2010 (8) TMI 641 - AT - Income Tax

Penalty - Survey - Unaccounted income - Addition - Concealment of income - the basis for levy of penalty is return of income - The omission or commission or contumacious conduct has to be viewed from the return of income and if certain thing is not disclosed or not furnished therein only then it can be said that assessee has concealed the particulars of income or furnished inaccurate particulars of income - But where the AO accepts the income declared in the return of income then assessee cannot be charged for any contumacious conduct - The duty to disclose particulars of income arises at the time when assessee furnishes return of income under section 139 and if in filing his return he conceals the particulars of income or furnishes inaccurate particulars he incurs penalty under section 271(1)(c) - In the case of Patna Guinea House vs. CIT (1999 -TMI - 15241 - PATNA High Court) it is held that there is no case for levy of penalty if income is disclosed in the return of income but assessee has refused to disclose source of income - Accordingly decided in the favour of the assessee

Issues Involved:
1. Legitimacy of penalty under section 271(1)(c) of the Income Tax Act.
2. Determination of concealment of income and furnishing of inaccurate particulars.
3. Validity of penalty proceedings initiated based on survey findings.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c):
The primary issue is whether the penalty of Rs. 10,49,520/- levied under section 271(1)(c) of the Income Tax Act is justified. The Revenue appealed against the order of the CIT(A), which had cancelled the penalty. The survey under section 133A revealed unaccounted income of Rs. 32,84,663/-, which the assessee disclosed in the return of income. The AO initiated penalty proceedings based on this disclosure.

2. Determination of Concealment of Income and Furnishing of Inaccurate Particulars:
The AO argued that the assessee admitted to not issuing receipts to all patients, thereby concealing income. However, the CIT(A) cancelled the penalty, stating:
- No material evidence proved fraud on the assessee's part.
- Disclosure of income was not linked to any incriminating documents found during the survey.
- There was no specific finding of concealment of income or furnishing inaccurate particulars.

The Tribunal upheld the CIT(A)'s decision, emphasizing that penalty under section 271(1)(c) relies on the return of income. If the disclosed amount is included in the return, it cannot be considered concealed or inaccurately furnished. The Tribunal cited several judgments, including CIT vs. Reliance Petro Products and CIT vs. Prakash Industries Ltd., to support this view. The Tribunal reiterated that concealment or furnishing inaccurate particulars must be evident in the return of income, not just discovered during a survey.

3. Validity of Penalty Proceedings Initiated Based on Survey Findings:
The Tribunal clarified that a survey under section 133A is not a statutory proceeding but a means of collecting evidence. Penalty proceedings under section 271(1)(c) can only be initiated based on findings from statutory proceedings, such as assessment or penalty proceedings. The Tribunal stressed that concealment or furnishing inaccurate particulars must be determined from the return of income. The Tribunal noted that the AO did not make any significant additions to the returned income, and thus, there was no basis for levying the penalty.

Conclusion:
The Tribunal upheld the CIT(A)'s order canceling the penalty, stating that since the assessee disclosed the unaccounted income in the return, there was no concealment or furnishing of inaccurate particulars. The appeal filed by the Revenue was dismissed.

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