2014 (8) TMI 1000 - AT - Income Tax

Penalty u/s 271(1)(c) - return has been filed after the issue of notice u/s 148 - whether the return filed by the assessee is a return u/s 139(4) or in response to notice u/s 148 ? - Held that - There is no dispute to the fact that the assessment in the case of M/s. Bedi Automobiles in which the assessee is a partner was made much before the issuance of notice u/s 148 to the assessee. Therefore it cannot be said that the assessee partner Smt. Mohinder Kaur was not aware of such fact as recorded in the reasons recorded by the A.O. The assessee proceeded to deposit tax on 03.02.2010 amounting to Rs. 2.25 lacs which is a part payment against tax payable after payment of advance tax of Rs. 12, 89, 333/- as claimed by the assessee in the submission dated 04.03.2011. The return u/s 139(4) should have been filed up to 31.03.2009 for the assessment year 2007-08 which in fact has been filed on 18.02.2010. Therefore the return of income filed by the assessee on 18.02.2010 is a non est return and therefore the claim of the assessee in para 4 to Explanation/Reply dated 04.03.2011 reproduced hereinabove is against the facts of the case and is not a return u/s 139(4) of the Act. On this count the return filed by the assessee is a non est return. The assessee in the same explanation had claimed the return to have been filed in response to notice u/s 148 of the Act. The fact that notice in the present case has been issued on 15.02.2010 and served on the assessee on 18.02.2010 and the assessee filed the return on 18.02.2010. If the return is treated to have been filed after service of notice u/s 148 of the Act then the fact that the return has been filed when the income tax department detected the concealment of income. No cogent explanation has been submitted by the assessee to substantiate the claim of not filing the return voluntarily. The assessee was short of finances and therefore did not deposit the tax with the Income tax Department cannot be a sufficient explanation. The issuance of notice u/s 148 and in the facts and circumstances of the present case as mentioned hereinabove the assessee was aware of the fact in the assessment of the firm M/s. Bedi Automobiles by virtue of issuance of notice u/s 148 and in the facts and circumstances shall be deemed to have concealed the particulars of income or has furnished inaccurate particulars of thereof and the assessee is liable to penalty u/s 271(1)(c) of the Act. The Ld. CIT(A) has observed that it cannot be said in certainty that as to whether the return filed by the assessee is a voluntarily return or it has been filed in response to notice u/s 148 of the Act and the benefit of doubt should go in favour of the assessee in all probability. The Ld. CIT(A) cannot blow hot and cold in the same breath. This finding of the ld. CIT(A) cannot hold good for the reasons that the return filed by the assessee is a non est return as has been held hereinabove by us. The return cannot be said to be voluntary return as per our findings hereinabove. - Decided against assessee

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the return filed under Section 139(4) or in response to notice under Section 148.
3. Whether the return filed was voluntary or after detection by the Income Tax Department.

Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):
The Revenue appealed against the CIT(A)'s decision to delete the penalty of Rs. 8,44,050 levied by the AO under Section 271(1)(c) of the Income Tax Act, 1961. The AO had imposed the penalty on the grounds that the assessee concealed income by not filing the return within the prescribed period and by providing inaccurate particulars of income. The CIT(A) deleted the penalty, reasoning that the return filed by the assessee was voluntary and not in response to the notice under Section 148, and that the income declared was accepted without any additional disallowance or addition by the AO. The CIT(A) also considered that the conditions under Explanation 3 to Section 271(1)(c) were not fulfilled, as the return was filed before the expiry of the period specified in Section 153(1) and before the notice under Section 148 was issued.

2. Validity of the Return Filed:
The AO and the Revenue argued that the return filed by the assessee on 18.02.2010 was not valid under Section 139(4) as it was filed after the expiry of the prescribed period on 31.03.2009. The return was considered non-est and thus invalid. The assessee contended that the return was filed voluntarily and not in response to the notice under Section 148, and that the delay was due to a bona fide belief that the income was below the taxable limit and due to financial constraints.

3. Voluntary Return or After Detection:
The Revenue asserted that the return was not voluntary but filed after the detection of concealed income by the Income Tax Department during the assessment of the firm in which the assessee was a partner. The AO had initiated penalty proceedings based on the belief that the return was filed in response to the notice under Section 148 and after the detection of concealed income. The CIT(A) gave the benefit of doubt to the assessee, considering the return as voluntary, but the Tribunal found this approach incorrect. The Tribunal held that the return was filed after the issuance of the notice under Section 148 and was not voluntary, thus attracting the penalty under Section 271(1)(c).

Tribunal's Decision:
The Tribunal reversed the CIT(A)'s order, reinstating the AO's decision to levy the penalty. The Tribunal concluded that the return filed by the assessee was not voluntary and was in response to the notice under Section 148, and thus the assessee had concealed income. The Tribunal emphasized that the return filed on 18.02.2010 was non-est as it was beyond the period allowed under Section 139(4) and was filed only after the detection of concealed income by the department.

Conclusion:
The appeal by the Revenue was allowed, and the penalty of Rs. 8,44,050 levied by the AO under Section 271(1)(c) was reinstated. The Tribunal found that the return filed by the assessee was not voluntary and was a result of the detection of concealed income, thus justifying the imposition of the penalty.