RAKESH KUMAR GARG, J. - (1.) THE Revenue has filed the present appeal under s. 260A of the IT Act, 1961 (hereinafter referred to as the 'Act') against 1998 -99 raising the following substantial question of law :
(2.) "Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in deleting the penalty under s. 271(1)(c) by treating the voluntary disclosure made in response to notice under s. 148 as having been done in good faith and to avoid litigation - of Rs. 77,520 inter alia declaring income from house property and salary earned in the capacity of a partner in a partnership firm. Subsequently on an information received from the Investigation Wing that the assessee had acquired a response to the notice issued under s. 148 of the Act. The legal heirs i.e. wife and his son expressed their unawareness about the source of investment made in the said property. Accordingly the income declared in the return filed in on account of investment in the aforesaid property i.e. Rs. 5,10,000. Accordingly the source of investment in the said property remained unexplained. The assessment under s. 143(3) r/w s. 147/148 was thereafter completed by the AO on 1998, penalty proceedings under s. 271(1)(c) of the Act were initiated against the assessee at the time of passing of the assessment order. During penalty proceedings, the assessee was provided an opportunity to offer an explanation in respect of the abovestated concealed income. The legal heirs of the assessee submitted that they have preferred to surrender the amount of investment made by the assessee as the sources were not known to her as the deceased husband was managing his financial affairs and had made the investment in property. The legal heir having no knowledge of sources of investment which were made by her husband and being an illiterate housewife chose to 271(1)(c) of the Act amounting to Rs. 1,44,752. The CIT(A) upheld the imposition of penalty against which the assessee imposed under s. 271(1)(c) of the Act amounting to Rs. 1,44,752 while holding that the act of voluntary disclosure made by the legal heir in the return of income filed in response to notice under s. 148 of the Act was done in good faith and to avoid litigation. The Tribunal also found that it was a case of bona fide disclosure done not merely to avoid the consequences of law, but with a view to avoid litigation. The relevant portion of the order of the Tribunal is reproduced hereunder :
(3.) "We have considered the rival submissions carefully. In this case the whole issue revolves around as to whether disclosure of Rs. 5,10,000 made by the assessee in the return filed by his legal heir in pursuance of notice under s. 148 constitute a bona fide disclosure. The factual position is that the assessee was found to have invested sums in purchase called upon to explain the sources of investment in the purchase of said property, he had already expired and the return of income was thereafter furnished by his legal heir, namely, Smt. Munni Devi (wife). The legal heir, being unaware of this count. The AO has held that the said income of Rs. 5,10,000 is liable for imposition of penalty in terms of s. 271(1) (c) of the Act being an income concealed by the assessee. Quite fairly it has to be granted that consequent to the death of the assessee himself, the legal heir would not be in a position to explain and elaborate the sources for making the impugned investment. Faced with such a situation, the action on behalf of the part of the legal heir by making return of income inter alia including the impugned amount only demonstrates her bona fides and willingness not to prolong any litigation with the Revenue. Such a situation cannot be compared with a situation whereby an assessee discovers an earlier omission or wrong statement to justify the filing of subsequent return of income. Even when enquiries are carried out by the Revenue and an assessee accepts the result of enquiries, and on that basis discovers a mistake of a wrong statement in the return of income earlier filed, such an assessee still has an option in law to demonstrate and explain the reasons for such omission or wrong statement so as to avoid imposition of penalty under s. 271(1)(c) of the Act. In this case, ostensibly the assessee had died and his legal heir namely his wife was not in a position to explain the circumstances leading upto the impugned investment. It was under these circumstances that the assessee's legal heir accepted the charge made out by the AO in the notice issued under s. 148 of the Act. Therefore, in the instant case, having regard to the peculiar circumstances, it can be deduced that it is a case of bona fide 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, there could not be any person having first hand knowledge as to the sources of investment in the said property. Therefore, to say that the assessee had made any deliberateness in not declaring the correct income in the original return and on that basis to hold it guilty under s. 271(1)(c) would be unjustified. Fairly the assessee had no chance of carrying through his explanation and in any case the AO in the present case has also not recorded any finding as to the reasons weighing with the assessee for doing so in the original return. The Revenue in the present case has simply rested its conclusion on the act of voluntary disclosure made by the legal heir in the return of income filed in response to notice under s. 148, which we have already inferred, was done in good faith and to avoid litigation." Ms. Urvashi Dugga, learned counsel for the Revenue, has vehemently argued that in this case an offer to surrender was not voluntary and bona fide and, therefore, the Tribunal has erred at law while deleting the penalty imposed upon the assessee under s. 271(1)(c) of the Act.;