2014 (8) TMI 275 - AT - Income Tax

Penalty u/s 271(1)(c) - Transactions relating to cash loan and purchase of land not accounted - Held that - Penalty u/s 271(1)(c) should not be levied if there is no difference between the returned income and assessed income - there should not be any difference of opinion in respect of this proposition - The income surrendered during the course of survey has been duly offered in the return of income filed by the assessee - the assessee has accounted for the Cash loan and land value in the books of account by making corresponding credit to the Capital Account, which fact proves that both the items cannot be said to have been omitted to be accounted due to incomplete nature of books of accounts - Relying upon CIT Vs. SAS Pharmaceuticals 2011 (4) TMI 888 - Delhi High Court - The entry passed by the assessee clearly shows that the assessee has used its unaccounted money only to give cash loans and to purchase the land. The penalty cannot be imposed on surmises, conjectures and possibilities - Section 271(1)(c) of the Act has to be construed strictly - unless it is found that there is actually a concealment or non-disclosure of particulars of income, penalty cannot be imposed - If the assessee has made a complete disclosure in the income tax return and offered the surrendered amount for the purposes of tax, there is no concealment or non-disclosure of particulars of income - the provisions of sec. 271(1)(c) should be interpreted strictly - the assessee cannot be imposed penalty u/s 271(1)(c), since it has already disclosed the surrendered amount as its income in the return of income the order of the CIT(A) Decided against Revenue.

Summary

Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Consideration of survey operations under Section 133A as statutory proceedings.
3. Determination of concealment of income or furnishing inaccurate particulars of income.

Issue-wise Detailed Analysis:

1. Deletion of Penalty Imposed Under Section 271(1)(c):
The primary issue in this case is the deletion of a penalty amounting to Rs. 35,34,300/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The Assessee had filed its return of income for the assessment year 2007-08 on 31.10.2007, declaring a total income of Rs. 1,70,69,561/-, which included Rs. 1,55,00,000/- surrendered during survey operations conducted on 02.08.2007. The AO completed the assessment with certain disallowances, arriving at a total income of Rs. 1,82,16,100/-. The AO initiated penalty proceedings, arguing that the Assessee was constrained to admit additional income due to incriminating materials found during the survey. However, the Assessee contended that since the additional income was disclosed in the return and accepted by the AO, it could not be considered concealed income. The CIT(A) agreed with the Assessee, stating that the income declared in the return filed before the due date under Section 139(1) cannot be deemed concealed or inaccurately furnished, as no disallowance or addition was made to the returned income. The Tribunal upheld this view, referencing the judicial principle that penalty under Section 271(1)(c) should not be levied if there is no difference between returned income and assessed income.

2. Consideration of Survey Operations Under Section 133A as Statutory Proceedings:
The AO's view that the Assessee admitted additional income due to incriminating materials found during survey operations under Section 133A was challenged. The Assessee argued that survey operations are not statutory proceedings and cannot be the basis for penalty under Section 271(1)(c). The CIT(A) and the Tribunal supported this argument, referencing the decision of the Hon'ble Delhi High Court in CIT Vs. SAS Pharmaceuticals (335 ITR 259), which clarified that the expression "in the course of any proceedings under this Act" in Section 271(1)(c) does not refer to survey proceedings. The Tribunal further cited the decision of the Ahmedabad bench in Dr. Satish B. Gupta's case, which held that penalty cannot be levied if income declared during a survey is included in the return filed before the due date and accepted by the AO.

3. Determination of Concealment of Income or Furnishing Inaccurate Particulars of Income:
The AO argued that the Assessee would not have declared the income if not for the survey operations, suggesting concealment. However, the Assessee contended that the books of account were incomplete at the time of the survey, and the discrepancies were included in the return of income filed subsequently. The CIT(A) and the Tribunal found that the Assessee had disclosed the income in the return filed before the due date and paid the requisite taxes. The Tribunal referenced the Hon'ble Delhi High Court's ruling that penalty under Section 271(1)(c) requires actual concealment or non-disclosure of particulars of income, which was not the case here. The Tribunal concluded that since the Assessee had disclosed the surrendered amount in the return, there was no concealment or furnishing of inaccurate particulars of income.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the penalty. The ruling emphasized that penalty under Section 271(1)(c) requires strict interpretation and cannot be imposed based on surmises or conjectures. The Assessee's disclosure of the surrendered amount in the return filed before the due date negated the grounds for penalty, aligning with judicial precedents that penalty should not be levied if there is no difference between returned and assessed income.