2019 (8) TMI 59 - HC - Income Tax

Penalty u/s 271(1)(c) - assessee filed the return of income consequent to the survey u/s 133A and included income surrendered in survey - HELD THAT - CIT(A) held that the survey team did not make further enquiries nor was it established that these represented any other income. It is not a case where it was found / established that the income disclosed was not full and true. Further, the department has not built a case where the explanation of the appellant has been proved to be false or not bona fide. Even the conditions or Explanation 1 of section 271(1)(c) are not applicable in such a case. The Tribunal took notice of the fact that in the case on hand, the amount disclosed during the survey was duly included in the original return of income filed after the date of survey. It took the view that there is no difference as such in the return of income and the income. In the peculiar facts of the present case, the Tribunal arrived at the conclusion that the case is not one of furnishing inaccurate particulars of income. Also in the case of Pr. CIT vs. Valibhai Khanbhai Mankad, Tax 2015 (9) TMI 849 - GUJARAT HIGH COURT held that in the absence of any concealment of the particulars of income or furnishing of inaccurate particulars of income on the part of the assessee, no infirmity can be found in the impugned order passed by the Tribunal in confirming the order passed by the CIT(A) in deleting the penalty u/s 271(1)(c) We have reached to the conclusion that no error not to speak of any error of law could be said to have been committed by the Tribunal in passing the Impugned order. No interference is warranted in this appeal u/s 260-A - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of penalty for concealment detected during survey proceedings under Section 133A(1).
3. Interpretation of Explanation 4 to Section 271(1)(c) regarding the difference between assessed income and returned income.

Detailed Analysis:

1. Deletion of Penalty Levied Under Section 271(1)(c):
The Revenue challenged the deletion of a penalty amounting to ?55,15,650/- levied under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was initially imposed by the Assessing Officer (AO) on the grounds that the assessee had furnished inaccurate particulars of income, leading to concealment. However, the CIT(A) deleted the penalty, and this decision was upheld by the Income Tax Appellate Tribunal (ITAT). The Tribunal reasoned that the penalty under Section 271(1)(c) is contingent upon the return of income filed by the assessee. Since the assessee had disclosed the unaccounted income in the return filed post-survey, there was no concealment or furnishing of inaccurate particulars in the return itself.

2. Applicability of Penalty for Concealment Detected During Survey Proceedings:
The Revenue argued that the penalty under Section 271(1)(c) should apply to concealment detected during any proceedings under the Act, including survey proceedings under Section 133A(1). The Tribunal, however, clarified that survey proceedings do not constitute statutory proceedings under Section 271(1)(c). The Tribunal cited that concealment or furnishing of inaccurate particulars must be evident in the return of income. The Tribunal referenced the Delhi High Court's decision in CIT vs. SAS Pharmaceuticals, which held that the expression "in the course of any proceedings under this Act" does not extend to survey proceedings, as these are merely means of collecting evidence and do not create any liability by themselves.

3. Interpretation of Explanation 4 to Section 271(1)(c):
The Revenue contended that Explanation 4 to Section 271(1)(c) does not limit the penalty to the difference between assessed income and returned income. The Tribunal disagreed, stating that the penalty is based on the particulars of income as declared in the return. The Tribunal emphasized that there can be no concealment before the filing of the return. The Tribunal also distinguished the Supreme Court's decision in Mak Data Pvt. Ltd. vs. CIT, noting that in the present case, the assessee had included the disclosed amount in the original return filed after the survey, unlike in Mak Data where the disclosure was made during assessment proceedings.

Conclusion:
The High Court upheld the Tribunal's decision, stating that no penalty under Section 271(1)(c) can be imposed when the income has been duly declared in the return filed post-survey. The Court affirmed that the concealment must be evident in the return of income, and survey proceedings do not constitute statutory proceedings under Section 271(1)(c). The appeal was dismissed, reinforcing that the Tribunal's interpretation and application of the law were correct.