MANOHAR SHETTY vs. ASST CIT CEN CIR 34, MUMBAI

These appeals are directed against the three orders passed by the Ld. CIT(A)-37, Mumbai dated 30/07/2010 confirming the penalty orders passed u/s 271(1)(c) of the Income Tax Act, 1961 ( in short ‘the Act’), by the AO for the A.Y. 2004-05,2005-06 & 2006-07. Since all the three appeals pertain to the same assessee and the issues involved are common, all the three appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.

2.1 Accordingly, the assessee Shri. Manohar Sunder Shetty declared undisclosed income to the tune of Rs. 9,00,000/- for the A.Y. 2004-05 in the return of income filed u/s. 153A of the Act and the same was accepted and order u/s 153A r.w.s.143(3) of the Act was passed determining the total income at Rs. 22,00,440/-. Penalty proceedings u/s 271(1)(c) of the Act was also initiated and imposed penalty of Rs. 2,97,000/- u/s 271(1)(c) r.w. explanation- 1 of the Act, holding that the assessee had furnished inaccurate particulars of income.

2.2 The Ld. CIT(A) dismissed the appeal filed by the assessee against the penalty order passed by the Assessing Officer and confirmed the findings of the AO. Aggrieved by the impugned order passed by the CIT(A), the assessee is in appeal before the Tribunal.

2.3 The assessee has challenged the impugned order of following effective grounds. “The Learned Commissioner of Income Tax(A) erred in confirming the penalty levied u/s 271(1)(c) of Rs. 2,97,000/- on the grounds as contained in the Appellate order or otherwise.”

2.4 Before us the Counsel for the assessee submitted that the assessee has made the declaration with the intention to co-operate with the department and to avoid protracted litigation. The declaration was just to buy the peace. The appellant has revised his return of income by incorporating the amount in question in view the declaration letter made u/s 132(4) of the Act while completing the assessment. The Assessing Officer has accepted the declaration made by the assessee and has not made any further additions. The assessee has also co-operated with the department during the search and during the course of assessment proceedings. The appellant has also paid taxes with interest on the disclosed income. The Ld. Counsel relying upon the judgment delivered by the Hon,ble Supreme Court in CIT vs. Suresh Chandra Mittal (2000) 251 ITR 9 (SC) submitted that in the light of the ratio laid down in the sais case the penalty levied u/s 271(1)(c) may be deleted.

2.5 On the other hand the Ld. DR relying upon the concurrent findings of AO and the CIT(A) submitted that the CIT(A) has rightly confirmed the penalty imposed by the Assessing Officer as per the provisions of law. The DR further submitted the facts of the present case are different from the facts of the cases relied upon by the assessee, therefore, the same are distinguishable. Moreover the judgments relied upon pertain to the pre amendment period.

Whether, on the facts and in the circumstances of the case, Tribunal was justified in cancelling the penalty levied under s. 271(1)(c) of the IT Act, 1961 ?

“In the present case, though it is true that assessee had not surrendered at all and that he had done so on the persistent queries made by AO but once the revised assessment was regularised by the Revenue and once the assessing authority had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case. Therefore, Tribunal was justified in cancelling the penalty levied by AO and affirmed by CIT(A) in the facts and circumstances of the case. This reference is accordingly answered in affirmative holding that Tribunal was justified in doing so.”

6. The appeals pertaining to the subsequent assessment years 2005-06 and 2006-07 have also been filed by the assessee on the identical grounds (except the amount of penalty confirmed by the CIT(A) The facts of the present appeals are similar to the facts of the case pertaining to the assessment year 2004-05 and since we have allowed the appeal of the assessee for the assessment year 2004-05 and decided the identical issue in favour of the assessee, we set aside the impugned orders passed by the Ld. CIT(A) pertaining to the assessment years 2005-06 and 2006-07 also and allow the appeals of the assessee.