2020 (9) TMI 1134 - HC - Income Tax

Penalty u/s 271(1)(c) - non-disclosure of income and by voluntary surrender of income in the return of income filed which was claimed to be an expenditure for Land Development Charges debited to Profit and Loss Account, which later on, the Assessee did not claim in the revised return filed after issuance of notice under Section 148 - HELD THAT - Matter deserves to be remanded back to the learned Tribunal as it seems, it has not only committed some factual errors in respect of filing of return of income by the Assessee but also invoked Explanation 3 and 5A of Section 271(1)(c) with respect to the alleged non-filing return of income by the Assessee in pursuance of notice issued after the Search which took place in the business place of the Assessee and such a revised Return was filed by the Assessee voluntarily surrendering such income. While apparently surrendering all the income on its own by the Assessee ought not to have attracted penalty for concealment under Section 271(1)(c) Tribunal has not only restored the penalty by the impugned order but also restored the penalty on the issue for which no ground was raised in the Grounds of Appeal filed by the Revenue before it. Tribunal ought to decide the Appeal again after giving opportunity to both the parties afresh on the grounds of Appeal raised by the Revenue. We set aside the order passed by Tribunal in respect of penalty under Section 271(1)(c) of the Act and we request the learned Tribunal to decide the Appeal again.

Issues Involved:
1. Perverse finding in respect of Return u/s.139(1) of the Act.
2. Tribunal exceeded its jurisdiction.
3. Levy of penalty u/s.271(1)(c) on the entire income.
4. Penalty on additional income offered in return filed in response to notice u/s.153A.
5. Explanation provided by the Assessee in respect of additional income.
6. Penalty on disallowance u/s.40(a)(ia).
7. Validity of initiation of penalty.

Detailed Analysis:

1. Perverse finding in respect of Return u/s.139(1) of the Act:
The Tribunal found that the Assessee had not originally filed his return of income under Section 139(1) of the Income Tax Act on 30.11.2006. The learned Commissioner of Income Tax (Appeals) noted that the Assessee had e-filed his return for AY 2006-07 on 28.11.2006 declaring an income of ?1,01,46,668/-. The Tribunal’s finding was deemed perverse as it ignored this fact.

2. Tribunal exceeded its jurisdiction:
The Tribunal was criticized for exceeding its jurisdiction by holding the Assessee liable for penalty even on the income declared under Section 139(1) on 30.11.2006, which was prior to the search on 10.01.2008. The Tribunal’s decision to restore the penalty on the entire assessed income, including income declared in the original return, was beyond the grounds raised by the Revenue in the appeal.

3. Levy of penalty u/s.271(1)(c) on the entire income:
The Tribunal upheld the levy of penalty under Section 271(1)(c) on the entire income, including the income declared in the original return. The Commissioner of Income Tax (Appeals) had deleted the penalty, noting that no penalty could be levied on the voluntary income admitted by the Assessee under Section 139(1) prior to the date of search. The Tribunal’s decision was seen as an overreach.

4. Penalty on additional income offered in return filed in response to notice u/s.153A:
The Tribunal upheld the penalty on the additional income offered in the return filed in response to notice under Section 153A. The Commissioner of Income Tax (Appeals) had found the Assessee’s explanation satisfactory and deleted the penalty, noting that the additional income was voluntarily offered by the Assessee by withdrawing the land development expenses.

5. Explanation provided by the Assessee in respect of additional income:
The Tribunal held that the explanation provided by the Assessee regarding the additional income voluntarily disclosed was not satisfactory to delete the penalty under Section 271(1)(c). The Commissioner of Income Tax (Appeals) had accepted the explanation and deleted the penalty, referencing the Supreme Court decision in CIT v. Suresh Chandra Mittal.

6. Penalty on disallowance u/s.40(a)(ia):
The Tribunal restored the penalty on the disallowance under Section 40(a)(ia) of ?13,000/-, which was not a ground raised by the Revenue in the appeal. The Commissioner of Income Tax (Appeals) had deleted the penalty, noting that disallowance of expenses per se does not amount to furnishing inaccurate particulars of income.

7. Validity of initiation of penalty:
The Tribunal’s decision to restore the penalty was challenged on the grounds that the initiation of penalty by issuance of notice under Section 274 read with Section 271(1)(c) was bad in law as it did not specify which limb of Section 271(1)(c) was being invoked. The Commissioner of Income Tax (Appeals) had found the notice defective and deleted the penalty.

Conclusion:
The High Court found that the Tribunal committed factual errors and invoked presumptions of concealment without proper discussion. The Tribunal’s decision to restore the penalty was set aside, and the matter was remanded back to the Tribunal for a fresh decision after giving both parties an opportunity to present their cases. The appeal was disposed of without costs.

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