2010 (3) TMI 889 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act.
2. Filing of revised return and its voluntariness.
3. Explanation and reasons provided by the assessee for revising the return.
4. Assessing Officer's satisfaction and detection of concealment.
5. Bona fide nature of the assessee's explanation.
6. Applicability of Supreme Court judgments and legal precedents.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue was the levy of penalty amounting to Rs. 37,89,520 under section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) imposed the penalty on the grounds that the revised return was not voluntary and was filed after the AO initiated scrutiny. The AO concluded that the assessee had concealed particulars of income, which warranted the penalty.

2. Filing of Revised Return and its Voluntariness:
The assessee initially filed a return declaring an income of Rs. 3,53,027 but later revised it to Rs. 1,18,06,439. The revision was made after the AO called for details of investments in mutual funds reported in the Annual Information Return (AIR). The AO noted that the revised return was filed beyond the prescribed time limit and during the pendency of scrutiny assessment, thus questioning its voluntariness.

3. Explanation and Reasons Provided by the Assessee:
The assessee explained that the revised return was filed after discovering investments made by his deceased brother in joint accounts. The explanation included details of the bank accounts and transactions, asserting that the revised returns were filed voluntarily upon discovering the income. The assessee requested not to initiate penalty proceedings, claiming the revisions were beyond his control.

4. Assessing Officer's Satisfaction and Detection of Concealment:
The AO argued that the revised return was not voluntary but prompted by the AO's inquiries. The AO conducted independent verifications with the bank and found discrepancies in the original returns. The AO concluded that the revised returns were filed only after the concealment was detected, thus justifying the penalty.

5. Bona Fide Nature of the Assessee's Explanation:
The Tribunal examined whether the assessee's explanation was bona fide. The assessee argued that the revised return was filed before any specific query from the AO regarding the surrendered amounts. The Tribunal noted that the explanation was not found false by the AO and that the revised return was filed before any satisfaction regarding concealment was recorded.

6. Applicability of Supreme Court Judgments and Legal Precedents:
The Tribunal referenced multiple legal precedents, including the Supreme Court's judgments in B.A. Balasubramaniam & Bros. Co. v. CIT and Union of India v. Dharamendra Textile Processors. The Tribunal emphasized that penalty provisions are penal in nature and require a finding of a guilty mind. The Tribunal also considered other High Court and ITAT decisions supporting the assessee's case, asserting that mere surrender of income does not automatically lead to penalty.

Conclusion:
The Tribunal concluded that the assessee's explanation was bona fide and that the revised return was filed before any detection of concealment by the AO. The Tribunal held that the conditions for imposing penalty under section 271(1)(c) were not satisfied and canceled the penalty of Rs. 37,89,520. The appeal of the assessee was allowed.