2017 (7) TMI 1146 - AT - Income Tax

Tax Appeal Success: No Penalty Justified for Revised Return under Section 153C

Manorama V. Rathi C/o G.P. Mehta & Co. Versus Assistant Commissioner of Income Tax Circle 21 (1)

Manorama V. Rathi C/o G.P. Mehta & Co. Versus Assistant Commissioner of Income Tax Circle 21 (1) - TMI Issues Involved:1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Legality of the revised return filed by the assessee.3. Applicability and interpretation of Section 153C and its interaction with Section 139.4. Determination of 'concealment' of income for the purpose of penalty.Detailed Analysis:1. Confirmation of Penalty under Section 271(1)(c):The primary issue is the confirmation of penalty amounting to Rs. 8,07,840/- under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed following search operations on the Euro Group of Companies, during which blank promissory notes were seized from the residence of the assessee's husband. The assessee had booked four flats and issued promissory notes totaling Rs. 24,00,000/-. The assessee filed a revised return post-search, which included this amount as additional income. The penalty was imposed on the grounds that the additional income was disclosed only after the search operations, indicating it was not voluntary.2. Legality of the Revised Return Filed by the Assessee:The assessee initially filed a return showing an income of Rs. 2,92,366/-, which was later revised to Rs. 26,94,198/- post-search operations. The revised return was filed before the issuance of notice under Section 153C but beyond the statutory limit provided in Section 139(5). The revenue accepted the revised return as a response to the notice under Section 153C. The assessee contended that since the revised return was accepted without further additions, there was no difference between the returned and assessed income, making the penalty unwarranted.3. Applicability and Interpretation of Section 153C and its Interaction with Section 139:The Tribunal noted that the revised return filed under Section 153C takes precedence over the original return filed under Section 139 due to the non-obstante clause in Section 153C. This clause overrides the provisions of Section 139 and other sections, making the revised return the effective return for all purposes, including penalty considerations. The Tribunal referenced a Delhi High Court judgment, which clarified that the revised return under Section 153A (similar to 153C) replaces the original return, and any penalty must be based on the revised return.4. Determination of 'Concealment' of Income for the Purpose of Penalty:The Tribunal emphasized that 'concealment' must be determined based on the return filed under Section 153C. The penalty under Section 271(1)(c) is not automatic and requires a strict interpretation. The Tribunal cited several judicial precedents, including Supreme Court judgments, which established that mere disclosure of higher income in a revised return following a search does not automatically constitute concealment. The Tribunal concluded that since the revised return was accepted by the revenue, the original return became non-est, and no concealment could be attributed to the revised return.Conclusion:The Tribunal allowed the assessee's appeal, holding that the penalty under Section 271(1)(c) was not justified. The revised return filed under Section 153C, which was accepted by the revenue, replaced the original return, and no concealment was established based on the revised return. The Tribunal's decision was influenced by the principles of strict interpretation of penal provisions and the specific context of returns filed under Section 153C. The appeal was allowed, and the penalty was deleted.