2008 (3) TMI 621 - AT - Income Tax

Summary

Issues: Penalty under section 271(1)(c) for concealment of income or filing inaccurate particulars of income.

Analysis:
The appeal before the ITAT Mumbai pertained to the assessment year 1992-93, challenging the penalty levied under section 271(1)(c) of the Income Tax Act. The primary contention raised by the assessee was that all relevant material facts for the assessment had been disclosed to the Assessing Officer, thus negating the need for penalty imposition. The Department, however, argued in favor of the penalty, citing a search action that revealed unaccounted jewellery and silver articles, leading to the assessee offering additional income for the year. The ITAT considered the submissions and examined the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals) in this regard.

The search action conducted at the assessee's residence resulted in the seizure of jewellery, silver articles, and electronic items, prompting the assessee to declare these as additional income totaling Rs. 21,64,800 for the relevant year. The assessee claimed that the investments were made from income earned through gambling and requested the auction of seized items to settle the tax dues. Despite the lack of liquid assets, the Revenue disputed the validity of the request made through the assessee's chartered accountant, leading to the imposition of the penalty by the Commissioner of Income-tax (Appeals).

The ITAT disagreed with the Commissioner's approach, highlighting that if the Assessing Officer questioned the validity of the request letter, the assessee should have been given an opportunity to submit a valid request personally. The tribunal noted that the conditions of Explanation 5 to section 271(1)(c) were met, emphasizing that the penalty was based on the additional income voluntarily offered by the assessee. Consequently, the ITAT concluded that no case for penalty imposition under section 271(1)(c) was established, leading to the cancellation of the penalty and allowing the appeal in favor of the assessee.

In conclusion, the ITAT Mumbai ruled in favor of the assessee, canceling the penalty imposed under section 271(1)(c) for concealment of income or filing inaccurate particulars of income, based on the voluntary disclosure of additional income and the disputed validity of the tax settlement request made through the chartered accountant.