2022 (10) TMI 603 - AT - Income Tax

Appeals allowed, penalty under Income Tax Act Section 271(1)(c) deleted for assessment years 2010-13.

Shri Mangi Lal Kandoi Versus Assistant Commissioner of Income Tax, Central Circle-2, Jaipur.

Shri Mangi Lal Kandoi Versus Assistant Commissioner of Income Tax, Central Circle-2, Jaipur. - TMI Issues Involved:1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Validity of the penalty order passed without striking off the irrelevant portion of the printed show cause notice.3. Judicial consistency in passing the penalty order.4. Recording of satisfaction with reference to concealment of income or furnishing inaccurate particulars of income.5. Justification for the penalty amount imposed.Issue-wise Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:The primary issue revolves around the imposition of a penalty of Rs. 1,85,400/- on the assessee for alleged concealment of income. The original return filed declared an income of Rs. 8,06,240/-. A search revealed undisclosed advances amounting to Rs. 6,00,000/- which were added to the income by the Assessing Officer (AO). The AO justified the penalty by stating that the assessee admitted the advances were from undisclosed income and failed to provide a valid explanation. The penalty was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] and further confirmed by the ITAT, which allowed the set-off of this addition in the subsequent assessment year.2. Validity of the Penalty Order Passed Without Striking Off the Irrelevant Portion of the Printed Show Cause Notice:The assessee argued that the penalty order was invalid as the AO did not strike off the irrelevant portion of the printed show cause notice, which is a procedural requirement. However, this technical ground was not pressed by the assessee during the hearing, and thus, it was dismissed.3. Judicial Consistency in Passing the Penalty Order:The assessee contended that the penalty order was against the principles of judicial consistency. It was argued that the addition was based on rough notings on loose papers which did not conclusively indicate undisclosed income. The CIT(A) and ITAT confirmed the penalty on the grounds that the assessee himself admitted to the undisclosed advances during the search proceedings and in subsequent affidavits. The penalty was deemed consistent with judicial precedents, including the Supreme Court's decision in MAK Data P. Ltd. v. CIT-II, which held that voluntary disclosure does not absolve an assessee from penalty under Section 271(1)(c).4. Recording of Satisfaction with Reference to Concealment of Income or Furnishing Inaccurate Particulars of Income:The assessee argued that the penalty order was void ab initio as no satisfaction was recorded with reference to concealment of income or furnishing inaccurate particulars of income. The AO's satisfaction was based on the assessee's own admission of undisclosed income during the search and in subsequent affidavits. The CIT(A) and ITAT found that the AO had sufficient grounds to levy the penalty, as the assessee failed to substantiate the explanation and the documents seized during the search indicated undisclosed income.5. Justification for the Penalty Amount Imposed:The penalty amount of Rs. 1,85,400/- was imposed on the addition of Rs. 6,00,000/- for undisclosed advances. The assessee argued that the addition was based on a dumb document and that the penalty should not be imposed merely on the basis of a voluntary surrender made to avoid prolonged litigation. The ITAT found that the AO did not conduct further inquiries to substantiate the addition and relied solely on the assessee's admission. The ITAT concluded that the penalty was not justified as the addition was based on assumptions and the seized document did not conclusively prove undisclosed income.Conclusion:The ITAT allowed the appeals, deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment years 2010-11, 2011-12, and 2012-13. The decision was based on the grounds that the addition was not conclusively proven to be undisclosed income and was based on the assessee's voluntary admission without corroborative evidence. The appeals were allowed, and the penalty orders were set aside.