2025 (3) TMI 455 - AT - Income Tax

Penalty u/s. 271(1)(c) - income admitted by the assessee during the survey proceedings - HELD THAT - Assessee has declared the additional income which was accepted by the AO and brought to tax. AO cannot impose penalty u/s. 271(1)(c) of the Act based on the voluntary disclosure by the assessee. AO has also not brought on record any corroborative evidence but has purely proceeded to levy the penalty based on assumptions that the assessee has concealed the income or furnished the inaccurate particulars of income while filing the original return of income wherein if the survey was not conducted on the assessee this income would not have been admitted by the assessee. There cannot be any penalty based on surmises conjectures and possibilities. While invoking the penalty provisions of section 271(1)(c) of the Act it has to be construed strictly. Unless it is found that there is an actual concealment or non-disclosure of the particulars of income penalty cannot be imposed. In the instant case there is no such concealment or non-disclosure as the assessee has made a complete disclosure in the return of income offered surrendered the amount for the purpose of tax. The Explanation-5 and 5A to section 271(1) of the Act are also an exception to the Rule that the income is ultimately brought to tax is declared in a return of income there can be no question of treating the assessee as having concealed particulars of income or furnished inaccurate particulars of income. Decided in favour of assessee.

Summary

The appeal before the Appellate Tribunal concerned the levy of a penalty under section 271(1)(c) of the Income Tax Act, 1961 on the assessee for not disclosing the true particulars of income. The assessee, engaged in executing contract works for various government departments, admitted additional income during survey proceedings, which led to penalty proceedings initiated by the Assessing Officer (AO). The Tribunal analyzed whether the penalty was justified given the voluntary disclosure of additional income by the assessee.**Issues Presented and Considered:**- Whether the penalty under section 271(1)(c) was correctly imposed on the assessee for not disclosing true income.- Whether the voluntary admission of additional income by the assessee during survey proceedings warranted the penalty.**Issue-Wise Detailed Analysis:****Relevant Legal Framework and Precedents:**- Section 271(1)(c) of the Income Tax Act, 1961 deals with penalties for concealment of income.- Precedents such as Muninaga Reddy vs. ACIT and CIT vs. SAS Pharmaceuticals were cited to support arguments on voluntary disclosure and penalty imposition.**Court's Interpretation and Reasoning:**- The Tribunal considered the voluntary nature of the additional income admission by the assessee during survey proceedings.- It analyzed whether the delay in filing the return of income in response to the notice U/s. 148 affected the voluntary nature of the disclosure.- The Tribunal emphasized the strict interpretation of penalty provisions and the need for actual concealment or non-disclosure of income for penalty imposition.**Key Evidence and Findings:**- The assessee voluntarily disclosed additional income during survey proceedings to avoid litigation.- The Revenue argued that the belated filing of the return of income after the notice U/s. 148 negated the voluntary nature of the disclosure.**Application of Law to Facts:**- The Tribunal applied the legal principles regarding voluntary disclosure and concealment of income to the facts of the case.- It considered the absence of corroborative evidence and reliance on assumptions by the AO in levying the penalty.**Treatment of Competing Arguments:**- The assessee argued for the non-imposition of penalty based on voluntary disclosure.- The Revenue contended that the belated filing of the return of income after the notice U/s. 148 invalidated the voluntary nature of the disclosure.**Conclusions:**- The Tribunal held that the penalty under section 271(1)(c) was not justified in this case.- It emphasized that there was no actual concealment or non-disclosure of income as the assessee made a complete disclosure and offered the surrendered amount for tax purposes.- The Tribunal allowed the appeal filed by the assessee, concluding that there was no justification for imposing the penalty on the disclosed income.**Significant Holdings:**- The Tribunal's decision highlighted the importance of actual concealment or non-disclosure of income for penalty imposition under section 271(1)(c).- The core principle established was that voluntary disclosure of additional income, even if belated, may not warrant penalty if there is no actual concealment or non-disclosure.The Tribunal's ruling in favor of the assessee underscored the significance of voluntary disclosure and the strict interpretation of penalty provisions in cases of income concealment.