2007 (10) TMI 686 - AT - Income Tax

Summary

Issues Involved:
1. Cancellation of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the revised return filed by the assessee.
3. Satisfaction of the Assessing Officer (AO) regarding the concealment of income.

Detailed Analysis:

1. Cancellation of the Penalty Levied under Section 271(1)(c):
The appeal was filed by the revenue against the order of the Commissioner (Appeals) canceling the penalty of Rs. 17,46,500 levied by the AO under Section 271(1)(c). The revenue contended that the Commissioner (Appeals) erred in law and on facts by not appreciating that the revised return was filed after the detection of concealed income by the AO, and that mere submission of a revised return does not provide immunity from penalty proceedings. The revenue also argued that the Commissioner (Appeals) failed to consider the ratio of various judicial decisions which support the imposition of penalty in similar circumstances.

2. Validity of the Revised Return Filed by the Assessee:
The assessee filed a revised return surrendering Rs. 49,00,000 as income because it could not establish the genuineness of the share application money. The AO initiated penalty proceedings under Section 271(1)(c) on the ground that the revised return was not voluntary but was filed only after the AO's inquiry. The AO held that the revised return was prompted by the specific query raised by the department and thus could not be considered within the ambit of Section 139(5) of the Act. The AO relied on the decision in Sunanda Ram Deka v. CIT to support his view that mere filing of a revised return is insufficient to avoid penalty.

3. Satisfaction of the Assessing Officer Regarding the Concealment of Income:
The Commissioner (Appeals) canceled the penalty by observing that the AO had not made any specific query about a particular shareholding before the revised return was filed. The Commissioner (Appeals) found that the AO's notice under Section 142(1) contained general queries and did not specifically address the share application money. The revised return was filed suo motu by the assessee, and there was no detection of concealment by the AO. The Commissioner (Appeals) noted that the AO accepted the revised return as valid and did not indicate any specific concealment in the assessment order, thus the penalty under Section 271(1)(c) was not justified.

The Tribunal examined whether the AO was satisfied during the assessment proceedings that the conditions for imposing penalty under Section 271(1)(c) were met. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in S.V. Angidi Chettiar's case, which emphasized that the AO must be satisfied about the concealment of income during the assessment proceedings. The Tribunal noted that the AO's assessment order did not reflect any satisfaction regarding the concealment of income or furnishing of inaccurate particulars by the assessee. The Tribunal concluded that the AO had not arrived at the requisite satisfaction for assuming jurisdiction to issue the penalty notice under Section 271(1)(c).

Conclusion:
The Tribunal upheld the order of the Commissioner (Appeals) canceling the penalty of Rs. 17,46,500. It held that the AO had not demonstrated the necessary satisfaction regarding the concealment of income before initiating penalty proceedings. The appeal filed by the revenue was dismissed, and the penalty levied under Section 271(1)(c) was deemed unjustified.