Penalty under Section 271(1)(c) not imposed if additional income voluntarily disclosed without concealment evidence

The ITAT Jodhpur held that penalty under section 271(1)(c) for furnishing inaccurate particulars of income was not sustainable where the assessee voluntarily disclosed additional income in returns filed u/s 148 before assessment completion. No incriminating evidence of concealment or bogus transactions was found, and expenses were supported by internal vouchers and regular books. The AO accepted revised returns without adverse inference. Reliance on SC and HC precedents established that mere surrender of income or disallowance without proof of concealment does not attract penalty. Absence of AO's satisfaction on concealment or inaccuracy further vitiated penalty proceedings. Consequently, penalty under section 271(1)(c) was set aside for all assessment years and the assessee's appeal was allowed.

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ISSUES:

Whether the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 is justified where additional income is voluntarily disclosed in revised returns filed under section 148 before completion of assessment.Whether mere surrender of income to cover unverifiable expenses, without any finding of concealment or furnishing inaccurate particulars, attracts penalty under section 271(1)(c).Whether acceptance of revised returns by the Assessing Officer without adverse inference precludes imposition of penalty under section 271(1)(c).Whether the penalty order must specify the limb of section 271(1)(c)-concealment of income or furnishing inaccurate particulars-relied upon for levying penalty.

RULINGS / HOLDINGS:

The penalty under section 271(1)(c) is not sustainable where additional income is voluntarily disclosed in returns filed under section 148 and accepted by the Assessing Officer without any adverse inference, as the conditions of concealment or furnishing inaccurate particulars are not met.Mere surrender of income to avoid estimation and prolonged litigation, without any evidence of bogus or fictitious expenditure or suppression of income, does not constitute furnishing inaccurate particulars or concealment of income under section 271(1)(c).Acceptance of revised returns without variation or adverse finding negates the basis for penalty under section 271(1)(c).Failure of the penalty order to specify whether penalty is levied for concealment of income or furnishing inaccurate particulars vitiates the penalty proceedings.

RATIONALE:

The Court applied the statutory provisions of section 271(1)(c) of the Income Tax Act, 1961, which imposes penalty for concealment of income or furnishing inaccurate particulars.Judicial precedents relied upon include the Supreme Court decision in Reliance Petroproducts (P) Ltd. and decisions by various High Courts and Tribunals, which hold that mere disallowance or surrender of income without evidence of concealment or inaccuracy does not attract penalty.The Court emphasized that the Assessing Officer's acceptance of the revised returns without adverse inference and absence of incriminating material or rejection of books of account is determinative.The Court noted the absence of a recorded satisfaction by the Assessing Officer specifying which limb of section 271(1)(c) was violated, referring to the principle established in Manjunatha Cotton & Ginning Factory.This judgment reaffirms the principle that voluntary disclosure and acceptance thereof precludes penalty under section 271(1)(c), representing no doctrinal shift but consistent application of settled law.

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