Filing of revised return after issue of notice under section 143(2) is considered as voluntary disclosure in absence of specific particulars

The ITAT, Mumbai on 07.01.2015 passed a judgment stating that if an assessee files the revised return of income after the receipt of notice under section 143(2) of the Act and fact remains that the assessing officer failed to ask for particulars in the said notice, it should be considered that the assessee has declared the higher amount voluntarily.
The said judgment was passed in the case of Prema Gopal Rao vs. Deputy Commissioner of Income Tax, in a hearing dated 29.12.2014 by the bench consisting of J. B.R. Baskaran and J.H. L. Karwa.

Filing of revised return after issue of notice under section 143(2) is considered as voluntary disclosure

Facts and circumstances of the case:

The assessee preferred the said appeal against the order dated 15.11.2011 passed by the Ld. CIT (A)-25, Mumbai relating to the assessment year 2004-05, confirming the penalty of Rs.2,46,300/- levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act.
The assessee filed his original return on 10.09.2004 stating total income of Rs.12,16,600/- including Long Term Capital Gain on account of sale of shares of Rs.3,60,305/-. The case was picked up for scrutiny and accordingly notice under section 143(2) of the Act was issued on 28.3.2005. After the receipt of the said notice, the assessee filed his revised return wherein he revised the Long term Capital gains to Rs.14,87,789/-.
The assessment was completed according to the revised return by making some disallowances. The Assessing Officer took the view that the assessee has revised the return after the inquiry was initiated against him.
The Assessing Officer held that penalty was leviable on a sum of Rs.15,84,783/-,which included Long Term Capital gain enhanced amounting to Rs. 11,27,484/- and interest income and profit added in the assessment order amounting to Rs. 1,40,373. Accordingly, a penalty of Rs.2, 46,300/- was levied by the Assessing Officer.
The Ld. CIT (A) confirmed the penalty due to the reason that the filing of revised return of income was not voluntary and the same was filed after the original return was picked up for scrutiny.

Arguments made by the parties:

The bench heard both the parties and perused the record as well as the documents filed before it. It was noticed that the assessing officer had determined the concealed income though the additions made in the assessment order was only Rs.1,40,373/- and the difference of Long term Capital gains between the revised return and the original one was merely Rs.11,27,484/-.
It was observed that there was a difference in the amount of ‘concealed income’ for which the assessing officer failed to provide the details in the order imposing penalty. It was further noticed that the tax department took the view that the amount of Long term Capital gain increased by the assessee in the revised return should be treated as ‘concealed income’ as the assessee had revised the return after receipt of the notice under section 143(2) of the Act. The tax authorities derived the opinion that the notice prompted the assessee to file the revised return, as such, it cannot be considered as voluntary.
At the time of hearing, the Ld. Counsel for the assessee submitted that the Assessing Officer did not ask for any details at the time of issuing notice under section 143(2) for which no question of detection of the discrepancy in the Long Term Capital Gain arises at all in the instant case.
It was again submitted that the revised return was a voluntary one and the same was filed within the due date for filing revised return of income and the same was also recognized in the assessment proceedings. The decision of the Delhi bench of Tribunal in the case of Assistant Commissioner of Income Tax vs. Ashok Raj Nath (2013) was referred wherein the Tribunal had deleted the penalty levied under similar situations.

Provisions of section 143(2) of the Act:

Section 143 of the Income Tax Act, 1961, is a procedural section which lays down the procedures for making assessment in various cases. It prescribes two types of assessment — ‘summary assessment’ 143(1) and ‘scrutiny assessment’ under section 143 (2).
Section 143(2) of the Act prescribes the service of notice on the assessee within a particular period to enable the Assessing Officer to complete an assessment in case of scrutiny assessment. It states that where a return has been furnished under section 139 of the Act, the Assessing Officer shall serve on the assessee a notice to ensure that he has not understated his income or has not computed excessive loss. The notice shall require him either to attend his office on date to be specified therein or to produce any evidence on which the assessee may rely in support of his return.

The judgment passed by the ITAT, Mumbai:

The Tribunal went through the order passed by Delhi bench of Tribunal and noticed that the assessee therein had not filed revised return of income within the time prescribed in the Act by enhancing the Long term capital gain after the receipt of notice. Though the revised return was invalid, the assessment was completed by accepting the income stated in the revised return. Under such circumstances, the Tribunal had held that the additional amount of capital gain declared in the revised return was not concealment of income under section 271(1) (c) of the Act.
In the instant case, the revised return of income was filed within due time according to section 139(5) of the Act. Though the assessed filed the revised return of income after the receipt of notice under section 143(2) of the Act, however fact remains that the assessing officer did not ask for the particulars in the said notice.
For the said reason, it should be considered that the assessee has declared the higher amount of income by way of long term capital gains voluntarily. The Tribunal refused to agree with the view of the department that the revised return was not a voluntary one and the assessee was constrained to do so only upon the receipt of notice under section 143(2) of the Act. Accordingly the order of Ld CIT (A) was set aside and the assessing officer was directed to delete the penalty levied on the enhanced Capital gain amount.
Regarding the addition of Rs.1, 40,373/- made in the assessment order, it was held that the assessee has omitted to declare it in the revised return of income and no explanation was given in connection with the same. The penalty levied on the above said amount was thus deleted.