2002 (7) TMI 215 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) for the assessment year 1992-93.
2. Voluntariness and timing of the disclosure of additional income.
3. Applicability of legal precedents on the facts of the case.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) for the Assessment Year 1992-93
The appeal concerns the confirmation of a penalty of Rs. 2,68,380 under Section 271(1)(c) by the CIT(A) for the assessment year 1992-93. The assessee argued that the penalty was unjustified as the additional income was disclosed voluntarily without any detection by the Assessing Officer (AO). The AO had issued a notice under Sections 143(2) and 142(1) on 11th Dec 1992, which included a routine query for a detailed inventory of opening and closing stock. The assessee claimed that the omission of Rs. 5,34,452 from the closing stock was due to an inadvertent mistake by the accountant, which was corrected voluntarily on the first effective hearing date, 15th March 1993.

2. Voluntariness and Timing of the Disclosure of Additional Income
The assessee contended that the additional income was disclosed voluntarily on 15th March 1993, before any detection by the Department. The AO conducted a survey on 19th March 1993, and no discrepancies were found in the stock. The CIT(A) and the senior Departmental Representative argued that the disclosure was not voluntary but made after the Department's routine query. They emphasized that the stock was valued and certified by the partners, making it improbable that such a significant omission could occur without deliberate intent.

3. Applicability of Legal Precedents on the Facts of the Case
The assessee relied on several judgments to argue against the penalty:
- CIT vs. Khoday Eswara & Sons: The Department must establish that the receipt of the amount constitutes income and that there was conscious concealment.
- Cement Marketing Co. of India Ltd. vs. Asstt. CST & Ors.: Penalty cannot be imposed if the return was filed under a bona fide belief.
- G.C. Agarwal vs. CIT: The revised return must be within the scope of Section 139(5) and the omission must be due to bona fide inadvertence.
- K.M. Bhatia (Quarry) vs. CIT: The revised return filed voluntarily before detection by the AO was not subject to penalty.
- Anand Kumar Saraf & Ors. vs. CIT & Ors.: Detection of concealment requires verification of seized documents with disclosed income.
- K.S.N. Murthy vs. CBDT: Explained the meaning of "voluntary return" in the context of Section 273A.
- National Textiles vs. CIT: Penalty cannot be imposed without evidence of conscious concealment.

The Department relied on judgments emphasizing that the revised return filed after detection by the Department does not absolve the assessee from penalty:
- Sumati Dayal vs. CIT: The test of human probabilities should be applied.
- CIT vs. A. Sreenivasa Pai: Revised return filed after detection does not preclude penalty.
- Addl. CIT vs. Joginder Singh: Penalty is correlated to the time of the first return.
- P.C. Joseph & Bros. vs. CIT: Revised return after detection by search does not avoid penalty.
- CIT vs. Sudharshan Silks and Sarees: Revised return filed after search and seizure operations does not preclude penalty.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) was not justified. The issuance of routine queries did not establish that the Department had detected any concealment. The assessee voluntarily disclosed the additional income on the first effective hearing date, 15th March 1993, before any detection by the Department. The survey conducted on 19th March 1993 found no discrepancies. The Tribunal directed the AO to cancel the penalty, emphasizing that the additional income was disclosed voluntarily due to an inadvertent error by the accountant, which was corrected as soon as it was discovered.

Result:
The appeal was allowed, and the penalty under Section 271(1)(c) was cancelled.