2019 (12) TMI 914 - AT - Income Tax

Penalty u/s.271(1)(c) - penalty is leviable either for concealment of income or furnishing of inaccurate particulars of income - Assessee filing revised return disclosed his entire income in totality and have paid taxes - HELD THAT - Revised return was accepted and taxes paid accordingly. No further addition was made by the AO in the case of the assessee. In such scenario, in the instant case of the assessee as well, no penalty u/s.271(1)(c) of the Act can be imposed. While levying penalty u/s.271(1)(c) AO has recorded his satisfaction at the time of framing original assessment order based on the original return filed by the assessee u/s.139(1) of the Act. That however, while survey was conducted which resulted in levy of the penalty, during that time no separate satisfaction was recorded by the AO before initiation of penalty proceedings. This is also not legally permissible as observed by the Pune Bench of the Tribunal in the case of Ashok S. Agarwal Vs. the Deputy Commissioner of Income Tax 2018 (6) TMI 1678 - ITAT PUNE . It is not a fit case for levy of penalty u/s.271(1)(c) of the Act. Hence, we set aside the order of the Ld. CIT(Appeal) and direct the Assessing Officer to delete the penalty from the hands of the assessee. Appeal of the assessee is allowed.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on concealment of income and inaccurate particulars of income.

Analysis:

1. Background and Facts:
The appeal by the assessee challenged the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10. The assessee, a partnership firm in the transport and cargo business, faced a survey under section 133A of the Act in the financial year 2012-13. During the survey, incriminating documents revealed illegal payments to RTO Officers and Border Toll Officers. The firm agreed to disallow these expenditures, resulting in an offered income adjustment. The Assessing Officer initiated proceedings under section 147 of the Act due to the claimed illegal expenditures in the original return.

2. Contentions of the Assessee:
The assessee contended that all inadmissible expenditures were included in the revised return filed later, disclosing the income and paying taxes accordingly. The assessee argued that there was no concealment of income as all particulars were disclosed in the revised return, leading to no revenue loss. The penalty was challenged based on the timing of satisfaction recorded by the Assessing Officer.

3. Revenue's Stand:
The Revenue argued that had there been no survey, the inadmissible expenditures claimed in the original return would have benefited the assessee. The Revenue contended that the non-disclosure in the original return amounted to concealment of income.

4. Judicial Analysis and Precedents:
The Tribunal analyzed the case records and arguments. Referring to legal precedents, it highlighted that penalty provisions must be strictly construed and cannot be imposed on assumptions. The Tribunal cited the case law to emphasize that penalties are not leviable when discrepancies are rectified through revised returns without any irregularities pointed out by Revenue Authorities.

5. Decision and Rationale:
The Tribunal concluded that since the assessee rectified the inaccuracies through a revised return filed within the stipulated time, there was no concealment of income or furnishing of inaccurate particulars. The Tribunal set aside the penalty based on the examination of merits and legal precedents, directing the Assessing Officer to delete the penalty imposed on the assessee.

6. Outcome:
The Tribunal allowed the appeal of the assessee, pronouncing the order on 18th December 2019. The penalty under section 271(1)(c) was deemed not applicable in this case, leading to the penalty's deletion from the assessee's records.