2014 (8) TMI 165 - AT - Income Tax

Penalty u/s 271(1)(c) - Additional income declared Held that - The entire basis of the penalty u/s 271(1)(c) of the Act is the additional income declared by the assessee in her return of income filed in pursuance to the notice issued u/s 153C of the Act the additional income offered was on the basis of the amount mentioned in the promissory notes seized during the search and seizure operation in the case of assessee s husband Dr. Bhaskara Rao - there is no reference to the assessee in the promissory notes - the amount was advanced by him, only because he offered it at the hands of his wife, the assessee, it cannot be concluded that assessee has concealed her income or furnished inaccurate particulars of income - penalty cannot be imposed u/s 271(1)(c) of the Act against the assessee Decided in favour of Assessee.

Summary

Issues:
Penalty imposed under section 271(1)(c) of the Act for assessment year 2008-09.

Analysis:
The appeal was against the penalty imposed under section 271(1)(c) of the Act for the assessment year 2008-09. The assessee, an individual and proprietrix of a hospital, had originally filed a return of income declaring Rs. 69,48,870. Subsequently, during a search operation at her husband's premises, incriminating material, including promissory notes totaling Rs. 35 lakhs, was found. The husband declared this amount as additional income in the assessee's hands for the financial year 2007-08. The assessee then filed a return declaring income of Rs. 1,04,48,870, including the additional income. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) of the Act, which was upheld by the CIT (A).

The main contention was that the promissory notes did not mention the assessee's name, and she had not voluntarily disclosed the additional income. The argument was that since the husband declared the income on her behalf, it could not be considered as concealment or furnishing inaccurate particulars by the assessee. The assessee's representative cited legal precedents to support this argument.

The Department, however, argued that the assessee failed to provide a satisfactory explanation for not disclosing the additional income voluntarily. They relied on a Supreme Court decision to justify the imposition of the penalty.

The Tribunal analyzed the facts and determined that the seized promissory notes did not refer to the assessee, and it was the husband who declared the additional income in her name. The Tribunal found that the income declared by the assessee was accepted by the AO without any variation. Therefore, the Tribunal concluded that the penalty under section 271(1)(c) was not justified in this case and decided in favor of the assessee, deleting the penalty.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing that the imposition of the penalty was not warranted based on the circumstances and the lack of direct involvement of the assessee in concealing income or furnishing inaccurate particulars.