Justices S C Dharmadhikari and Prakash D Naik of Bombay High Court, in CIT v. Smt. Madhuri Satish Misal, held that penalty under the provisions of the Income Tax Act is not justifiable when Assessee not disclosed income in good faith and voluntarily offers the same to Tax during the course assessment proceedings.
The department found that assessee had not explained the source of invested made in the bank account. During the proceedings, assessee explained that her husband had transferred his Transferable Development Rights (TDR) prior to 2002. Assessee was neither the owner of the TDR assets nor a party to the sale transaction. The amount received by the assessee as a result of the dispute being settled in Court after the demise of her husband. Assessee, under a bonafide belief that the said amount constitutes capital receipt and hence, not taxable, had not disclosed the same in her return. However, during the course of the assessment the assessee agreed to pay tax on the same and that is how the sum of Rs.1,11,67,378/was added to the total income. Subsequently, the department imposed penalty on the Assessee.
On appeal, the Tribunal considered the principles which have to be invoked and applied for levy of penalty, the plain language of the statutory provision and the peculiar facts and held that once the assessee is a beneficiary of the amount received as a consequence of the transfer executed by her husband, of which she had no knowledge, she offered that during the course of the assessment proceedings, that does not mean that her act can be brought within the penalty provision. The explanation rendered by the assessee is bona fide.
Upholding the Tribunal order, the bench ruled that the assessee has discharged the primary burden and there was no material brought by the Revenue to show that the explanation of the assessee is either false or lacking in bona fides. Penalty imposed was, thus, deleted.
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