2011 (3) TMI 902 - AT - Income Tax

Penalty u/s 271(1)(c) - Certified Provisional Trading P&L found-Credit side of P&L contravened with return of income - show cause issued for supression of income & rejecting books of account - Assessee agreed to additions- AO also initiated penalty proceedings under 271(1)(c)-Assesseee appealed - CIT(A) upheld penalty as surrender was not voluntary being confronted by the impounded documents during the course of survey - Held that -In view the case of T.P. Indrakumar v. ITO (2009 -TMI - 76530 - KARNATAKA HIGH COURT), when the assessee on his own, in the wake of his need for avoiding further probe and scrutiny, offered this amount, it can be reasonably inferred that the assessee is obviously striking a balance to avoid a bigger liability or harsher consequences. Be that as it may, when the assessee had voluntarily offered the amount by way of income, there was nothing further for the authority to do when the authority is accepting it at its face value. - Thus appeal of assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the IT Act, 1961.

Analysis:
1. The appeal concerns the penalty imposed under section 271(1)(c) of the IT Act, 1961 for the assessment year 2005-06. The assessee contested the penalty, arguing that the surrender of Rs. 25 lakhs was made without concealment and under the condition of no penalty. The AO initiated penalty proceedings after the assessee agreed to the addition of Rs. 25 lakhs during the assessment proceedings. The CIT(A) upheld the penalty, emphasizing that the surrender was not voluntary and constituted an attempt to suppress receipts. The High Court's decision in Rajesh Chawla v. CIT was cited to support the penalty imposition.

2. During the proceedings, the assessee claimed that the surrender was made to avoid further scrutiny and no penalty was warranted. The Departmental Representative highlighted that the surrender was made after filing an explanation for discrepancies in documents seized. The Tribunal observed that the surrender was made to buy peace of mind, and the AO failed to identify any discrepancies in the explanation provided by the assessee. The key issue was whether the penalty under section 271(1)(c) was justified based on the voluntary surrender made by the assessee.

3. The Tribunal referred to the case of T.P. Indrakumar v. ITO where it was held that voluntary offers by the assessee to avoid scrutiny can be accepted at face value without further probe. Additionally, the decision in Rajiv Garg's case was cited, where the penalty on surrendered income was deleted. The Tribunal distinguished the present case from Rajesh Chawla's case and concluded that the penalty was unwarranted, following the precedents set by the High Courts. Consequently, the Tribunal directed the AO to delete the penalty levied under section 271(1)(c) of the Act, allowing the appeal filed by the assessee.