2012 (11) TMI 107 - AT - Income Tax

Penalty u/s. 271(1)(c) - survey u/s 133A - addition to income - Held that - There were huge tans in cash which were not explained during the survey proceedings. Stock difference between the physical stock and the books was also worked out & when these were confronted to the Director Shri Vasudevbhai Patel, he admitted that the firm had Rs.50 lacs as undisclosed income and agreed to pay the tax. No letter or correspondence withdrawing the disclosure made or alleging coercion was made by the assessee till the scrutiny proceedings started about two years later. Although, no income was declared on this basis in the return, still in the assessment proceedings the assessee offered to be subject to the addition as originally offered. AO is bound to examine all explanations and evidences in those proceedings, separately while considering the levy of penalty & cannot be bound by any condition of non-levy of penalty at the time of assessment. Thus in view of the facts as the document and cash and stock were found at the premises of the assessee, the additional income was accepted by the Director, assessee responsible person, the Director was confronted with the documents and evidences during survey although they may have been found from possession of employee and no claim of coercion or wrong doing was made even for months after the survey the addition as made by the AO is confirmed - against assessee.

Summary

Issues Involved:
1. Addition of undisclosed income during survey and subsequent penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961.

Detailed Analysis:
1. The appellant contested the addition of undisclosed income during a survey, arguing that the amount was disclosed under the condition that no penalty would be levied. The appellant filed an appeal before the Commissioner of Income-tax (Appeals), who upheld the addition. The appellant then appealed to the ITAT.

2. During the survey, loose papers and diary pads were impounded, revealing significant cash transactions and stock differences. The Director admitted to undisclosed income of Rs.50 lakhs, agreeing to pay tax on it. However, the appellant did not include this income in the return but offered it during assessment proceedings with a condition of no penalty.

3. The appellant's representative argued that the additional income was disclosed in good faith to avoid litigation, emphasizing that no incriminating documents were found during the survey. The appellant contended that the undisclosed income was not conclusively linked to the appellant and was based on assumptions and conjectures.

4. The ITAT reviewed the CIT(A)'s decision and noted that the Assessing Officer must evaluate explanations and evidence separately for penalty proceedings under section 271(1)(c). The ITAT upheld the CIT(A)'s order, stating that the AO was not bound by the condition of non-levy of penalty during assessment. As the undisclosed income was accepted by the Director and no coercion was alleged, the addition made by the AO was confirmed.

5. The ITAT concluded that the CIT(A) correctly held that the AO must assess penalty proceedings independently. The appellant failed to demonstrate that a penalty was imposed on the undisclosed income. Therefore, the ITAT upheld the CIT(A)'s decision, dismissing the appellant's appeal.

6. Ultimately, the ITAT dismissed the appellant's appeal, affirming the decision regarding the addition of undisclosed income during the survey and emphasizing the separate consideration of penalty proceedings under section 271(1)(c) by the Assessing Officer.

This comprehensive analysis covers the issues of addition of undisclosed income during a survey and subsequent penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, as addressed in the judgment by the Appellate Tribunal ITAT, Ahmedabad.