2019 (2) TMI 1189 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance u/s 57(iii) - scrutiny assessment - statutory notices u/s 143(2) and 142(1) calling for details - assessee has filed a revised return during the course of assessment - HELD THAT - Explanation of the assessee is that the assessee has noted certain mistakes in the computation of income in the return filed and since the return was belated one, it could not file the revised return. During the course of assessment in the first submission before the detection by the A.O., the assessee submitted the revised return. These submissions have not been disputed by the A.O., rather he has said that the assessee could have submitted the revised return at the TAPAL of the A.O. We find that the facts of the case clearly indicate the bonafide of the assessee. It is settled that unless the conduct of the assessee is contumacious, penalty cannot be levied. See Hindustan Steel Ltd. vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT - justification in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute.. Thus we delete the penalty levied in this case. - Decided in favour of assessee.

Summary

Issues:
1. Penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income.
2. Validity of penalty upheld by CIT(A) and challenged by the assessee.

Issue 1: Penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income:

The appellant filed a return of income for the assessment year 2012-13, declaring a total income of ?19,59,090. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) of the Act due to additions made during assessment. The AO added amounts related to capital gains on the sale of property, disallowance under section 57(iii) of the Act, and undisclosed income from investments. The AO found that the appellant had not disclosed all material facts truly and correctly, leading to the penalty imposition of ?13,83,007. The appellant argued that the revised computation of income was voluntarily submitted before the AO detected the errors, indicating no concealment. However, the AO maintained that the case was selected for scrutiny due to non-disclosure of material facts. The CIT(A) upheld the penalty citing relevant legal precedents.

Issue 2: Validity of penalty upheld by CIT(A) and challenged by the assessee:

The appellant appealed against the CIT(A)'s decision before the Appellate Tribunal. The Tribunal considered the appellant's submission of a revised return during assessment, explaining that mistakes in the original return were rectified promptly. The Tribunal noted that the AO did not dispute the appellant's explanation but suggested that the revised return could have been filed earlier. Referring to legal precedents, including the Hindustan Steel Ltd. case, the Tribunal emphasized that penalty for non-compliance should only be imposed in cases of deliberate defiance or contumacious conduct. As the facts indicated the appellant's bonafide intentions and absence of contumacious behavior, the Tribunal decided to delete the penalty levied under section 271(1)(c) of the Act.

In conclusion, the Appellate Tribunal allowed the appeal by the assessee, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal emphasized the importance of bonafide conduct and absence of contumacious behavior in penalty proceedings, aligning with established legal principles.