2019 (1) TMI 1603 - AT - Income Tax

Penalty u/s 271(1)(c) - survey action u/s.133A and the assessee offered additional income therein - income so offered was duly declared in the return of income and the assessment was framed - HELD THAT - It is not a case of furnishing inaccurate particulars of income as in the Income Tax Return particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the Income Tax Return nor there is a tax sought to be evaded on the basis of return of income as the assessee has not evaded any tax on the return income. The Hon ble Delhi High Court in the case of SAS Pharmaceuticals 2011 (4) TMI 888 - DELHI HIGH COURT has considered the expression in the course of any proceedings under this Act appearing in section 271 of the Act and held that the said expression cannot have reference to the survey proceedings. It has also held that penalty proceedings would depend upon the return of income filed by the assessee. No reason to interfere with the order of ld.CIT(A) and we accordingly confirm the same. Accordingly the grounds of appeal as raised by the Revenue are therefore dismissed. The finding in this case is mutatis mutandis apply to all the group of Nine Appeals mentioned in above table at page 1 2 accordingly all the grounds in respect of above Nine Appeals are dismissed.

Summary

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act.
2. Justification and explanation for undisclosed income.
3. Legal obligation to explain cash credit entries.
4. Applicability of penalty provisions when income is disclosed during survey and reflected in the return of income.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act:
The primary issue revolves around the deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act. The Revenue argued that the CIT(A) erred in deleting the penalty of ?1,08,15,000/- without appreciating that the undisclosed income of ?3,50,00,000/- would have remained undetected without the survey. The CIT(A) held that since the income was disclosed in the return and the assessment was completed without any addition, the penalty was not justified. The Tribunal upheld the CIT(A)’s decision, noting that the penalty provisions start from the furnishing of details in the return, not before that.

2. Justification and Explanation for Undisclosed Income:
The Revenue contended that the assessee failed to provide acceptable explanations or justification for the undisclosed income. During the survey, the assessee disclosed ?3.50 crores, which was included in the return of income. The AO initiated penalty proceedings, arguing that the income was taxable under Section 68 due to the lack of relevant details. The CIT(A) and the Tribunal found that the income was disclosed in the return, and there was no concealment or furnishing of inaccurate particulars, thus no penalty was warranted.

3. Legal Obligation to Explain Cash Credit Entries:
The Revenue argued that the assessee failed to fulfill the legal obligation to explain the nature and source of cash credit entries. The CIT(A) observed that the income was disclosed during the survey and included in the return of income. The Tribunal noted that the assessment was completed without any addition, and the penalty provisions were not attracted as there was no difference between the returned and assessed income.

4. Applicability of Penalty Provisions When Income is Disclosed During Survey and Reflected in the Return of Income:
The Tribunal referred to various case laws, including the Hon’ble High Court of Gujarat in Principal CIT Vs. Valibhai Khanbhai Mankad, which held that penalty under Section 271(1)(c) cannot be levied when the particulars of income disclosed during the survey are duly reflected in the return of income. The Tribunal also noted that merely because the AO changed the head of income from business income to income under Section 68, it did not amount to furnishing inaccurate particulars. The Tribunal concluded that the penalty provisions were not applicable as the income was disclosed in the return, and there was no concealment or furnishing of inaccurate particulars.

Conclusion:
The Tribunal dismissed the Revenue’s appeals, confirming the CIT(A)’s decision to delete the penalty under Section 271(1)(c). The Tribunal emphasized that the penalty provisions apply based on the return of income, and since the income was disclosed in the return and there was no addition, the penalty was not justified. The Tribunal’s decision was consistent across all nine appeals, leading to the dismissal of the Revenue’s grounds in each case.