not unaware of details contained in the seized documents, which were taken from his custody contrary to what was explained by him before the Assessing Officer. However, the assessee has stated time and again that the amounts mobilised in the name of different groups relate to Sujana Group of concerns and the money relates to mobilisation of share capital. However, the assessee was never able to establish his claim that the money mobilised as narrated in A/PVR/5 to A/PVR/7 relates to Sujana group or particular persons/concerns of Sujana group and the money was on account of share capital. Neither during the course of search or post search investigations or assessment proceedings, details or evidences were furnished to support the claim that the transactions are in the nature of share capital mobilisation and for Sujana Group of companies. Accordingly, the documents seized from the assessee are presumed to belong to him and his efforts to explain away the transactions therein during the course of assessment proceedings and earlier have miserably failed.
3.9 The Assessing Officer has made substantial addition for A.Ys. 1999-2000 to 2001-02 on the basis of seized documents A/PVR/1 to A/PVR/4. However, nowhere in the assessment order the entries have been discussed or narrated by the Assessing Officer. The Assessing Officer had not given the basis for arriving at the figures taken by him for addition. It has not been explained how the figures have been arrived at. Show-cause letters or questionnaire issued by the Assessing Officer has not covered A/PVR/1 to A/PVR/4. In the course of appellate proceedings the assessee filed receipt and payment account and offered income as follows:
Rs. in lakhs
| Financial Years | ||||
| 1998-99 | 1999-2000 | 2000-2001 | 2001-02 | |
| Total receipts | 8.84 | 34.22 | 126.51 | 25.31 |
| Total payments | 3.07 | 31.46 | 167.80 | 26.35 |
| Net Balance | 5.77 | 2.76 | 40.29 | 1.04 |
3.10 Thus, the assessee offered total sum of Rs. 2,86,83,440 as per transactions as relate to him though it pertain to the period 1995. The above offer is on the basis of figures as provided by the assessee as follows:
(Rs. in Lakhs)
Name of theassessee |
FY 1998-99 |
FY 1999-2000 |
FY 2000-2001 |
FY 2001-2002 |
||||
Receipt |
Payment |
Receipt |
Payment |
Receipt |
Payment |
Receipt |
Payment |
|
Surendra |
1.34 |
1.10 |
15.62 |
4.00 |
5.00 |
63.20 |
9.50 |
15.25 |
Jitin Kumar |
2.50 |
1.94 |
0.00 |
14.00 |
50.01 |
58.05 |
||
Y. Sivalinga Prasad |
5.50 |
0.03 |
18.60 |
13.23 |
72.50 |
46.44 |
12.00 |
11.10 |
Surendra Reddy |
– |
– |
– |
0.15 |
– |
0.11 |
||
Y. Rishi Kanya |
3.81 |
|||||||
Total |
8.84 |
3.07 |
34.22 |
31.46 |
127.51 |
167.80 |
25.31 |
26.35 |
Total receipts |
8.84 |
34.22 |
127.51 |
25.31 |
||||
Total payments |
3.07 |
` |
31.46 |
167.80 |
26.35 |
|||
Net balance |
5.77` |
2.76 |
-40.29 |
-1.04 |
||||
3.11 However, there was a payment relating to Y. Jitin Kumar at Rs. 8 lakhs in the financial year 2001-02 which was not reflected in the payment as shown above at Rs. 26.35 lakhs in the FY 2001-02 which worked out now after adding Rs. 8 lakhs at Rs. 34.35 lakhs. Thus, the income offered by the assessee on the basis of A/PVR/1 to A/PVR/4 was taken as under:
A.Y. Amount (Rs. in lakhs)
1999-2000 5.77
2000-2001 2.76
2001-2002 40.29
2002-2003 9.04
3.12 The CIT(A) accepted the additional income offered by the assessee for A.Ys. 1999-2000 to 2001-2002 at Rs. 5.77 lakhs, Rs. 2.76 lakhs, Rs. 40.29 lakhs as mentioned above. He directed the Assessing Officer to substitute the above additions in place of Rs. 36 lakhs, Rs. 105 lakhs and Rs. 203 lakhs for the A.Ys. 1999-2000, 2000-01 and 2001-02. For A.Y. 2002-03 he directed to accept Rs. 9.04 lakhs.
3.13 Regarding computation of peak credit relating to A.Y. 2002-03 and A.Y. 2005-06, the CIT(A) observed that the assessee was not able to establish the claim with details and evidences. Though it was stated that transactions relate to Sujana Group. Further M/s. Sujana Group has also not confirmed the submissions of the assessee. The CIT(A) was of the opinion that the Assessing Officer had added interest twice to a substantial extent. However, on the basis of submissions made by the assessee during the course of appeal proceedings had given a conclusion that the amount mentioned in the seized material has “principals” has been considered as assessee’s own funds and, therefore, no addition should be made on account of interest payment. As per the assessee’s own submissions filed before the learned CIT(A), the peak credit of the amount mentioned as per seized material up to 31.10.2001 arrived at Rs. 15,09,50,605. However, the peak credit as on 1.7.2004 is Rs. 15,35,29,936. He accordingly added the peak credit of Rs. 15,09,50,615 and Rs. 25,79,321 for the A.Y. 2002-03 and A.Y. 2005-06, respectively.
3.14 From these peak amounts the CIT(A) further allowed deduction and arrived at a peak credit of Rs. 8,34,78,490 and the same was considered as income of the assessee for the A.Y. 2002-03. However, on further appeal the same was reduced to Rs. 2,43,21,090 by the Tribunal. For A.Y. 2003-04, the assessee admitted negative cash balance of Rs. 1,84,47,285 and the same was treated by the Assessing Officer as addition the returned income.
3.15 For the A.Y. 2005-06 the peak credit was arrived at Rs. 25,79,321 and added to the assessee’s returned income on which the assessee though went in appeal before the ITAT where this ground was not pressed. Finally the Assessing Officer levied penalty u/s. 271(1)(c) of the Act for these assessment years as follows:
A.Y. Amount (Rs.)
1999-00 1,74,100
2000-01 96,000
2001-02 13,18,000
2002-03 73,83,000
2003-04 53,11,000
2005-06 8,75,000
3.16 On appeal, the CIT(A) confirmed the penalty on the reason that the assessee came up with the offer of additional income for various years only when he was pushed to the wall and he faced with huge demand raised by way of assessment orders which was affirmed by the Tribunal, were indeed based on seized material, post search investigations and the statement of the assessee himself.
4. The learned counsel for the assessee submitted that for the A.Ys. 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 addition on account unexplained credit on the basis A/PVR/5 to A/PVR/7 was deleted and substituted only for A.Ys. 2002-03 and 2005-06. Further he submitted that for the A.Y. 1999- 2000 the assessee offered Rs. 5,77,000 and the same was considered as undisclosed income by the Assessing Officer and penalty at Rs. 1,74,100 was levied which is incorrect and the same has to be deleted. For A.Y. 2000-01 a sum of Rs.2,76,000 was offered as undisclosed income by the assessee and the same was considered by the Assessing Officer and penalty of Rs. 96,000 was levied. For A.Y. 2001-02 the assessee offered additional income of Rs. 40,29,000. The CIT(A) confirmed Rs. 40.29 lakhs for A.Y. 2001-02. The Assessing Officer levied penalty for this year at Rs. 13,18,000. For A.Y. 2002-03 the Assessing Officer erred in considering the additional income offered by the assessee at Rs. 2,43,21,090 and levied penalty of Rs. 73,83,000. For the A.Y. 2003-04, the assessee offered negative peak cash balance of Rs. 1,84,47,285, the Assessing Officer considered the same to levy penalty of Rs. 58,11,000. For the A.Y. 2005-06 unexplained peak cash credit was arrived at by the CIT(A) at Rs. 25,79,321 and the Assessing Officer considered the same for levying penalty at Rs. 8,75,000.
4.1 The learned counsel for the assessee submitted that the additions sustained by the appellate authorities and accepted by the assessee on reason that the assessee does not want to prolong the litigation and that itself cannot be construed as furnishing inaccurate particulars of income or concealment of income. Thus, the CIT(A) substituted the addition made by the Assessing Officer by some new figures on the basis of certain seized material marked as A/PVR/5 to A/PVR/7. On the same basis the Tribunal deleted certain additions and reduced the unexplained income of the assessee. According to the learned counsel for the assessee there is no conclusive evidence to show that the assessee has actually concealed the income. A mere omission or negligence would not constitute a deliberate act of omission or concealment of income. According to the learned counsel for the assessee in order to justify the levy of penalty two factors must exist. There must be some material or circumstances leading to the reasonable conclusion that the amount does not represent the assessee’s income. It is not enough for the possible levy of penalty that the amount has been assessed as income and circumstances must show that there was conscious concealment or act of furnishing inaccurate particulars on the part of the assessee. The discrepancies noticed by the lower authorities may be enough to make addition while framing assessment but the same is not enough for levy of penalty u/s. 271(1)(c) of the Act. Levy of penalty is not automatic based upon the additions made in the assessment. The genuine basis in computation of income by the assessee as compared to the Department cannot itself be a reason for levy of penalty. There is no deliberate default and mistake. Only it is a bona fine mistake while making the computation of income. He relied on the following judgements.
4.2 ACIT vs. VIP Industries (112 TTJ 289) wherein it was held that in all cases where addition ms made the penalty was not automatically follow. The true effect is that mens rea is not to be proved by the revenue. If the ‘A’ can successfully prove his bona fide by tendering a valid explanation then, penalty cannot be levied. Hence, in case of genuine difference between AO and the assessee, penalty cannot be levied.
4.3 In the case of CIT vs. Siddharth Enterprises (184 Taxman 460) the Punjab & Haryana High Court held that penalty can be imposts only when there some element of deliberate default and not when there is a mere mistake or bona fide claim.
4.4 CIT vs. Reliance Petro Products Pvt. Ltd. (322 ITR 158) wherein it was held that “particulars” means details of the claim made where information given is not found to be incorrect, assessee cannot be held guilty of furnishing inaccurate particulars of income for the purpose of levy of penalty u/s. 271(1)(c) of the Act. It was further held that mere making a wrong claim does not amount to furnishing inaccurate particulars of income. In the absence of finding that any details supplied by the assessee is incorrect or false penalty cannot be levied.
4.5 In the case of Mahavir Irrigation Pvt. Ltd. vs. CIT [314 ITR 150 (AT)] wherein it was held that since assessment proceedings and penalty proceedings were separate and distinct, the finding in the assessment proceedings could not be regarded as conclusive for the purposes of penalty proceedings and could not be taken as conclusive for the purpose of holding the assessee liable for concealment and imposing penalty under section 271(1)(c) of the Act. Since neither of the two events, i.e., signing of contract between the DTC and DMIL or placement of order by DTC on DMIL for the supply of buses had taken place during the year under consideration, the assessee could reasonably claim that no fees had become payable to the assessee for the year under consideration and there was no accrual of income on account of such fees. The claim of the assessee was based on an interpretation given to the relevant clauses and having been accepted by the Assessing Officer while completing the assessment, the interpretation given by the assessee was a possible one. Moreover, all the relevant particulars relating to the said claim were duly furnished by the assessee along with its return of income including a copy of the memorandum of understanding. The claim of the assessee treating the amount of Rs. 3 crores received from DMIL as security deposit was bona fide as it was based on the interpretation given to the memorandum of understanding and although the claim was not found to be acceptable in the quantum proceedings on the merits, it was not a case of concealment as envisaged in section 271(1)(c) of the Act attracting levy of penalty especially where all the material facts relevant to the said claim were duly furnished by the assessee before the Assessing Officer. (The penalty imposed was set aside).
4.6 In the case of Roshan Lal Madan vs. ACIT (67 ITD 33) the Tribunal held that Explanation 1, which is relevant in the instant case, consists of two clauses; clause (A) provides that the assessee fails to offer an explanation or offers an explanation which is found to be false. Clause (B) provides for the situation where the assessee is not able to substantiate the explanation and fails to prove that the explanation is bona fide. In the situations envisaged by the aforesaid clauses, deeming fiction would come into play and the amount added in the total income would be deemed to represent the income in respect of which the particulars have been concealed. This Explanation enacts a rule of evidence which has the effect of shifting the burden of proof on the assessee. It is well settled that the degree of proof required for proving a negative fact would not be as heavy as required for proving a positive fact. In the case of proving a negative fact, the test of preponderance of probabilities would apply. If the assessee is able to furnish a bona fide and plausible explanation in respect of material facts, the burden cast by the Explanation would be discharged and the case would not be hit by the mischief of the said Explanation. Further, merely because the explanation furnished by the assessee was considered unsatisfactory or unreasonable would not ipso facto justify the invocation of clause (A) to levy penalty under section 271(1)(c).
5. On the other hand, the DR submitted that in response to the notice issued u/s 143(3), the assessee filed its return of income on 13.12.2006 declaring income as follows:
| Sl.No. | Assessment year | Return of Income |
| 1 | 1999-2000 | 2.25 lakhs |
| 2 | 2000-01 | 1,95,400/- |
| 3 | 2001-02 | 1,95,400/- |
| 4 | 2002-03 | 1,90,400/- |
| 5 | 2003-04 | 1,85,400/- |
| 6 | 2004-05 | 9,22,000/- |
| 7 | 2005-06 | 9,54,040/- |
Later the Assessing Officer made the additions. The assessee at various stages offered income for various assessment years at Rs.2,86,83,440/-.
6. The Learned Departmental Representative has submitted that since the assessee was not able to explain the transactions as they are very old and he came up with an offer on search of documents seized during the course of search and sworn statement recorded, suggested the concealment of income. He further submitted that the additions were not offered on voluntary basis; rather the assessee was non cooperative during the search as well as during the assessment proceedings. There was a deliberate attempt to conceal the income of the unaccounted transactions which was within the personal knowledge of the assessee and he had attempted to maintain of such records for his personal memory. Because of only search actions, these transactions came to light and this case is fit to confirm the penalty. He relied on the judgement in the case of Union of India & Others Vs Dharmendra Textiles Processors & Others (306 ITR 277) (SC).
7. We have heard both the parties and perused the materials available on record. We have also carefully gone through the materials. Admittedly, the assessee owned the unaccounted transactions only after search action taken place in the case of the assessee on 7.10.2004. The assessee offered additional income as he was not in a position to explain the seized material A/PVR/1 to A/PVR/4, admitting that those records connected to be receipts and payments happening in the inter group company and had been maintained for the purpose of his memory. He stated that the transactions are very difficult for him to reconcile with records as the same are very old. However, he admitted the receipts and payments for year wise, for all the persons. Finally, he offered a sum of Rs.2,86,83,440/- as income from these transactions. Accordingly, the CIT(A) while deciding the quantum issue was also of the opinion that the amount mentioned in the seized material as ‘principle’ had been considered as the assessee’s own funds, no further addition on account of interest payment have been required. However, the additional income offered by the assessee was not on voluntary basis, nor any offer was made during the course of post search enquiry or during the assessment proceedings. The additional income was offered only when the assessee was pushed to the wall as he was faced with the huge demand raised by way of assessment order. Considering these facts, while deciding the penalty issue, the First Appellate Authority confirmed the levy of penalty. The CIT(A) was of the opinion that though the transactions were within the knowledge of the assessee, it was not brought to the knowledge of the department, until he was compelled to admit to explain the same.
7.1 Further, according to CIT(A), the explanations offered by the assessee did not prove that he is bona fide. When the assessee admits that he has committed a wrong, it cannot be said that his statement is false or not bona fide. The assessee herein admitted his mistake and offered the additional income for taxation. Thus, the question remains to be considered is whether the penalty is automatic, even if the assessee corrects his mistake. Neither the First Appellate Authority nor the Tribunal is not completely clear about the exact amount of concealment. The assessee herein admitted that there is certain lapse on his part. In this case, the Assessing Officer has made additions towards principle and interest, the CIT(A) deleted certain additions there after substituted some other additions, Tribunal also deleted certain additions which is evident from the below mentioned Table:
| S. .N | Assessment year | Return filedby the assessee |
Assessed by the Assessing Officer | Determined by the CIT(A) | Final income determinedby Tribunal order |
| 1 | 1999-2000 | 1,95,400 | 10,695,400 | 4.71 lakhs | No appeal |
| 2 | 2000-2001 | 1,95,400 | 210.92 lakhs | 48.21 lakhs | 40.21 lakhs |
| 3 | 2002-2003 | 190.4 lakhs | 633.76 lakhs | 834.78 lakhs | 243.21 lakhs |
| 4 | 2003-2004 | 1.85 lakhs | 666.13 lakhs | 186.33 lakhs | No appeal |
| 5 | 2004-05 | No appeal | |||
| 6 | 2005-06 | 9.54lakhs | 594.11 lakhs | 43.94lakhs | 35.33 lakhs |
The above table shows that there is no conclusive evidence while determining the income by the lower authorities for levying of penalty u/s 271(1)( c). The Assessing Officer is required to satisfy himself about the concealment of income or furnishing inaccurate particulars of such income. It gives discretion to the Assessing Officer to exonerate the assessee from levy of penalty even in case where the assessee has concealed the income or furnish incorrect particulars of income.
The expression in section 271(1)(c) reads as follows:
“If the Assessing Officer ………… is satisfied that in person ……..
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income;
He may direct …….”
8. That above provision shows that the Assessing Officer is vested with a discretionary power to levy or not to levy any penalty in a deserving case. In the case of Hindustan Steel Ltd Vs. State of Orissa (83 ITR 26) (SC), held that penalty should not be imposed merely because it is lawful to do so. The Assessing Officer has to exercise his discretion judiciously. If an assessee files the revised return though at a later stage or disclosed true income, penalty need not be levied. No doubt, merely offering additional income will not automatically protect the assessee from levy of penalty but in a given case where the assessee’s case, came forward with additional income though after deduction on account of that the assessee was not in a position to explain properly, the seized material and express remorse, in his conduct un-hesitantly, the Assessing Officer might have to exercise the discretion in favor of such assessee as otherwise the expression ‘may’ in section 271(1)(c) of the Act remains redundant. If it is to be understood that in a case of admitted concealment penalty is not automatic. The discretion vested in the officer should be used not to levy the penalty. In our opinion, the case before us is most befitting case to exercise such discretion, particularly there is divergent of opinion among the lower authorities as well as the Tribunal while deleting or sustaining the addition. It shows that there is no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. Further as seen from the facts of the case, to avoid litigation the assessee accepted the additions or made fresh offer in the course of the proceedings before the lower authorities. After the Assessing Officer had the clinching evidence of concealment then the offer may not have been accepted and the same should have been proceeded on the basis of material available on record. The lower authorities relied on proceedings before assessing officer for levying the penalty. The same do not constitute admission for the purpose of levying penalty. The addition made on the basis of more or less on the offer made by the assessee and the Assessing Officer not brought enough incriminating material for concealment and there is no material for establishing the concealment independently in the given facts and circumstances of the penalty is not leviable and the same is deleted.
9. In the result, the appeals of the assessee are allowed.
Order pronounced in the open court on 6.1.2012
very nicely analaysied the provisions of penalty leviable u/s.271(1)(c) of the IT Act by the Hon’ble Tribunal. The approach of the department that in case of every acceptance for addition autotmatically leads concealement of income or amounts furnishing of inaccurate particulars of income is an erroneous view. Huge penalty when levied, more discretion and judicious approach is needed. Though I do not mean that there should not levy of penalty at all u/s. 271(1)(c) of the Act, when the burden to prove is a negative fact , more discretion in favour of the assesee needs to be exercised and the decision of the Hon’ble Apex court in Hindusthan Steels requires to be appplied. A very reasonsed order of the Tribunal explaining legal position.