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2008 (5) TMI 710

Tax Act, 1961 (hereinafter referred to as the Act ) against the order dated 11.7.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench B in ITA No.231/CHD/2007 for the assessment year 1998-99 raising the following substantial questions of law:- Whether on the facts and in the circumstances of the case and in law, the ITAT is right in deleting the penalty u/s 271(1)(c) by treating the voluntary disclosure made in response to notice u/s 148 as having been done in good faith and to avoid litigation ?. In this case the assessee filed his return of income for the assessment year 1998-99 on 13.11.98 declaring an income of ₹ 77,520/- inter-alia declaring income from house property and salary earned in the capacity of a partner i .....

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bove stated concealed income. The legal heirs of the assessee submitted that they have preferred to surrender the amount of investment made by the assessee as the sources were not known to her as the deceased-husband was managing his financial affairs and had made the investment in property. The legal heir having no knowledge of sources of investment which were made by her husband and being an illiterate housewife chose to surrender the amount but to no penal action. The Assessing Officer vide his order dated 30.3.2006 imposed a penalty under Section 271(1)(c) of the Act amounting to ₹ 1,44,752/-. The Commissioner of Income Tax (Appeals) upheld the imposition of penalty, against which the assessee filed an appeal before the Tribunal. .....

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5,10,000/- is liable for imposition of penalty in terms of Section 271(1)(c) of the Act being an income concealed by the assessee. Quite fairly it has to be granted that consequent to the death of the assessee himself, the legal heir would not be in a position to explain and elaborate the sources for making the impugned investment. Faced with such a situation, the action on behalf of the part of the legal heir by making return of income inter-alia including the impugned amount only demonstrates her bonafides and willingness not to prolong any litigation with the Revenue. Such a situation cannot be compared with a situation whereby an assessee discovers an earlier omission or wrong statement to justify the filling of subsequent return of inc .....

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assessee for doing so in the original return. The Revenue in the present case has simply rested its conclusion on the act of voluntary disclosure made by the legal heir in the return of income filed in response to notice u/s 148, which we have already inferred, was done in good faith and to avoid litigation. Ms. Urvashi Dugga, learned counsel for the revenue, has vehemently argued that in this case an offer to surrender was not voluntary and bona fide and, therefore, the Tribunal has erred at law while deleting the penalty imposed upon the assessee under Section 271(1)(c) of the Act. We have heard Ms. Urvashi Dugga, learned counsel for the revenue and have perused the record. We find that the Tribunal has found as a matter of fact that in r .....

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