V. HARIKRISHNAN,TRICHY vs. ACIT, TRICHY

All the appeals of the independent assessees are directed against the respective orders of the Commissioner of Income Tax, Central-II, Chennai, dated 14.11.2014, revising the order of the Assessing Officer dropping the penalty proceeding initiated under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act'). Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.

All the assessees filed their respective appeals belatedly.

Sh. T. Banusekar, the Ld. representative for the assessees, submitted that there was a search operation in the case of AMN Jewellers Pvt. Ltd. According to the Ld. representative, it was found by the Revenue authorities that the assessees sold jewellery to M/s AMN Jewellers Pvt. Ltd. during the year under consideration. The assessees could not furnish source for the acquisition of jewellery.

The Ld. representative for the assessee further submitted that the assessees explained before the Assessing Officer during the penalty proceeding that the gold jewellery sold to M/s AMN Jewellers Pvt. Ltd. was acquired by way of gifts from relatives and parents during the marriage and other functions over the year. The assessees also filed revised return before initiating penalty proceeding disclosing all the jewellery and offered the same for taxation. According to the Ld. representative, the revised returns filed by all the assessees were accepted by the Assessing Officer and no addition was made. In those circumstances, the Assessing Officer, after considering the decision of Indore Bench of this Tribunal in Shri Radhey Shyam Sarda and Others v. ACIT 2012 (12 TMI 320) and the judgment of Apex Court in CIT v. Suresh Chandra Mittal (2001) 251 ITR 9, found that this is not a fit case for levy of penalty. Accordingly, he dropped the penalty proceeding.

The Ld. representative for the assessee further submitted that the Administrative Commissioner in the guise of exercising his revisional jurisdiction under Section 263 of the Act, found that dropping the penalty proceeding initiated by the Assessing Officer is erroneous and prejudicial to the interests of Revenue. The Ld. representative further submitted that an authority under the Income- tax Act, who initiates penalty proceeding, is not obliged to levy penalty when he is satisfied with the explanation of the assessee in the course of penalty proceeding. Referring to Section 271(1)(c) of the Act, the Ld. representative submitted that the Assessing Officer may levy penalty for concealment of any part of income or furnishing inaccurate particulars of such income. In this case, the assessees admitted their entire income in the revised return and therefore, there is no question of any concealment or furnishing inaccurate particulars. Moreover, according to the Ld. representative, when the Assessing Officer accepted the explanation offered by the assessees and found that it is not a case for levy of penalty, the Administrative Commissioner cannot substitute his view to that of the Assessing Officer. When the Assessing Officer, by placing reliance on the judgment of Apex Court in Suresh Chandra Mittal (supra), took one of the possible views, the same cannot be considered to be erroneous and prejudicial to the interests of Revenue. Referring to the judgment of Apex Court in CIT v. MAX India Ltd. (2007) 295 ITR 282, the Ld. representative submitted that when the Assessing Officer has taken one of the possible views on the basis of the judgment of Apex Court, the Administrative Commissioner cannot substitute his view by holding that the dropping the penalty proceeding is erroneous and prejudicial to the interests of Revenue.

Sh. T. Banusekar, the Ld. representative for the assessees, further submitted that except in the case of Smt. H. Pradeepa in and Shri V. Ramesh in I.T.A.

On the contrary, Smt. Ruby George, the Ld. Departmental Representative, submitted that the assessees filed revised return after the search, therefore, it cannot be considered to be a voluntary one. According to the Ld. D.R., excess jewellery was found in the search proceeding and it was contended before the Assessing Officer that the jewellery belonging to these assessees were given to M/s AMN Jewellers Pvt. Ltd. The source for acquisition of jewellery by these assessees are gifts received during the course of marriage and other occasions from the parents, relatives and friends. However, according to the Ld. D.R., they could not substantiate the claim before the Assessing Officer. Since the assessees have offered the cost of jewellery as income for taxation, according to the Ld. D.R., the Assessing Officer found that there was concealment of income, hence, he initiated penalty proceeding by issuing show cause notice. In the course of penalty proceeding, according to the Ld. D.R., on the basis of the judgment of Apex Court in Suresh Chandra Mittal (supra), the Assessing Officer found that it is not a fit case for initiating any penalty. According to the Ld. D.R., when there was difference of income reported and assessed, there was presumption of concealment of income, therefore, the Assessing Officer is not justified in dropping the penalty proceeding.

The Ld. Departmental Representative further submitted that the assessees claim that they offered the income voluntarily in order to avoid litigation and buy peace, etc. According to the Ld. D.R., the Income-tax Act does not recognize this kind of defences. Voluntary disclosure does not discharge the assessee from the mischief of penalty proceeding. The Assessing Officer has dropped the proceeding without any application of mind. Therefore, according to the Ld. D.R., the Administrative Commissioner, being a revisional authority, set aside the order of the Assessing Officer dropping the penalty proceeding and directed him to pass an order afresh after considering all the material available on record. Therefore, according to the Ld. D.R., the Administrative Commissioner has rightly exercised his power.

We have considered the rival submissions on either side and perused the relevant material available on record. The penalty proceeding initiated by the Assessing Officer under Section 271(1)(c) of the Act was dropped on the ground that the assessees offered the income voluntarily by way of filing revised return and the Assessing Officer accepted the same. The Assessing Officer placed his reliance on the judgment of Apex Court in Suresh Chandra Mittal (supra). The Administrative Commissioner in exercising of his power under Section 263 of the Act, held that voluntary offer of income by way of revised return does not absolve the assessees from the mischief of penalty consequences as provided under the Income-tax Act.

We have carefully gone through the proviso to Section 271(1)(c) of the Act which reads as follows:-

From the above, it is obvious that if the Assessing Officer or the Commissioner, in the course of any proceeding under the provisions of Income-tax Act, is satisfied that any person concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct such person shall pay penalty.

The question arises for consideration is when the assessees filed the revised return after the search operation in the case of AMN Jewellers Pvt. Ltd. and offered the value of the jewellery for taxation, whether penalty proceeding can be initiated against the assessees? This Tribunal is of the considered opinion that when the assessees offered the income voluntarily and offered the same for taxation and the source of acquisition of such jewellery was also explained before the Assessing Officer as the gifts from relatives, friends and parents, which are accepted, there is no need to proceed further with penalty proceeding. As rightly submitted by the Ld. representative for the assessees, the Assessing Officer placed his reliance on the judgment of Apex Court in Suresh Chandra Mittal (supra).

In the case of Suresh Chandra Mittal (supra), the assessee originally filed return showing meagre income. After the search operation, a notice under Section 148 of the Act was served and by way of revised return, higher income was offered for taxation. The Assessing Officer regularized the revised return and accepted the income offered in the revised return. The Assessing Officer levied penalty which was also confirmed by the CIT(Appeals). But, this Tribunal found that the Department had not discharged any burden of proving concealment and simply rested its conclusion on the act of voluntary surrender done in good faith, therefore, the penalty cannot be levied. On a reference to the High Court, it was found that no penalty can be levied for concealment. This judgment of the High Court is reported in (2000) 241 ITR 124 and on further appeal before the Apex Court, the Apex Court dismissed the appeal. In this case, since the Assessing Officer has followed the judgment of Apex Court in Suresh Chandra Mittal (supra), it cannot be said that the view taken by the Assessing Officer is erroneous and prejudicial to the interests of Revenue. This Tribunal is of the considered opinion that the view taken by the Assessing Officer for dropping the penalty proceeding initiated under Section 271(1)(c) of the Act is one of the possible views supported by the judgment of Apex Court in Suresh Chandra Mittal (supra). Therefore, it is not justified for the Administrative Commissioner to substitute his view by setting aside the order of the Assessing Officer dropping the penalty proceeding initiated. Therefore, we are unable to uphold the orders of the Commissioner. Accordingly the orders of the Administrative Commissioner passed under Section 263 of the Act are set aside and that of the Assessing Officer dropping the penalty proceeding are restored.

In the result, all the appeals filed by the assessees stand allowed.