2014 (9) TMI 729 - HC - Income Tax

Penalty u/s 271(1)(c) Amount voluntary surrendered by assessee Held that - The assessee has surrendered the amount voluntarily to purchase peace - As per the then law, the penalty was not leviable, when the revised return was accepted by the AO as decided in CIT Vs. Shyam Lal 2004 (10) TMI 54 - MADHYA PRADESH High Court - each deposit was less than ₹ 20,000/- which is meager amount.- The assessee might have contested it on merit, but to purchase peace, he has surrendered the amount, which was accepted by the Department - when it is so, then the penalty is not attributed thus, the order levying the penalty is to be set aside Decided in favour of assessee.

Summary

Issues:
1. Appeal filed under Section 260A of the Income Tax Act, 1961 against an order passed by the Income Tax Appellate Tribunal for the assessment year 1996-97.
2. Justification of the surrender made by the appellant of an amount deposited by various parties.
3. Correctness of the Tribunal's decision regarding the surrender made by the appellant.
4. Consideration of whether the amount surrendered was concealed income.
5. Treatment of additions under section 68 as concealed income for imposing penalty under section 271(1)(c) of the Act.

Analysis:
1. The appellant filed an appeal under Section 260A against the Tribunal's order for the assessment year 1996-97. The appeal raised substantial questions of law regarding the surrender of an amount of Rs. 1,47,000 deposited by various parties shown in the Balance-sheet attached to the return of income.

2. The Tribunal was questioned on whether the surrender made by the appellant was voluntary and in good faith. The appellant revised the return and surrendered the amount when his case came under scrutiny. The penalty proceedings were initiated under Section 271(1)(c) of the Act, and the penalty was levied. The appellant contended that there was no malafide intention and that the amount represented cash credits from eight persons, each deposit being less than Rs. 20,000.

3. The appellant argued that the penalty amount was incorrectly calculated by the Assessing Officer and requested the cancellation of the penalty. The Department justified the penalty, stating that the surrender was not voluntary. The Tribunal found that the surrender was made to purchase peace, and as per previous legal precedents, the penalty was not leviable when the revised return was accepted.

4. The Tribunal considered whether the surrendered amount was concealed income. It was noted that each deposit was a meager amount, and the appellant surrendered the amount voluntarily to avoid litigation. Legal precedents were cited to support the decision to cancel the penalty, emphasizing that the surrender was made to purchase peace and avoid further disputes.

5. In light of the circumstances and legal principles, the Tribunal set aside the impugned order and canceled the penalty levy. The decision favored the appellant, citing leniency based on CBDT Circular No. 451 and legal precedents. The appeal filed by the appellant was allowed, and the penalty was revoked.