2017 (2) TMI 1080 - AT - Income Tax

Penalty u/s 271(1)(c) - inflation of expenses - addition on the bass of survey - Held that - There can hardly be any dispute that quantum and penalty are two distinct and independent proceedings wherein each and every disallowance or addition does not necessarily result in penal action under the provisions of the Act. It has already come on record that the impugned additional income is in fact on account of alleged inflation of various heads of expenses in assessee s construction activity. The department has very much seen assessee s books in the course of assessment completed after its disclosure in question. It however does not even refer to a single evidence to support its prima facie opinion of inflation of expenses. Something further surprises us is that all the above heads of inflated expenses involve precise round figures which have nowhere been tallied with the actual ones in books of accounts. The Revenue strongly rests its case on assessee s partners survey disclosure of ₹ 1.3crores and payment of taxes thereupon. It however fails to rebut Board s circular itself dated 10.03.2003 that no significance is attached to such survey statement in absence of any corresponding evidence being collected. - Decided in favour of assessee

Summary

Issues involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on alleged inaccurate particulars/concealment of income.
2. Validity of penalty proceedings and the evidence considered by the Assessing Officer.
3. Interpretation of survey statements and their evidentiary value.
4. Application of legal precedents in penalty proceedings.

Detailed Analysis:
1. The appeal pertains to the imposition of a penalty of ?44,54,540 by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961, based on alleged inaccurate particulars/concealment of income. The CIT(A) upheld the penalty, leading to the appeal before the Appellate Tribunal ITAT Ahmedabad.

2. The case involves a civil construction business firm that revised its return to include additional income of ?1.3 crores following a survey action by the department. The Assessing Officer completed a regular assessment accepting the revised return but initiated penalty proceedings alleging inaccurate particulars/concealment of income. The assessee argued that the additional income declaration was made to avoid litigation due to unavailability of relevant books of accounts at the time of the survey.

3. The assessee contended that the revenue authorities failed to collect any evidence to support the alleged inflation of expenses based on survey statements. The assessee cited a Board circular stating that admissions made during surveys do not hold evidentiary value. The Revenue, however, emphasized the non-retraction of the additional income declaration and payment of taxes thereon.

4. In its analysis, the Tribunal noted that the quantum assessment and penalty proceedings are distinct, and each disallowance or addition does not automatically lead to penal action. The Tribunal observed discrepancies in the Revenue's case, highlighting the lack of evidence supporting the alleged inflation of expenses and the reliance on survey statements without corresponding evidence. Referring to legal precedents, the Tribunal distinguished the present case from previous judgments, ultimately deciding to delete the penalty imposed under section 271(1)(c) of ?44,54,540.

This detailed analysis covers the issues involved in the legal judgment comprehensively, providing insights into the arguments presented by both parties and the Tribunal's reasoning in arriving at its decision.