2012 (7) TMI 724 - AT - Income Tax

Penalty u/s 271(1)(c) search assessee voluntarily disclosed additional income on account of unaccounted raw material and machinery - assessee did not disclose the surrendered amount in his return filed - penalty proceedings u/s 271(1)(c) of the Act were initiated on account of failure on the part of the assessee in disclosing the surrendered amount and for concealment of income detected during the course of survey Held that - Mere enquiry about surrendered income having not been shown in the return, does not tantamount to detection of concealment of income u/s. 271(1)(c) of the Act - mere inadvertence in not showing the amount surrendered during the course of survey, on which tax had also been paid before filing the return , in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that any material particulars were concealed or furnished inaccurate - levy of penalty is not justified In favor of assessee

Summary

Issues Involved:
1. Whether the CIT(A) erred in upholding the order of the AO levying penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Whether the assessee should be allowed to add, delete, alter, or modify any ground of appeal.

Detailed Analysis:

Issue 1: Levy of Penalty under Section 271(1)(c)
The primary issue revolves around the correctness of the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. The facts reveal that the assessee had initially filed a return declaring an income of Rs. 75,180/-. During a survey conducted under section 133A, the assessee disclosed additional income of Rs. 10,39,079/- due to unaccounted raw material and machinery. However, this amount was not included in the return filed on 01.02.2005. The AO initiated penalty proceedings on the grounds of concealment of income and furnishing inaccurate particulars.

The CIT(A) upheld the penalty, emphasizing that the concealment was discovered during the survey and that the assessee did not voluntarily disclose the surrendered income in the return. The CIT(A) rejected the assessee's arguments that the omission was not deliberate and that taxes had been paid on the surrendered amount under the condition that no penalty would be levied.

Analysis by the Tribunal:
The Tribunal noted that the assessee had paid taxes on the surrendered amount before filing the return and had submitted a revised computation of income during the assessment proceedings. The Tribunal referenced several judicial precedents, including the Hon'ble Supreme Court's decisions, to assert that concealment is only relevant at the time of filing the return. The Tribunal found that the assessee's failure to include the surrendered amount in the initial return was inadvertent and not an attempt to conceal income.

The Tribunal also highlighted that the assessee had paid the tax due on the surrendered amount and immediately rectified the omission upon being confronted. The Tribunal concluded that there was no basis for levying the penalty as there was no intent to conceal income, and the entire amount was offered to tax during the assessment proceedings.

Conclusion on Issue 1:
The Tribunal vacated the findings of the lower authorities, determining that the penalty under section 271(1)(c) was not justified. The appeal on this ground was allowed.

Issue 2: Addition, Deletion, Alteration, or Modification of Grounds of Appeal
The second issue was whether the assessee should be allowed to add, delete, alter, or modify any ground of appeal. Since no additional ground was raised before the Tribunal, this ground was dismissed.

Final Judgment:
The appeal was allowed, and the order for levying penalty under section 271(1)(c) was set aside. The Tribunal found that the assessee's omission was inadvertent and did not constitute concealment of income or furnishing inaccurate particulars. Consequently, the penalty was deemed unjustified and was vacated. The residuary ground of appeal was dismissed as no additional grounds were raised.