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2009 (8) TMI 761 - AT - Income TaxPenalty - assessee contended that mere fact of agreement to include certain amounts as income for a particular year would not ipso jure a ground in holding the same as concealed income particularly when such amount was surrendered merely as an income and not as a concealed income- The AO however held that the surrender of the said amount established it beyond doubt that the assessee had concealed particulars of its income while filing the return of income and the same would not have been surrendered if the AO would not have made the inquiries- Thereafter the AO relying on cl. (b) of Explanation to s. 271(1)(c) held that the assessee failed to submit necessary documents hence the explanation offered could not be considered as bona fide - CIAT(A) waived the penalty - Held that when in case of a search the assessee declares certain undisclosed income then he is saved from levy of penalty. Undisputedly exercise of search and search assessments is more rigorous than assessment proceedings under s. 143(3) of the Act in normal course and when an assessee in those situations can be exempt from levy of penalty under s. 271(1)(c) of the Act we are unable to find any reason that in case of agreed additions even though the same may be after some exercise by the AO penalty under s. 271 (1)(c) cannot be waived. An argument can be taken that in case of block assessment the rate of tax is 60 per cent. however in case of normal assessment if we take into consideration various interests payable by the assessee as a consequence of an addition the rate of tax ultimately reaches to that level. Hence this argument cannot also be taken. Penalty waived by CIT(A) upheld - In favor of assessee.
Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c) of the IT Act, 1961: Background: The appeal by the Revenue challenges the order of the CIT(A) who deleted the penalty of Rs. 16,14,374 imposed by the AO under Section 271(1)(c) for the assessment year 2004-05. The AO noted that the assessee company had allotted 3,000 equity shares at a premium of Rs. 27 lakhs to three companies. The director of the assessee company admitted that these transactions were bogus and surrendered the amount as income to avoid litigation. AO's Stand: The AO initiated penalty proceedings under Section 271(1)(c), arguing that the surrender of the amount indicated concealed income. The AO contended that the explanation offered by the assessee was not bona fide and distinguished the case from the Supreme Court decision in CIT vs. Suresh Chandra Mittal, stating that the surrender was not voluntary but post-detection. CIT(A)'s Findings: The CIT(A) found that the assessee had provided documentary evidence regarding the share allotment and confirmations from the shareholders, discharging its onus under Section 68 of the Act. The CIT(A) held that the assessee's admission of income to buy peace did not amount to concealment and that the AO did not gather additional evidence to prove concealment during penalty proceedings. Tribunal's Analysis: The Tribunal noted that the assessee had raised capital through genuine banking channels and provided confirmatory letters from shareholders. The Tribunal emphasized that assessment and penalty proceedings are independent, and the mere admission of income during assessment does not automatically justify penalty under Section 271(1)(c). The AO must prove that the explanation offered by the assessee is false or not bona fide. The Tribunal highlighted that the assessee surrendered the amount to avoid litigation and there was no evidence of concealment. The Tribunal also referenced the Supreme Court decision in Suresh Chandra Mittal, where voluntary surrender to avoid litigation was considered bona fide. Conclusion: The Tribunal concluded that the AO had not conducted sufficient investigation during penalty proceedings and relied solely on the director's statement. The Tribunal held that the penalty under Section 271(1)(c) should not be levied in cases of agreed additions where the assessee surrenders income to avoid litigation. The Tribunal confirmed the CIT(A)'s order deleting the penalty, emphasizing the need for the AO to exercise judicial discretion and not levy penalty routinely. Result: The Revenue's appeal was dismissed, and the deletion of penalty under Section 271(1)(c) was upheld.
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