INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Concealment or furnishing of inaccurate particulars - Assessee took plea of Expln. (3) to section 271(1)(c) -

During the course of investigation, it was noticed that assessee had made huge investments in real estate during the relevant year and in the earlier years, however, no return of income was filed for the year under consideration and for earlier years. Accordingly, AO issued notice under section 148 so as to reopen assessment. In compliance there, assessee filed his return of income for both assessment years admitting total income of Rs. 93,65,560 and Rs. 56,73,910 respectively. Thereafter, assessment was completed under section 143(3) read with section 147 by accepting income returned without making any further addition. AO simultaneously issued notice under section 274 read with section 271(1)(c), for levying penalty for concealment of income or furnishing of inaccurate particulars of income. Assessee challenged this on the ground that assessee neither concealed, nor furnished inaccurate particulars of his income in the return of income filed pursuant to notice under section 148 of the Act and hence, the question of levy of penalty under section 271(1)(c) did not arise, when there was no addition to returned income and therefore, assessee's case was covered under Expln. 3 to section 271(1)(c). Further no specific charge of offence was mentioned in the penalty notice. Held: Although assessee had admitted income in the return filed under section 148 and further, AO had not made any additions, but whether such admission of income in the return filed under section 148 was voluntary or after the Department cornered the assessee with necessary materials, was to be seen. Admittedly assessee had not filed any return of income before due dates specified under section 139(1)/139(4). It is also an admitted fact that investigation was not carried out under section 139(1A) the income of assessee went unnoticed. In these circumstances, it was difficult to accept arguments of assessee that he had filed returns voluntarily in response to notice under section 148 and admitted true and correct income. Therefore, case of assessee fell under Explanation (1), but not under Explanation (3) of section 271(1)(c). Further, AO was not required to record his satisfaction in a particular manner or reduce it into writing. The only requirement of law is AO has to satisfy himself about initiation of penalty proceedings, but such satisfaction need not be in writing or in a particular manner. In assessee case, AO after recording relevant facts of concealment of income, initiated penalty proceedings under section 271(1)(c) during assessment proceedings itself. Therefore, such initiation of penalty proceedings amounted to satisfaction by AO. Accordingly, penalty levied by AO under section 271(1)(c).

Distinguished:CIT & Anr. v. Manjunatha Cotton and ginning factory, Manjunath Ginning & Presssing Veerabhadrappa Sangappa and Co., V.S. Lad & Sons, G.M. Export (2013) 359 ITR 565 (Karn) : 2014 TaxPub(DT) 0202 (Karn-HC), CIT & Anr. v. M/s. Ssa's Emerald Meadows 2016 TaxPub(DT) 4242 (SC)Relied:DCIT v. R. Padmanabhan, (2015) 371 ITR 211. The Hon'ble High Court of Calcutta in the case of CIT v. Prasanna Dugar, (2015) 371 ITR 19 (SC) : 2015 TaxPub(DT) 2340 (SC), (2015) 373 ITR 681 (SC) : 2015 TaxPub(DT) 2340 (SC) and CIT v. Usha International Ltd. (2012) 254 CTR 509 (Del) : 2013 TaxPub(DT) 244 (Del-HC).

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