2016 (4) TMI 807 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - In the present case on hand, the assessee right from the beginning contends that he has not maintained regular books of accounts, so as to say whether those 12 receipts which are the basis for estimation of income was accounted in the books of accounts or not. The assessee explained that he has fairly estimated his income based on the available information and arrived at annual gross receipts of ₹ 20 to 25 lakhs and after all expenses for maintenance of hospital, net income would be around ₹ 15 lakhs which is probable and estimated. However, he disclosed ₹ 20 lakhs which is over and above his estimated income with a request to immunity from the penalty proceedings. The assessee surrendered the income during the course of survey and also paid taxes before filing the return of income. Though, A.O. assessed slightly higher income over and above income declared by the assessee, which was on account of referral income from two hospitals amounting to ₹ 2,14,177/- which is subsumed in the extra income declared during the course of survey. The A.O. had his own apprehension that assessee would not have declared his true and correct income, if survey could not taken place. Whether survey is taken place or not, the fact remains that the due date for furnishing return for both the assessment years was not over as on the date of survey. Therefore, there is no scope for such suspicion and surmises in the penalty proceedings. This is not a fit case for levy of penalty under explanation 1 and 3 of section 271(1)(c) of the Act, as the conditions stipulated for levy of penalty is not fulfilled. The explanations offered by the assessee under explanation 1 of section 271(1)(c) of the Act appeared to be bonafide. The conditions stipulated under explanation 3 of 271(1)(c) of the Act are not fulfilled to hold that the assessee shall deemed to be concealed the income so as to levy penalty. Therefore, we direct the A.O. to delete the penalty of ₹ 10 lakhs levied u/s 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Concealment of income and furnishing inaccurate particulars of income.
2. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Concealment of Income and Furnishing Inaccurate Particulars of Income:
The assessee, a doctor by profession, filed his return of income for the assessment year 2008-09 on 17.10.2008, declaring a total income of ?20,64,450. The assessment was completed under Section 143(3) of the Income Tax Act on 31.12.2010, determining a total income of ?22,78,580. A survey conducted under Section 133A on 23.9.2008 revealed that the assessee had not filed any return for the assessment years 2007-08 and 2008-09. Loose slips found during the survey indicated professional receipts not accounted for in the books. The assessee admitted to average daily collections of ?6,000, estimating annual collections between ?20-25 lakhs and net income around ?15 lakhs, but could not substantiate this with documentary evidence. Consequently, the assessee agreed to admit ?20 lakhs each for the assessment years 2007-08 and 2008-09 and ?10 lakhs for the first half of the current financial year. The Assessing Officer (A.O.) completed the assessment and made additional additions for referral income from diagnostic centers not considered by the assessee.

2. Legitimacy of the Penalty Levied Under Section 271(1)(c):
The A.O. issued a show cause notice under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The assessee contended that the additional income was admitted on an estimation basis during the survey to cooperate with the department and requested immunity from penal proceedings. However, the A.O. levied a penalty of ?10 lakhs, asserting that the assessee willfully concealed particulars of income and furnished inaccurate particulars. The A.O. argued that if the survey had not occurred, the assessee would not have filed returns or disclosed true income. The CIT(A) upheld the penalty but directed it to be limited to 100% of the tax sought to be evaded.

On appeal, the assessee argued that the penalty was unjustified as the additional income was voluntarily disclosed during the survey and taxes were paid before filing the return. The due date for filing the return for the assessment year 2008-09 was not over as of the survey date, and the return for 2007-08 could still be filed under Section 139(4). The assessee cited the Delhi High Court decision in CIT Vs. SAS Pharmaceuticals and ITAT Visakhapatnam's decision in Godavari Townships (P) Ltd. Vs. DCIT, arguing that no penalty should be levied for income surrendered during the survey.

The Tribunal considered the factual matrix, legal provisions under Section 271(1)(c), and relevant case laws. It noted that the assessee had not maintained regular books of accounts and had estimated income based on available information. The income disclosed during the survey was not based on incriminating documents but on loose slips. The Tribunal found the explanation offered by the assessee to be bonafide and not a case of willful concealment. It held that the conditions for levying penalty under Explanation 1 and 3 of Section 271(1)(c) were not fulfilled.

Conclusion:
The Tribunal directed the A.O. to delete the penalty of ?10 lakhs levied under Section 271(1)(c) of the Act, allowing the appeal filed by the assessee and dismissing the appeal filed by the revenue. The judgment emphasized that penalty provisions should be strictly construed and applied only when conditions stipulated in the law are unambiguously satisfied.