2017 (2) TMI 1090 - AT - Income Tax

Penalty u/s. 271(1)(c) - unexplained cash deposited in bank - revised return of income filled - suo moto disclosures - Held that - The assessee in the instant case came forward and filed so called revised return of income on 28-02-2011 albeit beyond stipulated time u/s 139(5) of the Act of 1961 which expired on 31-03-2007 but before issuance of notice u/s 148 of the Act by the Revenue in the month of March 2012 as well the assessee filed affidavit dated 21-03-2011 explaining facts and circumstances under which the said cash of ₹ 1,50,000/- was deposited in his bank account which was not included in the return of income filed with the Revenue which shows and proves bona-fide conduct of the assessee . The assessee had submitted that the said receipt of ₹ 1,50,000/- which was deposited in cash in Bank account with Union Bank of India, Shahad was advised to be tax-free by his tax-expert Advocate for last thirty years. It is also submitted that the assessee being not highly educated person trusted the said advocate tax-expert and did not included the said receipt of ₹ 1,50,000/- in the return of income filed with the Revenue. The assessee had also filed an affidavit dated 21-03-2011 explaining the facts and circumstances wherein the said income was not included as income in the return of income originally filed with the Revenue. Revenue could not controvert the contents of the affidavit filed by the assessee to prove that the said affidavit had a false or untrue averments made by the assessee. Thus penalty levied u/s 271(1)(c) cannot be sustained as the assessee had came forward with an explanation which is a reasonable and bonafide explanation complying with the mandate of Section 271(1)(c) read with explanation 1 and hence penalty levied is hereby ordered to be deleted. - Decided in favour of assessee.

Issues Involved:
1. Justification of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Validity of the revised return of income filed by the assessee.
3. Bonafide explanation by the assessee for not declaring certain income in the original return.
4. Impact of tax evasion petition and subsequent investigation on the penalty proceedings.

Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):
The primary issue was whether the penalty levied under Section 271(1)(c) for concealing income or furnishing inaccurate particulars was justified. The assessee argued that the penalty was not warranted as the revised return was filed voluntarily before any inquiry or notice under Section 148 was received. The Tribunal observed that the assessee had indeed filed a revised return on 28-02-2011 before the issuance of notices under Section 148 in March 2012. The Tribunal concluded that the assessee had provided a reasonable and bonafide explanation for the non-disclosure of income in the original return, thus the penalty under Section 271(1)(c) was not sustainable.

2. Validity of the Revised Return of Income:
The Tribunal examined whether the revised return filed by the assessee was valid under the provisions of Section 139(5). The AO had rejected the revised return, stating it was filed beyond the time limit and with a different jurisdictional officer. However, the Tribunal noted that the revised return was filed before any notice under Section 148 and included the previously undisclosed income. The Tribunal held that although the revised return was not within the prescribed time, it demonstrated the assessee's intention to rectify the earlier omission voluntarily.

3. Bonafide Explanation by the Assessee:
The assessee claimed that the non-disclosure of income was based on the advice of a tax consultant who had misinformed him that certain cash deposits were not taxable. The Tribunal found this explanation to be credible, especially considering the assessee's affidavit dated 21-03-2011, which detailed the circumstances of the cash deposit. The Tribunal emphasized that the Revenue could not disprove the contents of the affidavit, thus accepting the assessee's explanation as bonafide.

4. Impact of Tax Evasion Petition and Subsequent Investigation:
The Tribunal considered the Revenue's argument that the revised return was prompted by an ongoing investigation following a tax evasion petition. However, the Tribunal highlighted that the filing of a tax evasion petition does not automatically imply concealment or furnishing of inaccurate particulars. The Tribunal acknowledged that the assessee might have revisited his financial records and filed the revised return to avoid litigation, which is a reasonable human conduct. The Tribunal concluded that the assessee's actions were in good faith and did not warrant a penalty under Section 271(1)(c).

Conclusion:
The Tribunal allowed the appeals for both assessment years 2005-06 and 2007-08, ordering the deletion of the penalties levied under Section 271(1)(c). The Tribunal's decision was based on the assessee's voluntary disclosure before any formal inquiry, the bonafide explanation provided, and the lack of evidence from the Revenue to disprove the assessee's claims. The judgment emphasized the importance of considering the taxpayer's intent and the factual matrix surrounding the filing of revised returns.

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