2013 (9) TMI 15 - AT - Income Tax

Penalty u/s 271(1)(c) - voluntary surrender of income - concealment of income or furnishing inaccurate particulars of income - Held that - In the assessment order, there is no adverse comment about the assessee s books of account and the surrender offer as made by the assessee was accepted by the assessing officer without any objection or reservation thereof about income offered or the other contents. The sole basis of assessing the income is only this surrender offer without relying any adverse material - Besides in this case the finding in assessment order is not of concealed income but that of a voluntary surrender and hence cannot be made a sole basis for imposing penalty. Thus, the finding in the assessment order itself does not militate against the stand taken by the assessee that it was a voluntary surrender. In view of the above facts and circumstances we have no hesitation to hold that the assessee made this surrender offer voluntary in peculiar circumstances of this case. Assessing officer himself accepted it as voluntary offer, reproduced the same in his order and assessed the income on exactly the same amount. There is no reference to any investigation or adverse material. Thus, the assessee s offer is to be held as voluntary surrender, accepted by the department accordingly. There being no adverse material available on record or any reliance thereon, the observations of assessing officer and CIT(A) about concealment or inaccurate particulars are not borne from the record and the same are contradictory to each other - Decided in favour of assessee.

Issues Involved:
1. Legitimacy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Voluntariness of income surrender by the assessee.
3. Assessment of books of accounts and cash payments to farmers.
4. Conditions attached to the voluntary surrender of income.
5. Applicability of case laws cited by both parties.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The primary issue revolves around the legitimacy of the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. The Assessing Officer (AO) imposed a penalty of Rs. 47,96,000/- at 200% for alleged concealment of income, which was later reduced to 150% by the CIT(A). The AO argued that the assessee tried to conceal the true particulars of her income, justifying the penalty.

2. Voluntariness of Income Surrender by the Assessee:
The assessee contended that the surrender of income was voluntary and made to avoid litigation and penalties. The surrender was made in response to a query about cash payments to farmers, which the assessee found difficult to substantiate within the short notice period. The assessee offered a net profit figure of Rs. 75,00,000/- on the condition that no penalties would be levied, which was accepted by the AO without any adverse comments.

3. Assessment of Books of Accounts and Cash Payments to Farmers:
The AO noted that the assessee's books of accounts were duly audited and found no defects. However, the issue arose due to the cash payments made to farmers for the purchase of earth/soil, which were not verifiable. The AO raised queries about these payments, leading to the assessee's voluntary offer to avoid further scrutiny.

4. Conditions Attached to the Voluntary Surrender of Income:
The assessee's offer to surrender additional income was made with a clear stipulation that no penalties would be imposed. The AO accepted this offer without any objections, implying acceptance of the conditions. The CIT(A) observed that the surrender was a result of inquiries and investigations by the AO, but the assessee maintained that it was a voluntary act to buy peace and end litigation.

5. Applicability of Case Laws Cited by Both Parties:
The assessee and the Revenue cited various case laws to support their respective positions. The assessee relied on judgments like CIT Vs. Upendra V. Mithani, CIT Vs. M/s Careers Education & Infotech Pvt. Ltd., and National Textile Vs. CIT, which supported the view that voluntary surrender does not automatically imply concealment of income. On the other hand, the Revenue cited cases like Zoom Communication and others, arguing that concealment was evident.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) was not justified in this case. The surrender of income by the assessee was deemed voluntary and made under peculiar circumstances to avoid litigation and penalties. The AO's acceptance of the surrender without any adverse remarks further supported the assessee's claim. The Tribunal found that the lower authorities' observations about concealment were not based on any cogent material. Consequently, the penalty imposed was deleted, and the assessee's appeal was allowed.

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