2013 (12) TMI 361 - AT - Income Tax

Penalty under section 271(1)(c) Furnishing inaccurate particulars of income - The assessee has collected Mahumai amounts from its customers The assessment was made and addition was done on account of Mahumai amounts collected treating it to be the part of total turnover - Held that - Following CIT Vs. Bijli Cotton Mills (P) Ltd. 1978 (11) TMI 1 - SUPREME Court In assessee s own case for A.Y. 2001-02 order passed that there was an overriding title created in favour of charity on the Mahumai amount collected does not form part of income Keeping in mind the above judgement the assessee in bona fide belief that Dharmada collections were not part of its income but were diverted by an overriding title towards charity, filed returns for the impugned Assessment Years excluding the Dharmada collections from its turnover - The assessee was not making a frivolous claim - There was not any filing of inaccurate particulars of income. Following Dharmandra Textile Processors 2008 (9) TMI 52 - SUPREME COURT - Willful and deliberate suppression on the part of assessee was necessary for levy of penalty under section 271(1)(c) Following Reliance Petro Products Pvt Ltd. 2010 (3) TMI 80 - SUPREME COURT - A mere claim will not amount to furnishing inaccurate particulars regarding the income of the assessee - Decided against Revenue.

Summary

Issues Involved:
- Appeal against deletion of penalty under section 271(1)(c) by CIT(A)
- Validity of revised returns filed after search
- Treatment of Mahumai collections as part of income
- Justification for not levying penalty under section 271(1)(c)

Analysis:

Issue 1: Appeal against deletion of penalty under section 271(1)(c) by CIT(A)
The Revenue appealed against the CIT(A)'s decision to delete the penalty under section 271(1)(c) for the impugned Assessment Years. The grounds taken by the Revenue included arguments regarding the voluntary admission of income, applicability of section 271(1)(c), and precedents supporting penalty imposition.

Issue 2: Validity of revised returns filed after search
The case involved a search conducted at the premises of the partners of the assessee firm, leading to the issuance of notices under section 153A for all years except one. The Assessing Officer contended that the revised returns filed by the assessee, including Mahumai collections, were not valid under the law due to the nature of the original returns and the timing of filing. The argument focused on whether the revised returns constituted a valid disclosure.

Issue 3: Treatment of Mahumai collections as part of income
The core dispute revolved around the treatment of Mahumai collections by the assessee from its distributors. The Assessing Officer considered these collections as part of the assessee's turnover and subject to taxation. The assessee, however, relied on legal precedents and argued that the collections were for charitable purposes and should not be taxed as income. The CIT(A) acknowledged these contentions and canceled the penalty based on the nature of the voluntary disclosure.

Issue 4: Justification for not levying penalty under section 271(1)(c)
The Tribunal analyzed the circumstances surrounding the Mahumai collections, including the history of similar assessments and the assessee's belief in the legality of excluding these amounts from income. The Tribunal emphasized the absence of willful or deliberate suppression on the part of the assessee, citing relevant legal decisions. The Tribunal upheld the CIT(A)'s decision based on the principle that a mere claim, even if made after search, does not automatically warrant a penalty under section 271(1)(c).

In conclusion, the Tribunal dismissed the Revenue's appeals for all the years, affirming the CIT(A)'s decision to delete the penalty under section 271(1)(c) based on the legal arguments and factual circumstances presented in the case.