2015 (12) TMI 1874 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus purchases - AO treated the additional income as concealed income considering the fact that only after the finding of the bogus purchases by the department, assessee accepted and filed the revised return of income - HELD THAT - In the present case, the assessee had accepted the bogus purchase as additional income voluntarily due to the fact that assessee was not in a position to substantiate the claim, even though, the transaction was made through banking channel. The assessee had declared the additional income voluntarily and filed return of income, which the AO accepted the revised return of income to complete the assessment u/s 143(3) r.w.s. 147. We are inclined to note that the assessee filed the revised return of income which was duly accepted by the AO. From the above observations, it is clear that the assessee had neither concealed the particulars of the income nor furnished inaccurate particulars of such income. Hence, this is not a fit case to attract penalty proceedings u/s 271(1)(c) - Appeal of assessee allowed.

Summary

Issues:
Assessment of additional income as concealed income leading to penalty under section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Background and Reopening of Assessment:
The appeal was filed against the order of the ld. CIT(A) for the AY 2006-07. The case involved the assessee declaring a total income of Rs. 29,518 from a jewelry trading business as a firm. The case was reopened due to specific information regarding bogus purchases made by the assessee from M/s Vijay Gems, Jaipur. The assessee admitted the additional income in the revised return after being informed by the department, leading to an assessment under section 143(3) r.w.s. 147 of the Act.

2. Levy of Penalty:
The Assessing Officer (AO) treated the additional income as concealed income, resulting in the imposition of a penalty of Rs. 1,99,600 under section 271(1)(c) of the Act. The CIT(A) upheld the penalty, stating that the assessee concealed the bogus purchase and admitted it only after detection by the department during scrutiny proceedings for another assessment year.

3. Additional Grounds of Appeal:
The assessee sought to file additional grounds of appeal related to reopening proceedings and the assessment order. However, these grounds were rejected as they were not relevant to the penalty under section 271(1)(c) being considered in the appeal.

4. Arguments and Case Laws:
The assessee argued that the additional income was voluntarily offered to avoid litigation and buy peace with the department. The assessee cited case laws to support the argument that penalty cannot be levied when additional income is accepted voluntarily. The argument emphasized that the revised return was filed beyond the prescribed time under section 139(5) of the Act.

5. Decision and Rationale:
After considering submissions from both sides, the Tribunal observed that the assessee admitted the additional income to avoid unnecessary litigation, even though the purchases were made through banking channels. The Tribunal noted that the assessee voluntarily declared the additional income, which was accepted by the AO during assessment proceedings. Relying on case laws, the Tribunal concluded that the assessee did not conceal or furnish inaccurate particulars of income. Therefore, the Tribunal allowed the appeal, stating that it was not a fit case for penalty under section 271(1)(c) of the Act.

In conclusion, the Tribunal set aside the penalty imposed by the AO, emphasizing that the assessee's voluntary disclosure of additional income, made to avoid litigation, did not warrant the imposition of a penalty for concealment of income.