2015 (8) TMI 558 - HC - Income Tax

Penalty under Section 271(1)(c) - unapproved expenditure - appellant filed a revised return showing the additional income after claiming the expenditure - Held that - It is, no doubt, true that the appellant filed a revised return on 30.11.1995 as a sequel to the survey conducted in his premises. It is not a case where any search was conducted or any definite amount was unearthed in the course of the same. The figures pointed out against the appellant are on the basis of projections based upon the strength in the school and the fee payable by the students. No finding as such was recorded to the effect that the amount of ₹ 9,22,810/- was collected. Obviously with a view to purchase peace and to avoid a delicate situation before the competitors in the field, the appellant filed a revised return showing the income, after deducting the expenditure. That was accepted. Here itself, it needs to be mentioned that though the Department pointed out that even after the revised return was filed, a sum of ₹ 5,30,790/- was not included, ultimately, an order under Section 143(3) of the Act was passed accepting the facts and figures furnished by the appellant. This only indicates that the figures mentioned, on the basis of survey, were not accurate. The levy of penalty cannot be resorted to as a matter of course. An assessee can be made to suffer such far reaching consequences, if only facts of the case support, and it emerges that the assessee had a clear intention to suppress the income. We do not find such elements in the instant case. Penalty deleted - Decided in favour of assessee.

Summary

Issues:
1. Penalty under Section 271(1)(c) of the Income Tax Act for filing a revised return.
2. Justification for levying penalty.
3. Assessment of income based on a survey conducted by the Department.
4. Appeal against the order of penalty.

Analysis:
The appellant, a Proprietor of a private educational institution, filed a revised return after a survey conducted by the Department pointed out discrepancies in the income declared for the assessment year. The Department alleged that the appellant may have collected a higher sum compared to what was declared. Despite the discrepancy, an order under Section 143(3) of the Act was passed accepting the revised returns, indicating that the figures mentioned in the survey were not accurate. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act, which led to the imposition of a penalty of Rs. 73,578.

The appellant contended that the revised return was filed to avoid a delicate situation and to purchase peace, as no definite amount was unearthed during the survey. The High Court observed that the levy of penalty cannot be a routine measure and should only be imposed if there is clear intention on the part of the assessee to suppress income. The Court emphasized that differences between returns and estimates by authorities are common, and penalties should not be imposed without evidence of intentional wrongdoing. In this case, the Court found no elements indicating an intention to suppress income, leading to the allowance of the appeal and setting aside the Tribunal's order imposing the penalty.

The Court highlighted that the understanding of provisions and assessments can vary, leading to differences in income calculations. The availability of multiple appeal stages indicates that interpretations by authorities are not absolute. The judgment emphasized that penalties should not be used to treat an assessee as an economic offender unless there is clear evidence of intentional suppression of income. The decision to set aside the penalty was based on the lack of such evidence in the case at hand.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's order imposing the penalty. The Court ruled that there shall be no order as to costs, and any miscellaneous petitions filed in relation to the appeal were also disposed of.