2011 (1) TMI 1183 - HC - Income Tax

Penalty - reassessment proceedings - assessee offered an additional income of Rs. 50 lakhs for assessment. Out of Rs.50 lakhs so offered, Rs. 35 lakhs was assessed for 2005-06 and Rs. 15 lakhs assessed for the year 2006-07 which were done in terms of the proposal of the assessee accepted by the Assessing Officer. Even though notice under section 271(1)(c) was issued initiating penalty for the year 2005-06 Held that - after disabling the assessee from filing appeal or challenging an assessment made on agreed basis, the department cannot hold the assessee guilty of concealment. - after accepting the offer of the assessee for assessment of additional income, Assessing Officer cannot simultaneously levey penalty treating such income as concealed income. We therefore uphold the order of the Tribunal, appeal is dismissed

Summary

Issues:
Appeal against cancellation of revision order under section 263 of the Income-tax Act regarding dropping of penalty proposal by Assessing Officer.

Analysis:
The case involved an appeal against the cancellation of a suo motu revision order under section 263 of the Income-tax Act by the Income-tax Appellate Tribunal. The revision order was issued by the Commissioner of Income-tax against the decision of the Assessing Officer to drop the proposal for penalty. The Assessing Officer had dropped the penalty proposal after the assessee contended that since the assessment was based on an agreed assessment, no penalty could be initiated. The Commissioner considered the officer's decision as prejudicial to the revenue and directed the Assessing Officer to reconsider the levy of penalty. The Tribunal, however, canceled this order, leading to the revenue filing an appeal before the High Court.

The revenue argued that penalty proceedings could be maintained against the assessee, and the dropping of penalty proceedings without assigning any reason was prejudicial to the interest of the revenue, citing various legal precedents. On the other hand, the assessee relied on previous court decisions stating that no penalty could be initiated under section 271(1)(c) in cases of agreed assessments. The High Court noted that the assessments in question were completed on an agreed basis, where the assessee offered additional income for assessment, which was accepted by the Assessing Officer. The court emphasized that the Assessing Officer's acceptance of the additional income indicated that he could not sustain any addition based on evidence or reasoning without the assessee's concession.

The High Court further elaborated that in agreed assessments, the assessee is precluded from challenging the assessment, and the final assessed amount is based on the additional income offered and accepted. Therefore, the court concluded that the Assessing Officer was protecting the revenue's interest by opting for an agreed assessment based on the assessee's offer. The court reasoned that if the Assessing Officer could establish concealment, he should rely on evidence collected by him rather than depending on the assessee's offer for assessment. Consequently, the court upheld the Tribunal's decision, stating that after accepting the offer for assessment of additional income, the Assessing Officer could not levy penalty for concealment. The High Court dismissed the appeal, affirming the Tribunal's order.