2025 (2) TMI 1041 - AT - Income Tax

Penalty u/sec 271(1) - income disclosed during a survey - as per revenue had there been no survey action u/s 133A assessee would not have disclosed the business income and long term capital gains - HELD THAT - When the assessee has paid sufficient advance tax apart from the TDS / TCS and the due date for filing of return has not expired on the date of return it cannot be said that the assessee would not have disclosed the income during the financial year 2016-17 had there been no survey. In our opinion both the AO and CIT(A) have completely ignored the fact of sufficient advance tax paid by the assessee and the due date for filing of return has not expired. It is also an admitted fact that the income returned by the assessee has been accepted without any variation. Since in the instant case the income declared during the course of survey has been offered in the return which has been accepted by the AO in the order passed u/s 143(3) of the Act and the assessee has paid sufficient advance tax before the survey was conducted and the date for filing of return of income has not expired on the date of survey therefore penalty levied by the AO and sustained by the Ld. CIT(A) is not justified - Appeal filed by the assessee is allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

1. Whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961 was rightly imposed on the assessee for concealment of income pertaining to the conversion of land from a capital asset to stock-in-trade, which was disclosed during a survey conducted by the Income Tax Department.

2. Whether the income declared during the survey and subsequently included in the income tax return filed before the due date can attract penalty under Section 271(1)(c) of the Act.

ISSUE-WISE DETAILED ANALYSIS

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act

Relevant Legal Framework and Precedents: Section 271(1)(c) of the Income Tax Act, 1961 provides for the imposition of a penalty on an assessee if it is found that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. The provision is penal in nature and requires strict interpretation. The case of CIT vs. SAS Pharmaceuticals and Prakash Mithalal Oswal vs. ITO were considered relevant precedents.

Court's Interpretation and Reasoning: The Tribunal considered whether the assessee had concealed income by not disclosing the conversion of land from a capital asset to stock-in-trade until the survey. The Tribunal noted that the penalty provisions require a clear case of concealment or furnishing inaccurate particulars in the income tax return.

Key Evidence and Findings: The Tribunal found that the assessee had converted the land into stock-in-trade in the financial year 2010-11 and disclosed this during a survey in 2016. The assessee argued that there was no specific column in the tax return form for such disclosure and that the accounts were not audited, which contributed to the non-disclosure.

Application of Law to Facts: The Tribunal applied the principle that penalty for concealment can only be imposed if there is a failure to disclose income in the return filed. Since the assessee filed the return incorporating the survey disclosures before the due date and paid advance tax, the Tribunal found no concealment.

Treatment of Competing Arguments: The Revenue argued that the disclosure during the survey indicated concealment. However, the Tribunal emphasized that the due date for filing the return had not expired, and the income was disclosed in the return filed, thus negating the concealment claim.

Conclusions: The Tribunal concluded that the penalty under Section 271(1)(c) was not justified as the income was disclosed in the return filed before the due date, and there was no concealment in the return.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Unless it is found that there is actually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the income tax return and offered the surrendered amount for the purposes of tax."

Core Principles Established: The Tribunal established that penalty under Section 271(1)(c) cannot be levied if the income is disclosed in the income tax return filed within the prescribed time, even if it was initially discovered during a survey.

Final Determinations on Each Issue: The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to cancel the penalty imposed under Section 271(1)(c) on the income disclosed during the survey, as it was included in the return filed before the due date.

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