By Jagdish D. Shah, Jagdish T.Punjabi Chartered Accountants
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Section 271(1)(c) – If surrender is on the condition of no penalty and assessment is based only on surrender and not on evidence, penalty cannot be levied. The fact that surrender of income was made after issuance of a questionnaire does not mean that it was not voluntary.
Facts:
The assessee company was engaged in manufacture of pesticides, herbicides and formulations. It filed its return of income for assessment year 2009-10 returning therein a total income of Rs.1.49 crore. In the course of assessment proceedings, the Assessing Officer (AO) noticed that during the previous year under consideration, the assessee had received share application money of Rs. 89.50 lakh. He asked the assessee to furnish details with supporting evidences. In response, the assessee expressed its inability to provide the necessary details and stated that in order to buy peace, it agreed to offer the share application money of Rs. 89.50 lakh as its income.
The AO added Rs. 89.50 lakh to the assessee’s income u/s. 69A and also levied penalty u/s. 271(1)(c).
Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal to Tribunal.
Held:
The Tribunal noted that the assessee, at the very first instance, surrendered share application money with a request not to initiate any penalty proceedings. Except for the surrender, there was neither any detection nor any information in the possession of the department. There was no malafide intention on the part of the assessee and the AO had not brought any evidence on record to prove that there was concealment. No additional material was discovered to prove that there was concealment. The AO did not point out or refer to any evidence to show that the amount of share capital received by the assessee was bogus. It was not even the case of the revenue that material was found at the assessee’s premises to indicate that share application money received was an arranged affair to accommodate assessee’s unaccounted money.
The Tribunal noted that the Supreme Court in the case of CIT vs. Suresh Chandra Mittal 251 ITR 9 (SC) has observed that where assessee has surrendered the income after persistence queries by the AO and where revised return has been regularised by the Revenue, explanation of the assessee that he has declared additional income to buy peace of mind and to come out of vexed litigation could be treated as bonafide, accordingly levy of penalty u/s. 271(1)(c) was held to be not justified.
The Tribunal held that in the absence of any material on record to suggest that share application money was bogus or untrue, the fact that the surrender was after issue of notice u/s. 143(2) could not lead to the inference that it was not voluntary.
The amount was included in the total income only on the basis of the surrender by the assessee. It held that in these circumstances it cannot be held that there was any concealment. When no concealment was ever detected by the AO, no penalty was imposable. Furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax. The Tribunal did not find any merit in the levy of penalty u/s. 271(1)(c).
The appeal filed by the assessee was dismissed.
