In Kalwa Bhaskar v. ACIT, the division bench of the Income Tax Appellate Tribunal (ITAT), Hyderabad held that penalty under Section 271(1)(c) of the income Tax Act is not leviable in a case where the assessee voluntary offers the income to tax during the course of scrutiny proceedings.
The Income Tax return filed by the assessee was selected for scrutiny under CASS. Assessee disclosed his income during the scrutiny proceedings on the basis of which assessment proceedings were completed. Subsequently, the assessing officer initiated penalty proceedings under section 271 (1)(c) of the Income Tax Act against the assessee.
On appeal, assessee maintained that penalty cannot be levied since he had voluntarily offered the income to tax. However, the first appellate authority rejected the contention and upheld the penalty order.
On second appeal, the bench noticed the fact that the assessee has disclosed all the particulars before completion of the assessment u/s 143(3), though the details were filed in the scrutiny proceeding. Further, scrutiny assessment proceedings have taken for AY 2011-12, but, the assessee has disclosed all the details in respect of 2008-09, 2009-10 and 2010- 11 also. It was therefore, the attempt made by the assessee to disclose the particulars of income shows the bonafides of assessee.
The bench relied on the decision in Manjunatha Cotton & Ginning Factory, wherein the Karnataka high Court held that the condition precedent for levying the penalty is the satisfaction of the authority that there is a concealment of the particulars of the income or inaccurate particulars are furnished to avoid payment of tax. Once the authority comes to such conclusion, the law mandates that before imposing penalty, the assessee must be heard.
Allowing the appeal by relying upon a plethora of decisions, the bench held that “the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the present case, the assessee has discharged the burden by giving detailed explanation before the AO. The AO simply rejected the explanation without discharging the burden cast upon him, as the assessee has disclosed the particulars of income in the scrutiny assessment.”
Read the full text of the Order below.
