2012 (5) TMI 339 - AT - Income Tax

Penalty u/s 271(1)(c) - held that - He has been regularly assessed to tax and charge of concealment of income has never been raised against him. The retirement benefits were deposited in a different account on which income accrued from month to month. He forgot to include such income as in past no such account was there. Looking to these facts, we are of the view that such omissions may take place by a retired person due to lapse of memory. In such circumstances, the explanation is held to be bona fide. Therefore, the levy of penalty is cancelled.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income.

Detailed Analysis:

Issue 1: Penalty for Concealment of Income
1.1 The assessee initially declared a total income of Rs. 4,13,825/- but later revised it to Rs. 5,76,697/- due to inadvertently omitting interest income in the original return. The assessment was completed at Rs. 5,79,697/- with an addition of Rs. 3,000/- for interest income. Penalty proceedings were initiated, resulting in a penalty of Rs. 50,760/- being levied by the Assessing Officer (AO) under section 271(1)(c).
1.2 The AO held that the revised return was not filed voluntarily as it was done after receiving a questionnaire and that the interest income was underreported even after revision, leading to a conclusion of income concealment. The arguments before the CIT(A) regarding lack of mens rea, voluntary filing, and lack of foundation were rejected, citing precedents and the discernible satisfaction from the assessment order.
1.3 The CIT(A) dismissed the appeal, emphasizing the discernible satisfaction from the assessment order, rejecting the arguments of voluntary revision and lack of mens rea. The plea regarding lack of foundation and subsequent processing of the return were also rejected, relying on legal precedents.
1.4 An interim order stayed the demand, but it ceased to have force upon the appeal decision.

Issue 2: Assessee's Explanation
2. The assessee contended that the omission of interest income was due to a lapse of memory, as retirement benefits were deposited in a separate account not previously considered. The explanation was deemed bona fide considering the surrounding circumstances, including past disclosures and retirement status.
2.1 The senior DR supported the lower authorities' findings, highlighting that the revised return was filed after receiving a questionnaire, aligning with legal precedents.

Judgment:
3. The Tribunal considered the facts and submissions, noting that the AO's satisfaction was recorded after the revised return was filed post-questionnaire receipt. The Tribunal emphasized that mens rea is not essential for penalty determination, focusing on statutory provisions and explanations. The Tribunal found the explanation of inadvertent omission due to memory lapse to be bona fide, especially considering the retiree's regular tax assessments and absence of prior concealment charges. As per the decision in Zoom Communications Ltd., the plea of inadvertence required supporting evidence, which was found in the circumstances of the case. Consequently, the penalty was canceled, and the appeal was allowed.