2003 (7) TMI 276 - AT - Income Tax

Summary

Issues:
Challenge to cancellation of penalty under section 271(1)(c) imposed by AO.

Detailed Analysis:

Issue 1: Surrender of income during survey proceedings and penalty imposition
- The Department challenged the cancellation of penalty under section 271(1)(c) imposed by the AO. The assessee-firm, engaged in the sale of fashion garments, surrendered a sum of Rs. 22 lacs during a survey conducted under section 133A of the Income-tax Act, 1961. The AO initiated penalty proceedings and imposed a penalty of Rs. 8,80,000.
- The learned CIT(A) cancelled the penalty, stating that the surrender was voluntary and not at the behest of the Department. The CIT(A) emphasized that concealment of income can only occur in the return filed by the assessee, and since the amount was voluntarily offered in the return of income, the penalty was unjustified.
- The Tribunal analyzed various precedents, including the case of CIT vs. Amalendu Paul, to establish that the burden of proving concealment lies on the Revenue. The Tribunal noted that the surrender made during the survey did not automatically imply deliberate concealment of income.
- Citing the case of Sir Shadilal Sugar & General Mills Ltd. & Anr. vs. CIT, the Tribunal highlighted that agreeing to additions to income does not necessarily indicate concealed income. The Tribunal also referred to the case of CIT vs. Suresh Chand Mittal to emphasize that the burden shifts to the assessee only if the Revenue establishes concealment.
- Ultimately, the Tribunal held that the Department failed to discharge its burden of proving concealment of income. The AO did not record satisfaction before initiating penalty proceedings, as required by law. Therefore, the Tribunal upheld the CIT(A)'s decision to cancel the penalty.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the cancellation of the penalty under section 271(1)(c) imposed by the AO. The decision was based on the lack of evidence to establish deliberate concealment of income and the absence of recorded satisfaction by the AO before initiating penalty proceedings.