2019 (4) TMI 1997 - AT - Income Tax

Penalty u/s 271(1)(c) - as argued Non specify in which limb of sec. 271(1)(c) penalty proceedings has been initiated, i.e. whether for concealment of income or furnishing of inaccurate particulars of income - unaccounted stock found in survey - income surrendered on account of unaccounted stock in response to notice u/s 148 - HELD THAT - Since, there was no return of income filed by the assessee, therefore, the said surrendered made by the assessee in any case includes the business income as well as unaccounted stock. Once, the assessee has disclosed the income on account of unaccounted stock as well as business income for the year under consideration then the addition made by the AO based on the statement of the assessee recorded U/s 133A of the Act would be regarded as without any valid evidence disclosing undisclosed income of the assessee. Therefore, the said addition though accepted by the assessee would not ipso facto lead to the conclusion that the assessee has concealed particulars of income or furnishing inaccurate particulars of income. Assessing Officer has not substantiated the addition by making reference to any incriminating material or other information to indicate such undisclosed income. Therefore, in the facts and circumstances of the case where the addition made by the AO is purely on the basis of the statement recorded U/s 133A of the Act the same would not attract the penalty U/s 271(1)(c) of the Act. Hence, the penalty levied by the AO is deleted. Since we have deleted the penalty levied by the AO on merits, therefore, we do not propose to not into the legal ground raised by the assessee regarding validity of initiation of penalty. Appeal filed by the assessee is allowed.

Summary

Issues involved:
Penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2003-04.

Analysis:

Issue 1: Validity of Penalty Imposed
The assessee challenged the penalty imposed under section 271(1)(c) of the Income Tax Act, arguing that the Assessing Officer (AO) did not specify the basis for initiating the penalty proceedings, i.e., whether for concealment of income or furnishing inaccurate particulars of income. The assessee contended that the addition of income was made solely based on a statement recorded under section 133A of the Act and not on any incriminating material. The assessee cited various legal precedents, including decisions of the Hon'ble Supreme Court and High Courts, to support the argument that the addition made without concrete evidence does not warrant a penalty under section 271(1)(c). The Tribunal agreed with the assessee's contention and held that the addition made by the AO was not based on any valid evidence of undisclosed income, thus deleting the penalty levied.

Issue 2: Disclosure of Income
The AO made an addition to the assessee's income for the assessment year 2003-04 based on a statement recorded under section 133A of the Act, where the assessee surrendered a certain amount as income. The Tribunal observed that the surrendered amount included both business income and unaccounted stock for the year under consideration. However, the AO's addition exceeded the surrendered amount, which was not supported by any incriminating material. The Tribunal emphasized that the addition made by the AO was not justified as it was solely based on the statement recorded under section 133A and lacked concrete evidence of undisclosed income. Therefore, the Tribunal concluded that the addition did not establish concealment of income or furnishing inaccurate particulars of income, leading to the deletion of the penalty imposed under section 271(1)(c).

Conclusion:
The Tribunal allowed the appeal filed by the assessee, highlighting that the penalty imposed under section 271(1)(c) for the assessment year 2003-04 was not sustainable in law due to the lack of valid evidence supporting the addition made by the AO. The Tribunal emphasized that the penalty was deleted based on the merits of the case, without delving into the legal grounds raised by the assessee regarding the validity of the initiation of the penalty proceedings.