2015 (10) TMI 2044 - AT - Income Tax

Tribunal cancels penalties for voluntary disclosure of income, following Gujarat High Court precedent.

Natubhai Gomanbhai Patel Versus Asstt. Commissioner of Income-tax, Central Circle, -1, Surat

The Tribunal allowed both appeals, directing the deletion of penalties imposed under section 271(1)(c) for Assessment Years 2004-05 and 2005-06. The ... Penalty u/s 271(1)(c) - undisclosed investment - Held that:- In the case of assessee the return under section 153A was furnished on 8.11.2007 and thereafter it was revised on 20.10.2008 and the assessment order was passed by the AO on 26.12.2008; which means that the return was revised before the completion of the assessment by AO. As regards imposition of penalty under section 271(1)(c), as decided by Hon’ble Gujarat High Court in the case of Kirit Dahyabhai Patel vs. ACIT (2015 (1) TMI 201 - GUJARAT HIGH COURT) held that penalty under section 271(1)(c) of the Act is to be levied on the income assessed over and above the income returned u/s 153A. In the case of assessee the income as shown in the revised return of income at ₹ 10,38,538/- was accepted by the AO and no other addition was made as such assessee’s case was not a fit case for the imposition of penalty under section 271(1)(c). We hereby direct the Assessing Officer to delete the penalty. - Decided in favour of assessee. Issues Involved:1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2004-05 and 2005-06.Issue-wise Detailed Analysis:1. Levy of Penalty under Section 271(1)(c) for AY 2004-05:The appellant contested the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961, amounting to Rs. 2,29,000/-. The original return filed on 16.03.2006 declared an income of Rs. 2,38,538/-. A search operation under section 132 revealed undisclosed investments in Om Surya Project amounting to Rs. 48,72,000/-. Following the search, the appellant filed a revised return on 20.10.2008 declaring an additional income of Rs. 8,00,000/- for undisclosed investments, bringing the total declared income to Rs. 10,38,538/-. The Assessing Officer (AO) accepted this revised income but initiated penalty proceedings, treating the additional income as undisclosed.The appellant argued that the additional income was voluntarily disclosed upon discovering discrepancies during account preparation and was not a result of concealment or inaccurate particulars. However, the AO imposed a penalty of Rs. 2,29,000/- at 100%, which was upheld by the CIT(A), who noted that the appellant had not disclosed the investment in the original return and only did so after the search and subsequent notices.2. Arguments by the Appellant:The appellant's representative submitted that:- The appellant, a trader in building materials, filed returns under presumptive income provisions.- No search was conducted on the appellant, and no documents were found in his possession.- The appellant filed returns in response to a notice under section 153C, declaring incomes of Rs. 2,38,538/- and Rs. 23,15,662/- for AY 2004-05 and 2005-06, respectively.- Revised returns were filed, disclosing additional incomes of Rs. 8,00,000/- and Rs. 16,15,000/- for the respective years.- The AO accepted the revised returns without any additions or disallowances, indicating no concealment of income.- The penalty was imposed without any material evidence of concealment, relying solely on the voluntary disclosure by the appellant.3. Judicial Precedents:The appellant cited the case of Kirit Dahyabhai Patel vs. ACIT, where the Gujarat High Court held that penalty under section 271(1)(c) cannot be levied on income disclosed in returns filed under section 153A, as these are considered returns under section 139. The court noted that the penalty should only be levied on income assessed over and above the income returned under section 153A.4. Tribunal's Analysis and Decision:The Tribunal found the facts of the appellant's case similar to those in the Kirit Dahyabhai Patel case. The appellant had disclosed the additional income in response to the notice under section 153C and revised the return before the assessment was completed. The Tribunal noted that the revised return, which included the additional income, was accepted by the AO without any further additions, indicating no concealment.Following the precedent set by the Gujarat High Court, the Tribunal held that the penalty under section 271(1)(c) was not warranted as the additional income was disclosed in the revised return filed under section 153A. The Tribunal directed the AO to delete the penalty, allowing the appellant's ground.5. Levy of Penalty under Section 271(1)(c) for AY 2005-06:The appellant raised an identical ground regarding the penalty for AY 2005-06. The representatives of both parties adopted the same arguments as for AY 2004-05. The Tribunal, noting no change in facts and circumstances, directed the AO to delete the penalty for AY 2005-06 as well, consistent with its decision for AY 2004-05.Conclusion:The Tribunal allowed both appeals filed by the appellant, directing the deletion of penalties imposed under section 271(1)(c) for AY 2004-05 and AY 2005-06. The decision was pronounced in the open court on 16.09.2015.