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TMI Blog2011 (3) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... s composite order and, for the sake of completeness, the grounds for the assessment year 2002-03 are reproduced as under:- 1. On the facts of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the levy of penalty u/s. 271(1)(c) of the Income-tax Act, 1961 of Rs. 4,80,000 on Appellant. 2. The learned Commissioner of Income-tax (Appeals) erred in not appreciating that the learned Assessing Officer had not recorded the requisite satisfaction regarding concealment of particulars of income or furnishing inaccurate particulars as required as per the provisions of section 271(1)(c) and therefore the levy of penalty is not justified. 3. Without prejudice to above Grounds of Appeal the Ld. CIT(A) erred in not appreciating that the Appellant had voluntarily and suo moto declared additional income of Rs.50 lacs for Assessment Years 2002-03, 2003-04 and 2004-05 on the date of survey i.e. 13.02.2004 itself and furnished year-wise bifurcation thereof on 16.02.2004 without any knowledge of the Department having conducted bank enquiries. 4. Without prejudice to above Grounds of Appeal, the Ld. CIT(A) ought to have restricted the levy of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nishing inaccurate particulars thereof. AO is of the view that the discrepancies noticed during the course of survey u/s. 133A and consequent disclosure of additional income of Rs.7 lakhs for the assessment year in question and subsequent revision of return on 9-3-2004 offering additional income of Rs. 12,82,258, attracts penalties. Notice u/s. 274 r.w.s. 271(1)(c) was issued and served on the assessee on 23-7-2004 to appear before the AO on 10-8-2004, and to submit his say in this regard. In response to the said notice the assessee vide his written submission dated 10-8-2004 stated as under:- "(a) No discrepancies were found by the survey party pertaining to assessment year 2002-03 nor are any discrepancies found during the course of assessment proceedings. (b) I have disclosed correctly Rs. 12,82,260 as an additional income for above year voluntarily and suo motu to avoid litigation and buy peace thereby proving my credentials and intention to disclose the full and correct income. I have paid additional tax and interest aggregating to Rs. 5,45,349 being tax of Rs. 3,92,368 and penal interest of Rs. 1,52,981. (c) Your Honour has vide order u/s. 143(3) dated 12th July, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was found that there were FDs which were not furnished by the assessee in the return of income for A.Ys. 2002-03 and 2003-04. The Assessing Officer also noted that these FDs exceeded the amount of additional income disclosed by the appellant vide his statement under oath and it was because of this reason that assessee at the time of filing of revised return declared Rs. 12,82,056 as additional income instead of Rs. 7,00,000 originally declared during the survey action u/s. 133A of the Act. At the end of the penalty proceedings, AO considered the facts of the case as well as the legal propositions and rejected the above explanation of the assessee. Finally, AO held that the assessee concealed the particulars of income and failed to offer satisfactory explanation to the AO. Resultantly, he proceeded to levy penalty of Rs.4 lakhs for the assessment year 2002-03. However, as seen from para 4 of the penalty order, the AO gave a finding that the assessee cooperated with the Department in filing the revised return of income and paid taxes as agreed during the survey operation. Aggrieved with the above levy of penalty, the assessee filed an appeal before the CIT(Appeals). First appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the declaration was made on the oral understanding that no penalty would be initiated or levied and the appellant had cooperated in the assessment proceedings and also that no major addition/disallowances had been made in appellant's case in scrutiny assessments for the earlier years. 8. On considering the above submissions, the CIT(A) held that cooperation of the assessee may be a case for waiver of penalty u/s. 273A but not for the proceedings u/s. 271(1)(c) of the Act. The CIT(A) did not appreciate the existence of oral understanding for not levying the penalties. On the assessee's contention relating to filing of revised return voluntarily, the CIT(A) is of the opinion that the additional income brought to tax relates to the event of survey. Therefore, the voluntary action of the assessee is not absolute. The CIT(A) is of the opinion that discovery of additional evidence and other fixed deposits relates to the enquiries conducted by the Department at the back of the assessee. Regarding the bona fide approach of the assessee in filing the revised return, the CIT(A) is of the opinion that the assessee misused the provisions of section 139(5) of the Act for enhancing h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to. Further, he mentioned that penalty u/s. 272(1)(c) of the Act should be levied in the assessment years under consideration in respect of the income/FDs, which in fact pertains to earlier AYs; (viii) the counsel also mentioned that some of the FDs are held in the names of the members of the family, such as, wife and the child. In such circumstances, without going into the facts of ownership of the income/FDs, the penalty cannot be levied on such income relatable to the disputed income. BY referring to the copies of the receipts from the Bank, which FDs were made, Sri Pathak demonstrated that the FDs stand in the names of Mrs. Kishori Dilip Oak and Sarika Dilip Oak, the members of the family. Pages 33 to 56 of the paper book are relevant in this regard; (ix) The counsel argued stating that the whatever the enquiries made by the department and their tactics might have resulted in ensuring the disclosure of additional income but the fact is that there is no iota of material, forget about the incriminating material, as seen from the orders to substantiate the penalty. Further, he mentioned that the penalty proceedings are entirely different and distinct from that of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the AYs under consideration and in fact, the said income relates to the earlier AYs i.e. 1999-2000; (ix) AO did not establish that the source income of the FDs or other income and its ownership vest with the assessee and not with wife or daughter of the assessee before deciding to levy the penalty u/s. 271(1)(c) of the Act. 12. Further, from the revenue side, we have examined the information available in their possession to substantiate the levy of impugned penalty. On perusal of the both the orders of the revenue, we do find notice anything incriminating material gathered either during the survey action or during the post survey enquiries with the bank has been specifically mentioned. However, they contain mere oblique reference to the bank enquiries and scanty material against the assessee, which is quantitatively disproportionate to the extent of disclosure offered by the assessee. In any case, neither the AO has described the said material nor the CIT(A) highlighted the incriminating nature of the same in their respective orders while levying/confirming the penalty. These orders are silent on the said material as to how the income in question is a concealed for the AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." Thus, the return of income or valid revised return is the basis or the starting point for arriving at the accuracy or inaccuracy of the particulars/claims "because that is the only document where the assessee can furnish the particulars of his income..... To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous". In the light of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent from that of the penalty proceedings. Sustaining of the additions in quantum appeal or assessee decision to not to file further appeal for some reasons, does not automatically invite the levying the penalty. Penalty cannot be sustained in such cases where there is some possibility for the acceptance of the assessee's explanation. It is so held in the case of Star International (P) Ltd. 23 SOT 88 (Luck). Further, when two views are possible, real ownership of the FDs/income and correct AYs as in this case, a bona fide belief for claim or allowance cannot be subjected to concealment merely because such belief is erroneous under the law as held in the case of Shetty GD 112 ITD 103 (Pune). In the light of the above, we are of the opinion that it is not a fit case for levy of penalty. 16. Application of the above scope of the provisions to the facts of the instant case: In the instant case, no inaccuracy in matters of furnishing of the particulars of income in the revised return/return has been noticed by the revenue. Thus, so far as the revised return of income is concerned, it is a valid and free of any inaccuracy in matters of furnishing of particulars of income. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced that the penalty u/s. 271(1)(c) is not attracted in respect of the income which is assessed in the wrong assessment year as in assessee's case. In that case the impugned income is taxable in the AY is 1949-50. Relevant portions from the said judgment read as follows:- "No penalty could be imposed for the non-disclosure of that income in assessment for the assessment year 1950-51." In the process, the Hon'ble High Court relied on the apex court's judgment in the case of Baladin Ram (71 ITR 427) where the apex court ruled that,- "the only way in which the income from undisclosed source could be assessed was to make the assessment on the basis of .... the previous year for such income..." Therefore, it is a decided issue at the level of the jurisdictional High Court, which is binding on us, that no penalty u/s. 271(1)(c) of the Act is leviable in respect of the concealment income, which was assessed in the wrong AY and in the wrong person for any reasons. Further, no penalties are leviable when the assessee has nowhere admitted that it had concealed its income as held by the jurisdictional High Court of Bombay in the case of CIT v. Bhimji Bhanjee and Co. 146 ITR 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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