2002 (12) TMI 192 - AT - Income Tax

Summary

Issues:
Levy of penalty under section 271(1)(c) of the IT Act, 1961 based on the revised return filed by the assessee.

Analysis:

Issue 1: Levy of Penalty under Section 271(1)(c)
The appeal was against the order confirming the penalty of Rs. 80,640 imposed by the ITO under section 271(1)(c) of the IT Act, 1961. The assessee, a 70-year-old individual, initially declared a total income of Rs. 1,70,240 in the return filed on 5th Nov., 1993, which was later revised on 17th Oct., 1994, to Rs. 2,60,240. The assessment was finalized under section 143(3) of the Act on 22nd May, 1995, considering a total income of Rs. 2,69,720, including a disclosure of Rs. 90,000 made by the assessee. The assessee had paid tax on the disclosed income and submitted detailed reasons for not paying tax in advance. The contention was that the revised return, on which the assessment was based, included the disclosed income, and therefore, no penalty should be levied.

Issue 2: Consideration of Revised Return
The Tribunal observed that penalty under section 271(1)(c) can be imposed in cases of income concealment. In this case, the assessee filed a revised return disclosing the additional income of Rs. 90,000 and paid tax on it before the assessment was finalized. The AO did not conduct a detailed enquiry into the disclosure and merely mentioned the disclosure in the penalty order. The Tribunal emphasized the importance of establishing mens rea for imposing a penalty, stating that if the revision of the return was an honest and bona fide action, penalty for concealment would not apply. It was noted that the assessee voluntarily disclosed the income without any intention to conceal, leading to the conclusion that the penalty was not justified.

Conclusion:
The Tribunal held that since the assessee had voluntarily disclosed the additional income and there was no intention to conceal, the penalty under section 271(1)(c) was unwarranted. Therefore, the penalty of Rs. 80,640 was deleted, and the appeal was allowed in favor of the assessee.