2015 (11) TMI 418 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of particulars of income as well as furnishing of inaccurate particulars of income - Held that - On perusal of the penalty order, it is clear that the penalty was levied for furnishing inaccurate particulars of income and thereby concealed the particulars of income which means that this finding, in our considered opinion, is confusing and is not clear whether the Assessing Officer holding the assessee guilty of furnishing the inaccurate particulars of income or concealing the particulars of income. This goes to prove that the Assessing Officer had not arrived at the satisfaction as to the guilty state of mind of the assessee. Further, we find that the statement of surrender is the sole basis for making the addition of ₹ 22,51,000/-, while surrendering this amount, the assessee clearly stated that the surrender is made with the intention of buying peace and avoiding unnecessary litigation and the amount surrendered cannot be co-related with incriminating materials found as a result of survey operations. Though the Assessing Officer and the CIT(A) recorded the finding that the assessee promised to produce the vouchers, which were not accounted in the books of account, failed to do so. It is a trite law that the onus always lies on the person who alleges in this case that it is the department who made an allegation that some vouchers found which were not accounted in the books of account. Therefore, it is the duty of the Revenue to prove that which vouchers were not accounted in the books of account. The Assessing Officer never brought any such vouchers on the record except making ipse dixit statement that some vouchers are found that apart, the Hon ble Madras High Court in the case of CIT Vs. S. Khader Khan Sons, (2007 (7) TMI 182 - MADRAS HIGH COURT ) and the Hon ble Kerala High Court in the case of Paul Mathews and Sons Vs. CIT, (2003 (2) TMI 25 - KERALA High Court) had clearly held that no addition can be made based on the mere statement. The decision of the Hon ble Madras High Court was approved by Hon ble Supreme Court in the case of CIT Vs. Khader Khand Son, (2013 (6) TMI 305 - SUPREME COURT) after granting the leave. That apart, the CBDT which is the apex body in administering the provisions of Income Tax Act had issued Circle dt. 10th March, 2003 to its officers that no addition can be made on mere statement of assessee without bringing any independent incriminating material on record. Therefore, in the light of the above decision, the very addition made by the Assessing Officer is not free from doubt. The mere disallowance cannot be a sound basis for imposition of penalty. In the light of the above legal position, we have no hesitation to quash the penalty levied under Section 271(1)(c) of the Act. Hence, the appeal filed by the assessee is allowed in full. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in levying penalty.
2. Validity of the penalty order under Section 271(1)(c) of the Income-tax Act, 1961.
3. Alleged concealment or furnishing of inaccurate particulars of income by the assessee.
4. Basis of additions made in the assessment order.
5. Compliance with principles of natural justice.
6. Requirement of "satisfaction" for levying penalty.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) in levying penalty:
The assessee contended that the CIT(A) erred in confirming the AO's action of levying a penalty of Rs. 6,23,046 without assuming jurisdiction as per law. The appellant argued that the penalty order was illegal and void ab initio, as it was framed without considering the facts and circumstances of the case.

2. Validity of the penalty order under Section 271(1)(c) of the Income-tax Act, 1961:
The appellant challenged the penalty order on the grounds that it was framed without providing any adverse material on record and without establishing that there was concealment or furnishing of inaccurate particulars of income. The assessee argued that the penalty was imposed contrary to law, as the assessment order under Section 143(3) dated 24-12-2009 and the additions made therein were also illegal and void ab initio.

3. Alleged concealment or furnishing of inaccurate particulars of income by the assessee:
The assessee argued that the penalty was levied without considering the submissions and evidence provided. The appellant contended that the statement made during the survey was obtained under duress and was later retracted. The assessee maintained that there were no vouchers found indicating undisclosed investments in the construction of the building, and the DVO's report confirmed that no construction took place during the relevant period. The appellant also argued that the surrender of income was made to buy peace and avoid litigation, and no independent incriminating material was brought on record by the AO.

4. Basis of additions made in the assessment order:
The AO made an addition of Rs. 22,51,000 under Section 69C of the Act based on the assessee's statement during the survey. The assessee argued that this addition was made solely based on the statement of surrender, which was later retracted. The appellant submitted various pieces of evidence, including licenses, property tax returns, and completion certificates, to support their claim that no construction took place during the relevant period. Despite this, the AO made the addition based on the advice of the appellant's counsel to avoid litigation, with the condition that no penalty proceedings would be initiated.

5. Compliance with principles of natural justice:
The assessee argued that the penalty order was passed without giving adequate opportunity to present their case and without considering the submissions and evidence provided. The appellant contended that the penalty order was framed by recording incorrect facts and findings, and without providing any adverse material on record.

6. Requirement of "satisfaction" for levying penalty:
The assessee contended that the CIT(A) erred in not quashing the penalty order, as it was framed without recording the mandatory "satisfaction" as per law. The appellant argued that the AO did not arrive at a clear satisfaction regarding the guilty state of mind of the assessee, as the penalty order was confusing and did not specify whether the assessee was guilty of furnishing inaccurate particulars of income or concealing the particulars of income.

Conclusion:
The Tribunal, after considering the submissions and evidence, concluded that the penalty order was not sustainable in the eyes of law. The Tribunal noted that the AO had not provided a clear finding on whether the assessee furnished inaccurate particulars of income or concealed the particulars of income. The Tribunal also observed that the addition was made based on the assessee's statement of surrender, which was retracted, and no independent incriminating material was brought on record by the AO. The Tribunal quashed the penalty levied under Section 271(1)(c) of the Act and allowed the appeal filed by the assessee in full.

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