Commissioner Of Income Tax,Chandigarh-Ii v. Sh. Tikka Ram Through L/Hsmt. Munni Devi, Booth

ITA No.121 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.121 of 2008Date of decision: 6.5.2008 Commissioner of Income tax,Chandigarh-II Versus ......Appellant Sh. Tikka Ram through L/HSmt. Munni Devi, Booth No.109,Sector 28, Chandigarh......Respondent CORAM:-HON'BLE MR.JUSTICE RAJIVE BHALLAHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Ms. Urvashi Dugga, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . The revenue has filed the present appeal under Section 260-Aof the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) againstthe order dated 11.7.2007 passed by the Income Tax Appellate Tribunal,Chandigarh Bench “B” in ITA No.231/CHD/2007 for the assessment year1998-99 raising the following substantial questions of law:- “Whether on the facts and in the circumstances of thecase and in law, the ITAT is right in deleting the penaltyu/s 271(1)(c) by treating the voluntary disclosure madein response to notice u/s 148 as having been done ingood faith and to avoid litigation ?.” In this case the assessee filed his return of income for theassessment year 1998-99 on 13.11.98 declaring an income of Rs.77,520/-inter-alia declaring income from house property and salary earned in thecapacity of a partner in a partnership firm. Subsequently on an information received from the Investigation Wing that the assessee had acquired aproperty, i.e. Booth No.107, Sector 28, Chandigarh on 8.1.1998 for aconsideration of Rs.5,06,250/- which was undeclared, the AssessingOfficer issued a notice u/s 148 on 29.9.2005 for making an assessment.In the meanwhile the assessee had expired and accordingly his legal heirSmt. Munni Devi(wife) filed return of income on 6.10.2005 in response tothe notice issued u/s 148 of the Act. The legal heirs i.e. wife and his sonexpressed their unawareness about the source of investment made in thesaid property. Accordingly the income declared in the return filed inresponse to Section 148 on 6.10.2005 was Rs.5,87,520/- which, inter-aliacontained the amount declared on account of investment in the aforesaidproperty i.e. Rs.5,10,000/-. Accordingly the source of investment in the saidproperty remained unexplained. The assessment u/s 143(3) read withSection 147/148 was thereafter completed by the Assessing Officer on27.12.2005 at the returned income of Rs.5,87,520/-. As the investment of Rs.5,10,000/- in the property had notbeen declared in original return of income dated 13.11.1998, penaltyproceedings under Section 271(1)(c) of the Act were initiated against theassessee at the time of passing of the assessment order. During penaltyproceedings, the assessee was provided an opportunity to offer anexplanation in respect of the above stated concealed income. The legalheirs of the assessee submitted that they have preferred to surrender theamount of investment made by the assessee as the sources were notknown to her as the deceased-husband was managing his financial affairsand had made the investment in property. The legal heir having noknowledge of sources of investment which were made by her husband andbeing an illiterate housewife chose to surrender the amount but to no penalaction. The Assessing Officer vide his order dated 30.3.2006 imposed apenalty under Section 271(1)(c) of the Act amounting to Rs.1,44,752/-. The Commissioner of Income Tax (Appeals) upheld the imposition ofpenalty, against which the assessee filed an appeal before the Tribunal.The Tribunal vide its order dated 11.7.2007 directed the Assessing Officerto delete the penalty imposed under Section 271(1)(c) of the Actamounting to Rs.1,44,752/- while holding that the act of voluntarydisclosure made by the legal heir in the return of income filed in responseto notice under Section 148 of the Act was done in good faith and to avoidlitigation. The Tribunal also found that it was a case of bona fide disclosuredone not merely to avoid the consequences of law, but with a view to avoidlitigation. The relevant portion of the order of the Tribunal is reproducedhereunder:- “We have considered the rival submissions carefully. Inthis case the whole issue revolves around as to whetherdisclosure of Rs.5,10,000/- made by the assessee in thereturn filed by his legal heir in pursuance of notice u/s148 constitute a bonafide disclosure. The factualposition is that the assessee was found to have investedsums in purchase of an immovable property on 8.1.98i.e. for the assessment year under consideration. Whenthe assessee was called upon to explain the sources ofinvestment in the purchase of said property, he hadalready expired and the return of income was thereafterfurnished by his legal heir, namely, Smt. Munni Devi(wife) . The legal heir, being unaware of the sources ofinvestments, filed return of income on 6.10.95 whereinan income of Rs.5,10,000/- was declared on this count.The Assessing Officer has held that the said income ofRs.5,10,000/- is liable for imposition of penalty in termsof Section 271(1)(c) of the Act being an income concealed by the assessee. Quite fairly it has to begranted that consequent to the death of the assesseehimself, the legal heir would not be in a position toexplain and elaborate the sources for making theimpugned investment. Faced with such a situation, theaction on behalf of the part of the legal heir by makingreturn of income inter-alia including the impugnedamount only demonstrates her bonafides andwillingness not to prolong any litigation with theRevenue. Such a situation cannot be compared with asituation whereby an assessee discovers an earlieromission or wrong statement to justify the filling ofsubsequent return of income. Even when enquiries arecarried out by the Revenue and an assessee acceptsthe result of enquiries, and on that basis discovers amistake of a wrong statement in the return of incomeearlier filed, such an assessee still has an option in lawto demonstrate and explain the reasons for suchomission or wrong statement so as to avoid imposition ofpenalty u/s 271(1)(c) of the Act. In this case, ostensiblythe assessee had died and his legal heir namely his wifewas not in a position to explain the circumstancesleading up to the impugned investment. It was underthese circumstances that the assessee's legal heiraccepted the charge made out by the Assessing Officerin the notice issued u/s 148 of the Act. Therefore, in theinstant case, having regard to the peculiarcircumstances, it can be deduced that it is a case ofbonafide disclosure done not merely to avoid the consequences of law but with a view to avoid litigation.Ostensibly in the absence of the assessee himself, therecould not be any person having first hand knowledge asto the sources of investment in the said property.Therefore, to say that the assessee had made anydeliberateness in not declaring the correct income in theoriginal return and on that basis to hold it guilty u/s 271(1)(c) would be unjustified. Fairly the assessee had nochance of carrying through his explanation and in anycase the Assessing Officer in the present case has alsonot recorded any finding as to the reasons weighing withthe assessee for doing so in the original return. TheRevenue in the present case has simply rested itsconclusion on the act of voluntary disclosure made bythe legal heir in the return of income filed in response tonotice u/s 148, which we have already inferred, wasdone in good faith and to avoid litigation.” Ms. Urvashi Dugga, learned counsel for the revenue, hasvehemently argued that in this case an offer to surrender was notvoluntary and bona fide and, therefore, the Tribunal has erred at law whiledeleting the penalty imposed upon the assessee under Section 271(1)(c) ofthe Act. We have heard Ms. Urvashi Dugga, learned counsel for therevenue and have perused the record. We find that the Tribunal has found as a matter of fact that inresponse to notice issued under Section 148 of the Act, the legal heir of theassessee (i.e. wife) herself filed the revised return of income atRs.5,87,520/- which includes the unexplained income of the assessee. As the assessee had died, the legal heir being unaware of the sources ofinvestment filed return of income including the impugned amount only todemonstrate her bona fides and willingness not to prolong any litigationwith the revenue. We find that in this case ostensibly the assessee haddied and his legal heir, namely, his wife, was not in a position to explain thecircumstances leading to the impugned investment and it was under thesecircumstances that she accepted the charge made out by the AssessingOfficer in the notice under Section 148 of the Act. Therefore, in the instantcase, the disclosure made by the legal heir of the assessee was bona fideand voluntary with a view to avoid litigation and therefore, deletion ofpenalty under Section 271(1)(c) of the Act in the present case is justified. We find no error in the order of the Tribunal and the same isupheld. No substantial question of law arises for our determination in thisappeal. Dismissed. (RAKESH KUMAR GARG) JUDGE May 6, 2008ps (RAJIVE BHALLA) JUDGE