TaxTMI 
TaxTMI 
2011 (3) TMI 846
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....rding concealment of particulars of income or furnishing inaccurate particulars as required as per the provisions of section 271(1)(c) and therefore the levy of penalty is not justified. 3. Without prejudice to above Grounds of Appeal the Ld. CIT(A) erred in not appreciating that the Appellant had voluntarily and suo moto declared additional income of Rs.50 lacs for Assessment Years 2002-03, 2003-04 and 2004-05 on the date of survey i.e. 13.02.2004 itself and furnished year-wise bifurcation thereof on 16.02.2004 without any knowledge of the Department having conducted bank enquiries. 4. Without prejudice to above Grounds of Appeal, the Ld. CIT(A) ought to have restricted the levy of penalty only to the extent of 100% of the tax sought to be evaded i.e. Rs. 3,92,348. 2. The summary of the above grounds is that the present appeal is filed against the decision of the CIT(A) in confirming the penalty u/s. 271(1)(c) of the Act for both the AYs. Assessee is aggrieved against such levy as the CIT(A) failed to see the fact that the AO failed to record the requisite satisfaction and when there is suo moto disclosure of income voluntarily without being privy to the di....
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....said notice the assessee vide his written submission dated 10-8-2004 stated as under:- "(a) No discrepancies were found by the survey party pertaining to assessment year 2002-03 nor are any discrepancies found during the course of assessment proceedings. (b) I have disclosed correctly Rs. 12,82,260 as an additional income for above year voluntarily and suo motu to avoid litigation and buy peace thereby proving my credentials and intention to disclose the full and correct income. I have paid additional tax and interest aggregating to Rs. 5,45,349 being tax of Rs. 3,92,368 and penal interest of Rs. 1,52,981. (c) Your Honour has vide order u/s. 143(3) dated 12th July, 2004 accepted the total income as per my revised return of income and assessed the total income at Rs. 97,44,150 i.e., same as declared by me in my revised return of income. (d) The declaration for assessment year 2002-03 was on the oral understanding that no penalty will be initiated and/or levied for assessment year 2002-03. (e) I have fully co-operated with the department in completing the assessment for assessment year 2002-03. (f) I am a regular taxpayer for last 20 ye....
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....s. 133A of the Act. At the end of the penalty proceedings, AO considered the facts of the case as well as the legal propositions and rejected the above explanation of the assessee. Finally, AO held that the assessee concealed the particulars of income and failed to offer satisfactory explanation to the AO. Resultantly, he proceeded to levy penalty of Rs.4 lakhs for the assessment year 2002-03. However, as seen from para 4 of the penalty order, the AO gave a finding that the assessee cooperated with the Department in filing the revised return of income and paid taxes as agreed during the survey operation. Aggrieved with the above levy of penalty, the assessee filed an appeal before the CIT(Appeals). First appellate proceedings:- 7. During the appellate proceedings before the CIT(A), the assessee submitted that declaration of Rs.50 lakhs for all the three assessment years, filing of the revised return of income u/s. 139(5) of the Act validly offering higher total income than that of the declared Rs. 50 lakhs constitute a voluntary act of furnishing of income and the said higher income relates to the fixed deposits with certain banks held in the names of the members of....
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.... 271(1)(c) of the Act. The CIT(A) did not appreciate the existence of oral understanding for not levying the penalties. On the assessee's contention relating to filing of revised return voluntarily, the CIT(A) is of the opinion that the additional income brought to tax relates to the event of survey. Therefore, the voluntary action of the assessee is not absolute. The CIT(A) is of the opinion that discovery of additional evidence and other fixed deposits relates to the enquiries conducted by the Department at the back of the assessee. Regarding the bona fide approach of the assessee in filing the revised return, the CIT(A) is of the opinion that the assessee misused the provisions of section 139(5) of the Act for enhancing his concealed income deliberately and he did not see the assessee's suo moto attempt to come clean voluntarily. Accordingly, he rejected the inadvertence-based submissions of the assessee and confirmed the penalty levied by the AO. 2nd Appellate Proceedings:- 9. During the proceedings before us, Shri S.U. Pathak, learned counsel for the assessee, read out the relevant portions of the orders of the Revenue and argued for the proposition that the as....
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....nalty cannot be levied on such income relatable to the disputed income. BY referring to the copies of the receipts from the Bank, which FDs were made, Sri Pathak demonstrated that the FDs stand in the names of Mrs. Kishori Dilip Oak and Sarika Dilip Oak, the members of the family. Pages 33 to 56 of the paper book are relevant in this regard; (ix) The counsel argued stating that the whatever the enquiries made by the department and their tactics might have resulted in ensuring the disclosure of additional income but the fact is that there is no iota of material, forget about the incriminating material, as seen from the orders to substantiate the penalty. Further, he mentioned that the penalty proceedings are entirely different and distinct from that of the assessment/quantum proceedings; (x) Further, Mr. Pathak, learned counsel for the assessee, relied on the decisions of Bombay High Court in the case of Jainarayan Babulal v. CIT 170 ITR 399 (Bom.) and CIT v. Bhimji Bhanjee and Co. 146 ITR 145 (Bom.) to substantiate his arguments. 10. Per contra, Ld AR for the Revenue relied on both the orders of the revenue. The case of the revenue is that the impugned addit....
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....side, we have examined the information available in their possession to substantiate the levy of impugned penalty. On perusal of the both the orders of the revenue, we do find notice anything incriminating material gathered either during the survey action or during the post survey enquiries with the bank has been specifically mentioned. However, they contain mere oblique reference to the bank enquiries and scanty material against the assessee, which is quantitatively disproportionate to the extent of disclosure offered by the assessee. In any case, neither the AO has described the said material nor the CIT(A) highlighted the incriminating nature of the same in their respective orders while levying/confirming the penalty. These orders are silent on the said material as to how the income in question is a concealed for the AYs under consideration and nothing is made out about the incriminating nature of the same. Even before us none of these said documents, however scanty they may be, were produced to demonstrate that the impugned additional income was declared by the assessee only due to said incriminating material discovered during the survey operation or post survey operation. Whil....
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..... Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." Thus, the return of income or valid revised return is the basis or the starting point for arriving at the accuracy or inaccuracy of the particulars/claims "because that is the only document where the assessee can furnish the particulars of his income..... To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous". In the light of the said settled position, we have examined the facts of the instant case, where the assessee furnished the valid revised return, which was accepted by the AO without pointing out a single inaccuracy and without making any further additions in the assessment. In such circumstances, we find that it is not a fit case for lev....
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....the acceptance of the assessee's explanation. It is so held in the case of Star International (P) Ltd. 23 SOT 88 (Luck). Further, when two views are possible, real ownership of the FDs/income and correct AYs as in this case, a bona fide belief for claim or allowance cannot be subjected to concealment merely because such belief is erroneous under the law as held in the case of Shetty GD 112 ITD 103 (Pune). In the light of the above, we are of the opinion that it is not a fit case for levy of penalty. 16. Application of the above scope of the provisions to the facts of the instant case: In the instant case, no inaccuracy in matters of furnishing of the particulars of income in the revised return/return has been noticed by the revenue. Thus, so far as the revised return of income is concerned, it is a valid and free of any inaccuracy in matters of furnishing of particulars of income. Therefore, the conditions specified in the main parts of the section 271(1)(c) are not violated by the assessee. Regarding revenue's allegation that the impugned additional income is the outcome of the survey action, we find the impugned income in fact does not pertain to the AYs under con....
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....No penalty could be imposed for the non-disclosure of that income in assessment for the assessment year 1950-51." In the process, the Hon'ble High Court relied on the apex court's judgment in the case of Baladin Ram (71 ITR 427) where the apex court ruled that,- "the only way in which the income from undisclosed source could be assessed was to make the assessment on the basis of .... the previous year for such income..." Therefore, it is a decided issue at the level of the jurisdictional High Court, which is binding on us, that no penalty u/s. 271(1)(c) of the Act is leviable in respect of the concealment income, which was assessed in the wrong AY and in the wrong person for any reasons. Further, no penalties are leviable when the assessee has nowhere admitted that it had concealed its income as held by the jurisdictional High Court of Bombay in the case of CIT v. Bhimji Bhanjee and Co. 146 ITR 145. 18. To sum up, the revenue has failed to crystalise that the impugned additional income/FDs, which is subject matter of the penalty, is actually earned by the assessee and it is validly and undebatably taxable in the hands of the assessee, which is releva....