Kanhaiyalal Rameshwar Das Vs ACIT (ITAT Jaipur)
Both appeals by the Assessee, a partnership firm of the Bundi Silica Group, Kota engaged in sandstone mining, challenged confirmation of penalties of ₹ 4.04 lakh (A.Y. 2012-13) & ₹ 2.79 lakh (A.Y. 2014-15) levied u/s 271(1)(c).
A search u/s 132 was conducted on 05-02-2015 in the group. Pursuant to notice u/s 153A, the Assessee filed return on 08-06-2015 declaring income of ₹ 92.85 lakh. Later, to rectify an omission of ₹ 13.09 lakh (undisclosed investment in plot surrendered during search), it voluntarily filed a revised return on 19-10-2015 declaring ₹ 1.06 crore & paid due tax. Assessment u/s 143(3) r.w.s. 153A was completed at ₹ 1.40 crore, later rectified u/s 154 to ₹ 1.62 crore by disallowing unabsorbed depreciation. CIT(A) ubsequently deleted that disallowance & reduced the assessed income to ₹ 1.06 crore — exactly as per the revised return. Despite this, AO imposed penalty of ₹ 4.04 lakh u/s 271(1)(c) holding that the Assessee had “concealed” ₹ 13.09 lakh. CIT(A) confirmed the penalty, treating the surrender as search-related income unearthed from seized material.
Assessee’s contention
- Penalty notice u/s 274 was vague, with both limbs (“concealment” & “inaccurate particulars”) not struck off — showing non-application of mind, invalidating the proceeding.
- The additional ₹ 13.09 lakh was voluntarily included before assessment; AO finally accepted the same figure — there was no difference between returned & assessed income.
- When revised return is filed before assessment, it substitutes the original return (Dhampur Sugar Mills Ltd., 90 ITR 236 (All); PCIT v. Babubhai Ramanbhai Patel, 84 taxmann.com 32 (Guj)).
- Cited Reliance Petroproducts (SC) & CIT v. Suresh Chand Mittal (SC) that bona fide disclosure to buy peace cannot invite penalty.
- Relied on ITAT Jodhpur (Poonam Marble Pvt Ltd., 40 taxmann.com 164) & Udaipur Central Co-operative Bank Ltd. (59 taxmann.com 471 (Raj)) to stress that once revised return is accepted in full, penalty fails.
Tribunal’s findings
- ITAT found that the AO accepted the revised return & made no addition beyond it. Thus, the income was not concealed but voluntarily corrected before assessment.
- It relied on jurisdictional High Court rulings (Udaipur Central Co-operative Bank Ltd.) holding that mere filing of revised return does not mean concealment if no material proves deliberate suppression. Also referred to Reliance Petroproducts (SC) that “making a wrong claim cannot mean furnishing inaccurate particulars.”
- Since the AO did not clearly specify the charge in the notice & no independent evidence of concealment existed, the penalty was held unsustainable in law.
- Revised return filed before assessment replaces the original return; no concealment when AO accepts it in full.
- Penalty notice vague & without specific limb = invalid.
- Penalty u/s 271(1)(c) deleted for both A.Ys. 2012-13 & 2014-15; Appeals Allowed.
This decision underscores that penalty u/s 271(1)(c) cannot stand where the taxpayer has self-corrected an omission before assessment & AO has accepted the revised figures. It also reaffirms that a vague penalty notice vitiates the proceeding, echoing SSA’s Emerald Meadows & Manjunatha Cotton (Karnataka HC). In essence, transparency before detection is not concealment, & penalty should not be used as a mechanical tool for voluntary rectifications.
