2015 (4) TMI 1094 - AT - Income Tax

Levy of penalty under s. 271(1)(c) - order u/s.143(3) adding surrendered amount u/s.69A - Held that - From the record we found that at the very first instance share application money was surrendered by assessee with a request not to initiate any penalty proceedings. The AO passed order u/s.143(3) adding surrendered amount u/s.69A on the plea that assessee has surrendered amount only after issue of notice. It is not disputed by the department that sum which was added u/s.69A was one which was surrendered by the assessee itself. Neither there was any detection nor there was any information in the possession of the department except for the amount surrendered by the assessee and in these circumstances it cannot be said that there was any concealment. Penalty should be imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax. Hon ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal (2001 (6) TMI 63 - SUPREME Court ) observed that where assessee has surrendered the income after persistence queries by the AO and where revised return has been regularized by the Revenue, explanation of the assessee that he has declared additional income to buy peach of mind and to come out of waxed litigation could be treated as bona fide, accordingly levy of penalty under s. 271(1)(c) was held to be not justified. - Decided in favour of assessee

Summary

Issues:
Imposition of penalty u/s.271(1)(c) of the I.T.Act for assessment year 2009-10 based on share application money received by the assessee.

Analysis:
The appeal was filed against the order of CIT(A) for the imposition of penalty u/s.271(1)(c) of the I.T.Act. The assessee, engaged in manufacturing pesticides, herbicides, and formulations, had filed a return showing total income of &8377; 1.49 crores, including share application money of &8377; 89.50 lakhs. The AO added this amount to the assessee's income u/s.69A and imposed a penalty u/s.271(1)(c). The CIT(A) upheld the penalty, leading to further appeal. However, the Tribunal found that the share application money was voluntarily surrendered by the assessee to avoid litigation, with no malafide intention. The AO did not provide evidence of concealment of income, and the surrender was made before any detection by the department. The Tribunal cited legal precedents to support that penalty u/s.271(1)(c) cannot be levied when additional income is offered to buy peace of mind and avoid litigation, as in this case. The AO's inclusion of the share capital in the total income was solely based on the assessee's declaration, without any evidence of it being bogus. The Tribunal concluded that there was no merit for the penalty under u/s.271(1)(c) of the Act, and thus allowed the appeal.

In summary, the Tribunal held that the penalty u/s.271(1)(c) was unjustified as the share application money was voluntarily declared by the assessee without any evidence of concealment or malafide intent. The Tribunal emphasized that the surrender of income to avoid litigation does not warrant a penalty, citing legal precedents to support this conclusion. Therefore, the appeal of the assessee was allowed, and the penalty was not upheld.