2015 (9) TMI 132 - AT - Income Tax

Penalty u/s. 271(1)(c) - CIT(A) deleted the penalty - Held that - Even though a survey was conducted 22-03-2009 i.e., during the financial year relevant to the AY. 2009-10, even though there was no incriminating material and only certain discrepancies have been found, assessee volunteered to pay additional taxes of ₹ 10 Lakhs. The statement itself, as extracted by the Ld. CIT(A) in the order, do indicate that there was no quantification of concealed income in the course of survey. In fact, what assessee has admitted was payment of ₹ 10 Lakhs as additional tax, accordingly, he worked out the income to be offered which he did in the return filed subsequently. As per the provisions of the Act in order to attract penalty u/s. 271(1)(c) either there should be concealment of income or furnishing of inaccurate particulars. In this case, there is no concealment of income as assessee has returned the correct income which was accepted by the AO in the scrutiny assessment. Question of furnishing inaccurate particulars does not arise on the facts of the case, which was accepted by DR as well. Looking at either way, the conditions specified u/s. 271(1)(c) are not satisfied. Moreover, the returned income and assessed income being the same, the computation of penalty also fails. Explanation-I with reference to expression Concealed income has deemed the amount concealed income indicates that the amount added or disallowed in computing the total income of such person shall for the purpose of Clause-C of this sub-section be deemed to represent the income in respect of which particulars have been concealed . As already stated, there is no amount added or disallowed in computing the total income of assessee as the returned income was accepted as such. Therefore, under Explanation-I, the amount of concealment is NIL. Therefore, no amount can be considered as concealed income under the facts of the case. There is also no provision in the Act to levy penalty on an income identified/un-earthed in the course of survey proceedings. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act for concealment of income.
2. Whether the voluntary disclosure of additional income by the assessee during a survey constitutes concealment of income.
3. The applicability of legal precedents and principles to the facts of the case.

Issue-wise Detailed Analysis:

1. Legitimacy of the penalty levied under Section 271(1)(c):
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) (CIT(A)), which cancelled the penalty of Rs. 10 Lakhs levied under Section 271(1)(c) of the Income Tax Act. The penalty was initially imposed by the Assessing Officer (AO) on the grounds that the additional income offered by the assessee during a survey was to cover discrepancies, thus attracting penalty proceedings for concealing income.

2. Voluntary Disclosure During Survey:
During a survey at the assessee's business premises, no incriminating material was found, but the assessee voluntarily offered to pay additional tax of Rs. 10 Lakhs to cover deficiencies and to "purchase peace with the department." The AO accepted the income returned but initiated penalty proceedings, concluding that the assessee had concealed particulars of income. The CIT(A) found that the explanation provided by the assessee regarding the cash discrepancy was acceptable and noted that the penalty provisions under Section 271(1)(c) are not attracted since the return of income was accepted as filed.

3. Applicability of Legal Precedents:
The CIT(A) relied on several legal precedents, including:
- CIT Vs. SAS Pharmaceuticals [335 ITR 259]: The court held that penalty under Section 271(1)(c) cannot be imposed unless there is actual concealment or non-disclosure of particulars of income in the return filed.
- Reliance Petro Products Pvt. Ltd. [322 ITR 158 (SC)]: The Supreme Court emphasized that the penalty provisions must be strictly construed and are applicable only when there is clear evidence of concealment or furnishing of inaccurate particulars of income.
- CIT Vs. Mohan Das Hassa Nand [141 ITR 203 (Delhi)]: The court reiterated that the concealment must be with reference to the return of income filed by the assessee.

The CIT(A) observed that the AO did not provide any cogent material evidence to prove that the voluntarily admitted income represented concealed income. The CIT(A) also noted that the penalty order lacked specifics on the nature of concealment and relied solely on the voluntary admission by the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s order, confirming that the penalty under Section 271(1)(c) was not justified. It was noted that the assessee had voluntarily disclosed the additional income to avoid litigation and there was no incriminating material found during the survey to substantiate the claim of concealment. The Tribunal emphasized that the penalty provisions are not automatic and must be supported by clear evidence of concealment or furnishing of inaccurate particulars of income. The Revenue's appeal was dismissed, and the order of the CIT(A) was confirmed, deleting the penalty of Rs. 10 Lakhs.