2013 (12) TMI 1362 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The assessee declared income from capital gains as when realized by him that such income has inadvertently not returned - No show cause notice was issued before 20.02.2004, the revised computation filed by the assessee on the said date cannot be said to declare additional income of the assessee after detection of concealment by the department - Following AVR Prasad vs. ITO 2005 (8) TMI 308 - ITAT HYDERABAD-B - Penalty cannot be levied if any income is voluntarily declared before any concealment is detected - The Assessing Officer has not found the explanation furnished by the assessee to be false - Penalty cannot be levied if any bona fide mistake is involved - Decided against Revenue.

Summary

Issues:
Appeal against deletion of penalty u/s 271(1)(c) of the IT Act for Assessment Year 2001-02.

Analysis:
The case involves an appeal by the department against the deletion of a penalty imposed on the assessee u/s 271(1)(c) of the IT Act for the Assessment Year 2001-02. The penalty was imposed by the Assessing Officer after reassessment, which determined the total income at Rs. 17,14,193/-. The penalty was based on the concealment of income from long-term and short-term capital gains. The Assessing Officer alleged that the assessee had consciously concealed the income, leading to the penalty of Rs. 3,67,324/-. The CIT (A) deleted the penalty, prompting the department to appeal.

The key contention raised by the department was that the CIT (A) erred in deleting the penalty that was correctly levied on the assessee. However, the revised computation declaring capital gains of Rs. 23,76,608/- was voluntarily filed by the assessee before any detection of concealment by the department. The CIT (A) observed that the revised computation was filed before the issuance of a general show cause notice/questionnaire by the Assessing Officer. The department failed to provide any material other than the revised computation to support the penalty.

The Tribunal upheld the CIT (A)'s decision, citing the principle that if income is voluntarily declared before concealment is detected, the penalty cannot be levied. The Tribunal noted that the Assessing Officer did not find the explanation furnished by the assessee to be false. The Tribunal referred to various legal precedents supporting the view that penalties cannot be imposed in cases of bona fide mistakes. The department's appeal was dismissed, and the decision was pronounced in open court on 20.12.2013.

In conclusion, the Tribunal found no merit in the department's appeal and upheld the CIT (A)'s decision to delete the penalty imposed on the assessee. The case highlights the importance of voluntary disclosure of income and the relevance of bona fide mistakes in tax assessments to determine the applicability of penalties under the IT Act.