Assessee should be aware that Department have discovered escapement of income: ITAT deletes penalty u/s 271 (1) (C) of Income Tax Act [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the penalty under Section 271(1) (c) of the Income Tax Act, 1961, stating that the assessee should be aware that the Department has discovered escapement of income.

The Commissioner of Income Tax ( Appeals ), dismissed the argument put forth by the assessee, stating that the disclosure of the undisclosed investment of Rs. 6.00 lakhs was made only in response to the notice issued under section 148 of the Income Tax Act, 1961. He deemed it to be a suitable case for imposing a penalty under Section 271(1) (c of the Income Tax Act, 1961.

The bench found that it did not come from any of the orders of the revenue authorities as to how the Revenue officers came to the conclusion that the assessee disclosed the income of Rs. 6 lakhs only when she was cornered and when she knew that the Department was aware that she was caught by the Department and there was no other way out but to declare the same in the return filed under Section 148 of the Income Tax Act, 1961.

The assessment order passed under Section 147 of the Income Tax Act, 1961, only revealed that the Department had information of Rs. 6.00 lakhs of investment made by the assessee from unexplained sources. But it did not come from the assessment order that the assessee was also aware of the fact that the Department knew of the same. The assessee could be stated to have been cornered only when she was aware that the Department was in the know of her income having escaped assessment.

The bench inclined to believe the assessee’s assertion that the disclosure of Rs. 6.00 lakhs in the return of income filed under Section 147 of the Income Tax Act, 1961 was entirely voluntary and not coerced by the Department. Consequently, the ruling of the Apex Court in the case of MAK Data P. Ltd. ( supra ) does not apply to the specifics of this case. Therefore, it cannot be argued that the assessee concealed income particulars amounting to Rs. 6.00 lakhs, especially considering that the said income was voluntarily disclosed in their return of income filed under section 148 of the Income Tax Act, 1961.

The single member bench of the tribunal comprising Anupama Gupta ( Accountant member ) held that the penalty levied under Section 271(1) (c) of the Income Tax Act, 1961, to the tune of Rs.1, 85,400/- to be unjustified and direct the deletion of the same.

Thus, the ground of appeal of the assessee was allowed.

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