2019 (7) TMI 1263 - AT - Income Tax

Condonation of delay of 264 days - Penalty u/s 271(1)(c) - assessee made a conditional surrender and paid the tax on the said surrender subject to no penalty u/s 271(1)(c) - HELD THAT - In the instant case the assessment was completed accepting the revised returns instead of making the assessment on the basis of the seized material and the evidences collected during the search. If the proposal of the assessee with regard to taking lenient view is not possible the AO ought to have intimated the same to the assessee and should have completed the assessment rejecting the revised return which was filed on conditional surrender. The AO would have completed the assessment as per incriminating material found during the course of search instead of accepting the revised returns. We are convinced that the assessee has admitted the additional income conditionally and the department has levied the penalty inspite of the conditional offer against the spirit of admission made by the assessee. Hence, the assessee's case required to be heard on merits to render the justice. Therefore, we hold that there is reasonable cause for filing the appeal belatedly and delay of filing the appeal required to be condoned. Accordingly, we condone the delay and remit the matter back to the file of the CIT(A) to decide the appeal on merits after giving opportunity to the assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Assessment of additional income and its exemption under Section 11.
3. Levy of penalty under Section 271(1)(c) and Section 271AAB.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The primary issue was whether the delay in filing the appeal by the assessee should be condoned. The assessee argued that the delay was due to an understanding with the Income Tax Department that no penalties would be levied if additional income was admitted. The Commissioner of Income Tax (Appeals) [CIT(A)] refused to condone the delay, stating there was no reasonable cause. The Tribunal found that the assessee had admitted additional income under the impression that penalties would not be imposed, which was a sufficient reason for condoning the delay. The Tribunal referenced various judicial precedents, including the Supreme Court's guidelines in Esha Bhattacherjee vs. Managing Committee of Raghunathpur, Nafar Academy, emphasizing a liberal and justice-oriented approach to condonation of delay.

2. Assessment of Additional Income and Its Exemption Under Section 11:
During a search under Section 132, cash and incriminating material were found, and the assessee admitted additional income of ?12.51 crores. Initially, the assessee filed 'nil' returns claiming exemption under Section 11, arguing that the receipts were spent on charitable activities. However, due to pressure from the Income Tax Department, the assessee filed revised returns admitting the additional income, believing penalties would not be levied. The Tribunal noted that the assessee's admission of income was conditional and that the assessment was completed based on these revised returns without detailed scrutiny of the incriminating material. The Tribunal held that the assessee should be allowed to present their case on merits and remitted the matter back to the CIT(A).

3. Levy of Penalty Under Section 271(1)(c) and Section 271AAB:
The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) and subsequently levied penalties after the assessment was completed. The assessee argued that the penalties were unjust as the additional income was admitted under a conditional understanding with the department. The Tribunal observed that such understandings, though not formally permissible, are not uncommon in search cases. The Tribunal found that the AO's acceptance of the revised returns implied an understanding to not levy penalties. Consequently, the Tribunal held that the delay in filing the appeal was justified and remitted the penalty matter back to the CIT(A) for a fresh decision on merits.

Conclusion:
The Tribunal dismissed the stay application for the Assessment Year 2014-15 but allowed the appeals for statistical purposes. The Tribunal remitted the matters back to the CIT(A) to decide the appeals on merits, emphasizing the need for a fair hearing and consideration of the assessee's arguments regarding the conditional admission of income and the subsequent levy of penalties.