2005 (8) TMI 308 - AT - Income Tax

Penalty levied u/s 271(1)(c) - For Concealment Of Income - Burden Of Proof - Assessment - Revised Returns - HELD THAT - Admittedly, neither the assessment order nor the penalty order contained details to prove that the differential income declared by the assessee in the revised returns, was detected by the Department before the assessee has come forward to furnish the revised returns. There was no doubt some delay on the part of the assessee to file the returns of income, particularly in respect of assessment years 1994-95 to 1996-97. However, the case of the Assessing Officer rested upon the fact that in the returns filed by the assessee, the income as originally admitted during the course of survey proceedings, was not declared, and thus it amounted to furnishing inaccurate particulars, and thereby the assessee concealed income. Thus, the issue is confined to the difference between the originally returned income and the income declared in the revised returns, though penalty was levied with reference to the tax payable on the assessed income, as could be seen from the assessment order. The assessee maintained some rough books supported by some vouchers, etc. Account copies from the companies from which the assessee has procured foundation seeds have been obtained and verified by the Assessing Officer. Gross receipts admitted by the assessee, supported by the vouchers, were also verified by the Assessing Officer. There is not even a whisper doubting the correctness of the particulars contained therein. Whether the explanation offered by the assessee is bona fide or not - There is nothing on record to suggest that for the assessment year 1997-98, the assessee has earned taxable income of Rs. 2 lakhs, as assessed on the basis of revised return, as against income of Rs. 67,230 declared by the assessee in the original return. Similarly, for the other years also there is nothing on record to suggest that the income finally assessed was detected by the Department as the correct income of the assessee. Except stating that the details furnished by the assessee were cross-verified, there is no indication to the effect that the assessee has either inflated the expenditure or concealed the gross income. No doubt, when the assessee has revised the returns and declared the income in conformity with the statement given during the course of survey proceedings, there was no occasion for the Assessing Officer to point out that the Department has detected certain facts which would go to show that the assessee has not correctly declared income. But at least in penalty proceedings, where the assessee had given an explanation, the duty is cast upon the Revenue to highlight that the revised returns were filed not merely to buy peace with the Department but on account of detection by the Revenue authorities. Some facts and figures and estimated working is necessary to show that the material on records that the finally assessed income is the actual/probable income earned by the assessee. In the instant case, such an exercise having not been done by the Revenue authorities, in conformity with the decision of the Apex Court in the case of Suresh Chandra Mittal 1999 (7) TMI 34 - MADHYA PRADESH HIGH COURT , I am of the view that the Assessing Officer has not made out a case for the levy of penalty. I, therefore, cancel the penalties levied by the Assessing Officer, and allow the appeals of the assessee. In the result, appeals filed by the assessee are allowed.

Issues Involved:
1. Penalties levied under section 271(1)(c) of the Income Tax Act.
2. Non-filing and delayed filing of income tax returns.
3. Alleged concealment of income and furnishing inaccurate particulars.
4. Bona fide explanation for filing revised returns.

Detailed Analysis:

Issue 1: Penalties levied under section 271(1)(c) of the Income Tax Act
The primary issue is the penalties levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, which were confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalties were imposed due to the alleged concealment of income and furnishing inaccurate particulars by the assessee.

Issue 2: Non-filing and delayed filing of income tax returns
The assessee, a proprietor of a seed business, did not file any returns of income for the assessment years 1994-95 to 1997-98, despite having a turnover exceeding Rs. 40 lakhs each year. The AO conducted survey operations under section 133A of the Act, which revealed that the assessee had not maintained proper books of account and had only kept a rough book. The assessee admitted to not filing returns and later offered certain incomes for taxation subject to finalization of accounts.

Issue 3: Alleged concealment of income and furnishing inaccurate particulars
The AO issued notices under sections 148 and 142(1) of the Act, and the assessee subsequently filed returns disclosing lower incomes than those offered during the survey. The AO observed that the assessee filed revised returns only after the survey operations, which led to the conclusion that the assessee had furnished inaccurate particulars of income. Consequently, the AO levied minimum penalties under section 271(1)(c) for the four years under consideration.

Issue 4: Bona fide explanation for filing revised returns
The assessee contended that the revised returns were filed to purchase peace and cooperate with the Department, arguing that there was no concealment of income. The CIT(A) rejected this contention, stating that the revised returns were filed only after detection by the Department during the survey, indicating a clear case of concealment. The CIT(A) distinguished the case from other case laws cited by the assessee, noting that there was no assurance from the Survey Officer that no penalty would be levied.

Tribunal's Findings:
The Tribunal noted that neither the assessment order nor the penalty order contained details proving that the differential income declared in the revised returns was detected by the Department before the assessee furnished the revised returns. The Tribunal emphasized that the explanation provided by the assessee-that the revised returns were filed to purchase peace and avoid litigation-was not found to be false by the Department. The Tribunal referenced the Supreme Court decision in CIT v. Suresh Chandra Mittal, which held that if the explanation is bona fide, the onus shifts to the Department to prove otherwise.

The Tribunal found no evidence on record to suggest that the income finally assessed was the correct income detected by the Department. It was noted that the gross receipts admitted by the assessee were verified and found correct, with no indication of inflated expenses or concealed income. The Tribunal concluded that the AO had not made out a case for the levy of penalty, as the Department failed to demonstrate that the revised returns were filed due to detection by the Revenue authorities.

Conclusion:
The Tribunal allowed the appeals filed by the assessee and canceled the penalties levied by the AO, concluding that the explanation provided by the assessee was bona fide and the Department did not provide sufficient evidence to prove otherwise.

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