2016 (5) TMI 1011 - AT - Income Tax

Penalty u/s 271(1)(c) - revised computation of income filled - Held that - The assessee already revised computation of income and paid the taxes before being noticed or detected by the Assessing Officer and further the assessee could not revise return because the original return was filed belated. Thus, in our considered view, the assessee has offered explanation for the mistake of not offering the income in the return of income filed and substantiated the explanation, which is also found to be bonafide. Thus, the Explanation- 1 to the section 271(1)(c) of the Act is not attracted and no penalty for concealment of income or inaccurate particulars of income is leviable in the case of the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction and validity of the penalty order under Section 271(1)(c) of the Income Tax Act, 1961.
2. Confirmation of penalty based on findings in the assessment order.
3. Imposition of penalty in respect of additions made to salary, capital gains, and other income.
4. Allegations of concealment or furnishing inaccurate particulars of income.
5. Bona fide explanation and payment of taxes by the assessee before detection by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Jurisdiction and Validity of the Penalty Order:
The appellant argued that the penalty order dated 24.07.2014, levying a penalty of ?18,35,000 under Section 271(1)(c) of the Income Tax Act, 1961, was without jurisdiction, bad in law, and void-ab-initio. It was contended that the penalty order was passed without recording proper satisfaction in the assessment order passed under Section 143(3) of the Act, which is essential for assuming jurisdiction. However, this ground was not pressed during the hearing and was dismissed as infructuous.

2. Confirmation of Penalty Based on Findings in the Assessment Order:
The appellant contended that the Commissioner of Income Tax(Appeals) erred in confirming the levy of penalty solely based on findings given in the assessment order, without appreciating that penalty proceedings are separate and independent from assessment proceedings. The appellant argued that there was no concealment or furnishing of inaccurate particulars of income and that the penalty order was bad in law.

3. Imposition of Penalty in Respect of Additions Made to Salary, Capital Gains, and Other Income:
The Assessing Officer made additions for the difference amount of perquisites related to ESOP of PepsiCo USA, short-term capital gains, foreign dividend income, and interest income. The appellant had not preferred an appeal against the assessment order but paid the differential taxes suo-motu before the case was taken up for scrutiny. The appellant argued that there was no malafide intention as taxes were already paid, and the mistake was due to an incorrect Form No. 16 provided by the employer.

4. Allegations of Concealment or Furnishing Inaccurate Particulars of Income:
The Commissioner of Income Tax(Appeals) held that the appellant was fully aware of the ESOP-related transaction and had a mala fide intention of evading tax by nondisclosure of perquisites value associated with ESOP shares. The appellant countered this by stating that the mistake occurred due to the incorrect Form No. 16 supplied by the employer, and there was no intention to conceal income. The revised computation of income and payment of taxes were made voluntarily before being noticed by the Assessing Officer.

5. Bona Fide Explanation and Payment of Taxes by the Assessee Before Detection by the Assessing Officer:
The appellant argued that the explanation for the nondisclosure of income was bona fide and that the taxes were paid voluntarily before any detection by the Assessing Officer. The Tribunal found that the explanation furnished by the appellant was bona fide and that all facts material to the computation of income were disclosed. The case did not fall under the explanation 1(A) or 1(B) of Section 271(1)(c) of the Act.

Conclusion:
The Tribunal concluded that the appellant had offered a bona fide explanation for the mistake and had paid the taxes before detection by the Assessing Officer. Therefore, no penalty for concealment of income or inaccurate particulars of income was leviable. The appeal filed by the appellant was allowed, and the penalty order was set aside.

Final Decision:
The appeal filed by the assessee is allowed, and the decision was pronounced in the open court on 19th April 2016.