2019 (8) TMI 991 - AT - Income Tax

Levy of penalty u/s 271(1) (c) - as during the survey assessee had admitted to disclose additional income on account of bogus purchases - survey was included in the return of income filed by the assessee in response to notice u/s 148 - HELD THAT - The perusal of statement recorded during the course of survey also reveals that it was stated that assessee firm had made actual purchases from the market for which it had received the bills from the parties and had also made payments through account payee cheques but since assessee was unable to prove the genuineness of the purchases to the extent required by the Revenue, and in order to avoid litigation and buy peace of mind, the income was offered by the assessee. It is a fact that the income declared during the course of survey was included in the return of income filed by the assessee in response to notice u/s 148 of the Act. Thereafter in the assessment order passed u/s 143(3) r.w.s. 147 of the Act the AO had accepted the return of income filed by the assessee and no addition was made therein. In such a situation, we relying on the decision of CHETAS CONTROL SYSTEMS PVT. LTD. 2019 (3) TMI 1632 - ITAT PUNE and for similar reasons are of the view that there is no question of levying penalty on account of concealment on the assessee. Hence, we direct to delete the penalty levied by the AO and which was confirmed by Ld.CIT(A). Thus, the grounds of assessee are allowed.

Summary

Issues:
- Levy of penalty under section 271(1)(c) of the Income Tax Act 1961 for A.Ys. 2006-07 and 2007-08.

Analysis:
1. The appeals filed by the assessee for A.Ys. 2006-07 and 2007-08 were heard together as the facts and issues were identical except for the assessment year and amounts involved. The primary issue revolved around the levy of penalty under section 271(1)(c) of the Income Tax Act 1961.

2. The case involved a partnership firm engaged in the trading of steel material. Following a survey action u/s 133A of the Act, it was discovered that certain purchases were not verifiable, leading to the disclosure of additional income on account of bogus purchases. The AO levied a penalty under section 271(1)(c) of the Act. The CIT(A) upheld the penalty, prompting the assessee to appeal before the ITAT Pune.

3. The assessee contended that the purchases were genuine, payments were made through cheques, and the additional income was declared to avoid litigation. The income declared during the survey was included in the return filed in response to notice u/s 148 of the Act, which was accepted by the AO without any additions. Citing precedent, the ITAT Pune concluded that there was no concealment of income, leading to the deletion of the penalty.

4. The ITAT Pune allowed both appeals, emphasizing that the facts and issues in both assessment years were similar, and there was no basis for the penalty under section 271(1)(c) of the Income Tax Act 1961. The penalty levied by the AO and confirmed by the CIT(A) was directed to be deleted in both cases.

5. The judgment highlighted the importance of genuine disclosures and accepted returns, emphasizing that penalties should not be levied in cases where there is no concealment of income. The ITAT Pune's decision provided relief to the assessee by allowing both appeals and deleting the penalties imposed by the tax authorities.

6. The comprehensive analysis of the judgment showcases the meticulous consideration of facts, legal provisions, and precedents by the ITAT Pune in determining the appropriate course of action regarding the penalty under section 271(1)(c) of the Income Tax Act 1961 for the respective assessment years.