2016 (12) TMI 679 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - under valuation of stock - income declared at the time of survey - Held that - No doubt additions have been made by the AO based on the disclosure made by the assessee during the course of survey operations u/s 133A of the Act. There was no allegation by the assessee hat disclosure was made by him out of duress and coercion by the department. No doubt, addition was on account of undervaluation of closing stock and it is no body case there is any difference in quantitative closing stock. The submission of the assessee that the addition was offered to tax on account of change in the method of closing stock from LIFO and FIFO at the insistence of the AO, is not borne out of record. Therefore, it follows that the difference in valuation arisen on account of adopting wrong method of valuation of closing stock which amounts to concealment of particulars of income. Therefore, in our considered opinion, the AO was justified in levying penalty u/s 271(1)(c) of the Act. The reasoning of the CIT(A) that penalty cannot be levied in estimate basis, cannot be applied to the facts of the present case as no addition was made on estimate basis and the CIT(A) has allowed appeal on wrong premise. - Decided against assessee Maintainability of the present cross-objections - Held that - Having regard to plain provisions of statute, in absence of nonadjudication of ground by the CIT(A), assessee can come only by way of appeal before the Tribunal, not by way of cross objections. In the present case, the CIT(A) had no occasion to deal with the issue raised by way of cross objections, as the assessee never contested this issue either before the AO or before the CIT(A). The cross objections do not widen the scope of subject matter of appeal. Therefore, the cross objections are not maintainable and dismissed as such.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income-tax Act, 1961.
2. Alleged concealment of income and furnishing inaccurate particulars by the assessee.
3. Validity and specificity of the show cause notice issued under Section 271(1)(c).

Detailed Analysis:

Issue 1: Deletion of Penalty under Section 271(1)(c)
The revenue appealed against the CIT(A)'s order which deleted the penalty levied under Section 271(1)(c). The CIT(A) held that the penalty was not leviable as the additions were made on an estimate basis. However, the Tribunal found this reasoning flawed, stating that the additions were due to undervaluation of stock and not on an estimate basis. The Tribunal emphasized that the penalty under Section 271(1)(c) is applicable when there is concealment of income or furnishing inaccurate particulars. The Tribunal reversed the CIT(A)'s decision, reinstating the penalty of ?13,23,380/-.

Issue 2: Alleged Concealment of Income
The revenue argued that the assessee had declared additional income only after detection during survey operations, implying concealment. The Tribunal noted that the assessee did not file a revised return voluntarily but only after the survey revealed undervaluation of stock. The Tribunal concluded that the assessee's change in the method of valuation from LIFO to FIFO at the insistence of the AO indicated concealment of particulars of income. The Tribunal cited the Supreme Court's decision in MAK Data (P) Ltd. vs. CIT, which held that voluntary disclosure does not absolve the assessee from penalty provisions. Thus, the Tribunal upheld the penalty, agreeing with the AO's assessment.

Issue 3: Validity and Specificity of the Show Cause Notice
The assessee's cross-objections challenged the validity of the show cause notice issued under Section 271(1)(c), claiming it was vague and lacked specificity. The Tribunal examined the provisions under Section 253(4) and concluded that cross-objections could only be filed against parts of the order that were adversely decided. Since the CIT(A) did not adjudicate on the validity of the show cause notice, the Tribunal held that the cross-objections were not maintainable. The Tribunal dismissed the cross-objections, stating that the assessee should have filed an appeal if aggrieved by non-adjudication.

Conclusion:
The Tribunal allowed the revenue's appeal, reinstating the penalty under Section 271(1)(c) for concealment of income due to undervaluation of stock. The Tribunal dismissed the assessee's cross-objections challenging the validity of the show cause notice, emphasizing that such issues should be raised through an appeal, not cross-objections. The decision underscores the importance of accurate income disclosure and the applicability of penalties for concealment, even in cases of voluntary disclosure post-detection.