2022 (6) TMI 516 - AT - Income Tax

Penalty u/s 271(1)(c) - Additional income declared during the survey u/s 133A - Penalty imposed as assessee would not have offered its income if the survey had not taken place - CIT-A deleted the penalty - HELD THAT - As reported income and the assessed income of the assessee remain the same. The AO has imposed penalty only with reference to the amount of Rs.1.50 crore which was suo motu declared by the assessee in the return. In that view of the matter, the ratio laid down in MAK data Pvt. Ltd. 2013 (11) TMI 14 - SUPREME COURT has no application to the facts of the extant case as the income under consideration, forming the foundation for the penalty, is not the one which was added by the AO beyond the income returned. Assessee voluntarily offered the income, declared in the survey, in the return of income and the assessment was made without making any addition on that score, we hold that such an income cannot constitute the bedrock for the imposition of penalty u/s.271(1)(c) of the Act. We, therefore, affirm the impugned order - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for income declared during survey u/s.133A - Application of Explanation 1 to section 271(1) - Comparison with the judgment in MAK Data Pvt. Ltd. case.

Issue 1: Penalty under section 271(1)(c) for income declared during survey u/s.133A:
The appeal addressed the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961, on the income of Rs.1.50 crore declared by the assessee during a survey conducted u/s.133A. The CIT(A)-3, Pune had deleted the penalty, leading to the Revenue's appeal.

Analysis: The Assessing Officer imposed the penalty based on the income declared by the assessee during the survey, contending that the income would not have been offered if the survey had not taken place. However, the Tribunal analyzed the situation, emphasizing that the assessee voluntarily included the income in the return filed after the survey. The key question was whether the assessee could be penalized under section 271(1)(c) for the voluntarily declared income.

Issue 2: Application of Explanation 1 to section 271(1) - Comparison with MAK Data Pvt. Ltd. case:
The Tribunal delved into the application of Explanation 1 to section 271(1) concerning the penalty for concealed income. It highlighted that the penalty is leviable concerning the amount of income added or disallowed in the computation of total income. The Tribunal differentiated between cases of income offered in the return and income added by the Assessing Officer. Reference was made to the judgment in MAK Data Pvt. Ltd. case, where the Supreme Court held that a penalty could be imposed if the reported income was lower than the assessed income due to concealment.

Analysis: The Tribunal compared the facts of the current case with the MAK Data Pvt. Ltd. case to determine the applicability of the penalty provision. It noted that in the present case, the reported income and the assessed income were the same, with the penalty imposed solely on the voluntarily declared amount. As the assessment did not involve any addition to the declared income, the Tribunal concluded that the voluntarily declared income could not be the basis for imposing a penalty under section 271(1)(c).

In conclusion, the Tribunal dismissed the appeal by affirming the order that deleted the penalty imposed by the Assessing Officer. The decision was based on the voluntary disclosure of income by the assessee during the survey, which was included in the return without any addition by the Assessing Officer. The judgment highlighted the distinction between income offered in the return and income added during assessment, emphasizing that the penalty provision under section 271(1)(c) applies when there is an addition to the declared income.