2015 (11) TMI 1012 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income surrendered - Held that - Under the present facts, the Assessing Officer has accepted the bifurcation of income, which was voluntarily surrendered by the assessee vide letter dated 30/05/2011. The foundation of satisfaction, arrived at by the Assessing Officer, is based upon the disclosure of additional income, which was pursuant to search action upon Ispat Group, thus, the allegation are based upon that group and nowhere it has been mentioned in the assessment order/penalty order that the assessee concealed its income or furnished inaccurate particular of such income. The additional income was offered by the assessee to buy peace with the department and further subject to the understanding that no penal proceeding will be initiated against the assessee in connection with the seized material, therefore, we find that the assessee has clearly demonstrated its intention/understanding with the department that conditional additional income was offered by the assessee, as discussed hereinabove. In view of the facts and the aforesaid documentary evidence, we are of the considered opinion that it is a fit case, where the penalty has to be deleted, thus, we find merit in the appeals of the assessee and direct the ld. Assessing Officer to delete the penalty imposed u/s 271(1)(c) of the Act, consequently, the appeals of the assessee are allowed. - Decided in favour of assessee.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Voluntary disclosure of income by the assessee.
3. Understanding with the Department regarding non-initiation of penal proceedings.
4. Legal precedents and judicial interpretations relevant to the case.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:
The primary issue in these appeals was the confirmation of the imposition of penalty under Section 271(1)(c) of the Income Tax Act for the assessment years 2006-07 to 2010-11. The penalties were levied on the grounds that the assessee had concealed income or furnished inaccurate particulars of income. The department argued that the penalties were justified as incriminating materials were found during a search on the Ispat Group, leading to the assessee's revised returns showing higher income.

2. Voluntary Disclosure of Income by the Assessee:
The assessee contended that the revised returns were filed voluntarily to buy peace and avoid litigation, with the understanding that no penal proceedings would be initiated. The assessee's counsel referred to a letter dated 31/08/2013, submitted to the department, which outlined this understanding. The assessee argued that the additional income was offered voluntarily and not due to any concealment or misrepresentation of facts.

3. Understanding with the Department Regarding Non-initiation of Penal Proceedings:
The assessee's letter dated 31/08/2013, addressed to the ACIT, stated that the additional income was offered with the clear understanding that no penal proceedings would be initiated. The letter emphasized that the offer was made to buy peace and fully cooperate with the department. This understanding was crucial in the assessee's defense against the imposition of penalties.

4. Legal Precedents and Judicial Interpretations Relevant to the Case:
The Tribunal considered several judicial precedents to support the assessee's case. Key judgments included:
- CIT vs Suresh Chandra Mittal (251 ITR 9 SC): The Supreme Court held that no penalty under Section 271(1)(c) could be levied if the assessee offered additional income to buy peace and avoid litigation.
- CIT vs Suraj Bhan (249 ITR 481 P&H): The Punjab & Haryana High Court ruled that no penalty could be imposed if the assessee offered higher income to buy peace and avoid litigation.
- CIT vs Kiran & Company (217 ITR 326 Bombay): The Bombay High Court held that no penalty could be imposed merely on the basis of an offer of settlement.
- CIT vs Rajiv Garg (313 ITR 256 P&H): The court held that penalty is not imposable if the revised return was filed with an explanation and the revised return was regularized by the Revenue.

The Tribunal concluded that the assessee had clearly demonstrated its intention to buy peace with the department by offering additional income voluntarily and with the understanding that no penal proceedings would be initiated. The Tribunal found merit in the assessee's appeals and directed the Assessing Officer to delete the penalties imposed under Section 271(1)(c) of the Act.

Final Judgment:
The appeals of the assessee were allowed, and the penalties imposed under Section 271(1)(c) were deleted. The order was pronounced in the open court on 07/10/2015.

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