2018 (1) TMI 230 - AT - Income Tax

Penalty u/s 271(1)(c) - addition towards interest income - assessee offering additional income in survey - Held that - In the present case the assessee has given detailed explanation before the Assessing Officer and offered additional income and the same is accepted. It is not the case of the Assessing Officer that the explanation given by the assessee is neither false nor bonafide. Therefore in our opinion the assessee has discharged burden cast upon him and if at all the Assessing Officer is not agreed with the explanation given by the assessee he has to make a positive enquiry in respect of additional income offered by the assessee and has to give a finding that the additional income offered by the assessee is a concealed income or furnished in accurate particulars of income. In the present case in the penal proceedings the Assessing Officer has not made any such enquiry and no such finding has been given. Thus on account of survey if the assessee has offered additional income it cannot be a ground to impose penalty under section 271(1)(c) unless Assessing Officer is able to strictly proved that the income offered by the assessee is either concealed or filed in accurate particulars of income otherwise section 271(1)(c) cannot be imposed. - Decided in favour of assessee.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Voluntary disclosure of additional income by the assessee.
3. Assessment and acceptance of revised returns by the Assessing Officer.
4. Comparison with the case of MAK Data Pvt. Ltd. Vs. CIT.
5. Evaluation of whether the conditions for penalty under Section 271(1)(c) are met.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue is whether the penalty under Section 271(1)(c) of the Income Tax Act is applicable in the given circumstances. The Assessing Officer initiated penalty proceedings after the assessee filed revised returns declaring additional income following a survey. The penalty was imposed on the grounds that the additional income was offered only after the revenue noticed a low rate of profit declared by the assessee.

2. Voluntary Disclosure of Additional Income:
During the survey, the assessee voluntarily disclosed additional income for the Assessment Years 2010-11 and 2011-12. The assessee argued that the disclosure was made under mental stress and without proper guidance. The revised returns were filed before any notice under Section 148 was issued by the Department. The assessee contended that the disclosure was voluntary and not due to detection of concealed income by the Department.

3. Assessment and Acceptance of Revised Returns:
The Assessing Officer accepted the revised returns filed by the assessee, which included the additional income disclosed during the survey. The assessment was completed without any further additions, except a minor addition towards interest income. The penalty proceedings were initiated based on the belief that the additional income was disclosed due to the survey findings.

4. Comparison with the Case of MAK Data Pvt. Ltd. Vs. CIT:
The Assessing Officer relied on the Supreme Court's decision in the case of MAK Data Pvt. Ltd. Vs. CIT, where it was held that voluntary disclosure does not release the assessee from penalty proceedings. However, the CIT(A) and the Tribunal distinguished the facts of the present case from MAK Data Pvt. Ltd., noting that no incriminating material was found during the survey, and the additional income was offered voluntarily without any detection of concealment by the Department.

5. Evaluation of Whether the Conditions for Penalty under Section 271(1)(c) are Met:
The CIT(A) and the Tribunal evaluated whether the conditions stipulated under Section 271(1)(c) were met. They noted that the Department did not find any incriminating material or discrepancies in the books of account. The additional income was offered to cover discrepancies related to self-made vouchers, which were satisfactorily explained by the assessee. The Tribunal concluded that the explanation given by the assessee was not found to be false, and there was no reference to any bogus expenditure. Consequently, the conditions for imposing penalty under Section 271(1)(c) were not fulfilled.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalty levied by the Assessing Officer. It was concluded that the additional income was offered voluntarily without reference to any incriminating material, and the explanation provided by the assessee was satisfactory. The Tribunal also noted that the case law relied upon by the Assessing Officer (MAK Data Pvt. Ltd.) was not applicable to the present case due to different factual circumstances. As a result, the appeals filed by the Revenue were dismissed.

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