Radheshyam Sarda vs. ACIT (ITAT Indore)

No s. 271(1)(c) penalty even if revised ROI filed after detection but before issue of s. 148 notice

For AY 2005-06, the assessee filed a return in which he offered long-term capital gains on sale of shares. An inquiry pursuant to a survey u/s 133A was conducted. Because the assessee was unable to furnish the documents called for by the department, it filed a revised return on 22.5.2008 in which the LTCG was offered as normal income and tax was paid. The AO thereafter issued a s. 148 notice, completed the assessment on the basis of the revised ROI without any addition. The AO levied s. 271(1)(c) penalty on the ground that the revised ROI was filed after detection by the department. The assessee argued that as the revised ROI was filed prior to the issue of the s. 148 notice, penalty was not leviable. HELD by the Tribunal:

It is the settled law that if a revised return offering additional income is filed after investigation has started but before the issue of the s. 148 notice, s. 271(1)(c) penalty is not leviable. In Sureshchand Mittal 251 ITR 9, the Supreme Court held that even where the assessee surrendered additional income by way of a revised return after persistent queries by the AO, once the revised ROI has been regularized by the revenue, the assessee’s explanation that he had declared the additional income to buy peace had to be treated as bona fide and s. 271(1)(c) penalty could not be levied. On facts, as the assessee filed a revised ROI after survey but before the issue of the s. 148 notice, penalty was not leviable.