2012 (10) TMI 1044 - AT - Income Tax

Summary

Issues Involved:
1. Cancellation of penalty levied u/s 271(1)(c) of the IT Act.
2. Surrender of income during survey proceedings.
3. Disallowance of deduction u/s 80G.

Summary:

Issue 1: Cancellation of Penalty Levied u/s 271(1)(c)

The department appealed against the cancellation of a penalty of Rs. 50,77,800/- levied u/s 271(1)(c) of the IT Act. The assessee, a proprietor of M/s. Kumar Constructions and M/s. Jain Poles, was regularly assessed to tax u/s 143(3). For A.Y. 2007-08, during assessment proceedings, a survey u/s 133A was conducted, leading to the assessee surrendering Rs. 1.50 Crores due to unverifiable liabilities. The AO completed the assessment by accepting the revised income but initiated penalty proceedings, stating the surrender was not voluntary. The AO imposed the penalty, asserting the surrender was due to incriminating evidence found during the survey.

Issue 2: Surrender of Income During Survey Proceedings

The assessee contended that the surrender was made to buy peace of mind and was not due to any incriminating evidence. The assessee explained that the liabilities were subsequently paid, and the surrender was on an ad hoc basis without reference to specific creditors or employees. The CIT (A) found that the liabilities were identifiable and paid subsequently, concluding that the surrender did not represent concealed income or inaccurate particulars. The CIT (A) canceled the penalty, stating the surrender was not due to any incriminating material found during the survey.

Issue 3: Disallowance of Deduction u/s 80G

The assessee claimed a deduction u/s 80G for donations made but could not furnish the receipt of the donation. The CIT (A) noted that the claim was disclosed in the return, and no facts were concealed. Relying on the Supreme Court's decision in Reliance Petro Product, the CIT (A) held that disallowance of a claim does not warrant a penalty u/s 271(1)(c).

Conclusion:

The Tribunal found no infirmity in the CIT (A)'s order, which was based on the facts that the surrender was ad hoc and the liabilities were subsequently paid. The Tribunal confirmed the CIT (A)'s order, stating that the department could not establish that the assessee had concealed income or furnished inaccurate particulars. The appeal of the department was dismissed.

The order was pronounced on 18.10.12.