2012 (6) TMI 475 - AT - Income Tax

Penalty u/s 271(1)(c) - revenue Challenged the deletion of addition made by CIT(A) - Held that - If any assessee offers an explanation, which is not found to be false, he can save himself of penalty even if he were not able to substantiate his case as long as he places all the relevant material - surrender was being made with a condition that no penal action will be made and to avoid further litigation and to buy peace,hence no point to levy penalty - in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income based on surrender made by the assessee.

Analysis:
1. The department appealed against the order of the CIT(A)-Meerut challenging the deletion of penalty amounting to Rs. 5,08,557 imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2005-06. The surrender of Rs. 16,95,190 under "sundry creditors" was made by the assessee during assessment proceedings to avoid further litigation, although no payment was made to the parties. The Assessing Officer imposed the penalty after observing that the surrender was made after a notice was issued under section 133(6) of the Act.

2. The assessee contended that the surrender was made voluntarily before detection by the Assessing Officer and without any incriminatory material in his possession. Various decisions were cited to support this argument, emphasizing that a conditional surrender does not attract penalty proceedings. The CIT(A) accepted the plea of the assessee and deleted the penalty based on jurisdictional High Court and Supreme Court judgments.

3. The department, aggrieved by the CIT(A) order, argued that the surrender was not voluntary but made only after scrutinizing the assessment when the assessee failed to substantiate the claim of sundry creditors. Relying on certain decisions, the department sought the reversal of the CIT(A) order.

4. Upon hearing both sides and considering the material on record, the Tribunal found that the surrender was made subject to no penalty as per the assessee's letter during assessment proceedings. Citing jurisdictional High Court decisions, the Tribunal upheld the CIT(A) order, emphasizing that a conditional surrender does not attract penalty proceedings. The department failed to provide contrary superior court decisions, leading to the dismissal of the department's appeal.

5. Consequently, the appeal of the department was dismissed, and the order of the CIT(A) deleting the penalty under section 271(1)(c) was upheld based on the principle that a conditional surrender does not warrant penalty imposition.

This detailed analysis of the judgment highlights the key arguments, legal principles, and decisions considered by the Tribunal in resolving the issue of penalty for concealment of income based on the surrender made by the assessee.