2019 (7) TMI 224 - AT - Income Tax

Penalty u/s 271 (1) (c) - survey action u/s 133A - assessee agreed to offer revenue @ 5% on the incremental construction work in progress on year on year basis subject to non levy penalty on such voluntary declaration - additional ground regarding invalid notice - assessee has not raised any bill as construction was not completed up to 30% - non following of revised accounting standard (AS-7) - HELD THAT - The contents of the addendum to the contract supports the contention of the assessee that the assessee was entitled to raise the initial bill only after completion of 30% of the work awarded. In the present case since the assessee has explained the circumstances under which the addition in question has been made and further established that the explanation is bonafide and it has disclosed all the facts material to the computation of its total income, the Ld. CIT(A) has wrongly confirmed the addition made by the AO. In our considered opinion, this is not a case of concealment of particulars of income by the assessee. We do not find any active concealment of particulars of income by the assessee in the present case which is a precondition for imposing penalty under the said section.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legitimacy of penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
3. Validity of notice issued under section 274 of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of a 43-day delay in filing the appeal, citing that the delay was due to the staff misplacing the order copy. The Departmental Representative (DR) opposed the application, arguing that no sufficient evidence was provided to justify the delay. The Tribunal, however, referred to the principle of "sufficient cause" as interpreted by the Hon'ble Supreme Court in cases like Collector Land Acquisition vs. Mst. Katiji & Others and Improvement Trust Ludhiana vs. Ujagar Singh and others, emphasizing a justice-oriented approach. The Tribunal found no mala fides in the assessee's conduct and condoned the delay, allowing the appeal to be argued on merits.

2. Legitimacy of Penalty Levied Under Section 271(1)(c):
The primary issue was whether the penalty under section 271(1)(c) for "concealment of particulars of income" was justified. The assessee argued that the penalty was unwarranted as the income was offered voluntarily during a survey to buy peace, without any concealment or furnishing of inaccurate particulars. The Tribunal noted that no incriminating documents were found during the survey, and the assessee had disclosed all relevant facts. The Tribunal emphasized that the penalty proceedings are distinct from assessment proceedings and require a higher standard of proof. Citing the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd., it was held that mere rejection of a claim does not automatically lead to penalty. The Tribunal concluded that the assessee's explanation was bona fide and there was no active concealment, thus directing the deletion of the penalty.

3. Validity of Notice Issued Under Section 274:
The assessee raised an additional ground challenging the validity of the penalty notice under section 274, arguing that the notice did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars." Since the appeal was allowed on merits, this ground became academic and was not decided.

Conclusion:
The appeals for both assessment years 2010-11 and 2011-12 were allowed. The Tribunal directed the deletion of the penalty imposed under section 271(1)(c) and condoned the delay in filing the appeal, emphasizing a justice-oriented approach and the necessity of a higher standard of proof in penalty proceedings. The additional ground regarding the validity of the section 274 notice was deemed academic and not addressed.