S. 271(1)(c): Despite Surrender After Detection, Penalty Can be Waived
Pursuant to a search & s. 153A assessment on the basis of seized papers, statements etc; the assessee offered additional income of Rs. 2.68 crores on the basis that he was unable to explain the old records. Some of the other additions made by the AO were partly deleted by the CIT (A) & Tribunal. The AO & CIT (A) levied s. 271(1)(c) penalty on the ground that the assessees offer of additional income was not voluntary or bona fide. On appeal by the assessee to the Tribunal, HELD allowing the appeal:
Though the assessee owned the unaccounted transactions only after search action, when an assessee admits his mistake and that he has committed a wrong and offers the additional income to tax, it cannot be said that his statement is false or not bona fide. Neither the CIT (A) nor the Tribunal were completely clear about the exact amount of concealment and there was no conclusive evidence as some additions had been deleted. S. 271(1)(c) gives discretion to the AO to exonerate the assessee from levy of penalty even in case where the assessee has concealed the income or furnished incorrect particulars of income. Penalty should not be imposed merely because it is lawful to do so. The AO has to exercise his discretion judiciously. If an assessee files a revised return though at a later stage or discloses true income, penalty need not be levied. No doubt, merely offering additional income will not automatically protect the assessee from levy of penalty but in a given case where the assessee came forward with additional income though after detection because he was not in a position to explain the seized material properly and expresses remorse in his conduct un-hesitantly, the AO has to exercise the discretion in favour of such assessee as otherwise the expression may in s. 271(1)(c) becomes redundant. In a case of admitted income, concealment penalty is not automatic. The discretion vested in the AO should be used not to levy penalty. On facts, the case was most befitting to exercise such discretion because there was divergent opinion while deleting or sustaining the addition and there was no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. The assessees offer was to avoid litigation. If the AO had clinching evidence of concealment, he should not have accepted the assessees offer and should have proceeded on the basis of material on record (VIP Industries 112 TTJ 289, Siddharth Enterprises 184 TM 460 (P&H) & Reliance Petro Products 322 ITR 158 (SC) followed).