In a significant ruling, Mumbai bench of the Income Tax Appellate Tribunal, in a recent ruling, held that the benefit if section 271(1)(c) shall be given if the assessee is ready to admit his/her undisclosed income even during the course f proceedings. In the opinion of the Tribunal, such an act makes an impression that the assessee cannot be deemed to have concealed the particulars of income and is duly falls under Explanation I of section 271(1)(c) of the Income Tax Act, 1961.
Coming to the facts of the case, the Assessing Officer, rejected the return filed by the assessee by holding that the assessee has not shown the source of cash deposited in a co-operative Bank. When the assessee received show cause notice asking for the same, the assessee agreed to offer her entire receipt as her income. However, the assessing officer passed an order by assessing the same as her taxable income and initiated penalty proceedings under section 271(1)(c) of the Act parallel.
On an appeal preferred by the assessee, the CIT(A) upheld the order with slight modifications. Being dissatisfied with the same, the assesee approached the ITAT on second appeal.
The Tribunal noted that “we find merit in the contentions of the assessee that the assessee has agreed to offer entire deposits as her income in order to buy peace from the revenue. We notice that the assessee has offered income from house property to the tune of Rs.36.91 lakhs. The assessee did not put forth a claim for telescoping the deposits with the income declared by her in the current year and in the earlier years and also with the withdrawals made from the bank account. This action of the assessee shows the bonafides of the assessee that it was an inadvertent mistake and the offer was made to buy peace from the revenue. It is well settled proposition of law that all receipts shall not constitute income.”
While nullifying the penalty order, the Tribunal observed that “We notice that the Ld CIT(A) has confirmed the penalty only on the reasoning that the offer was not voluntary, but the offer was made only after issuing show cause notice. We have held that the bonafides of the assessee cannot be doubted with upon considering the conduct of the assessee. We also notice that the explanation of the assessee has not been found to be false and at the same time, the assessee has furnished all facts relating to the bank account and material to the computation of his income, when called for by the AO. Even though the triggering point for offering the income may be the show cause notice issued by the AO, yet we are of the view that under Explanation 1 to sec. 271(1)(c) of the Act, the assessee cannot be deemed to have concealed the particulars of income.”
Read the full text of the order below.
