2017 (9) TMI 1226 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - professional receipts disclosure - Held that - Admittedly, the assessee has disclosed the additional income in its return of income only after the survey was carried out by the revenue authorities The assessee has furnished original return of income on 01/11/2004 and revised return was also filed on 14/01/2005 on which the Ld. assessing officer has accepted the same and acted upon the same. Therefore, facts of the present case also fall on the similar lines on the issue decided by Hon ble Gujarat High Court in case of CIT versus Girish Devcahnd Rajani 2013 (7) TMI 524 - GUJARAT HIGH COURT . Therefore, respectfully following the decision of the Hon ble Gujarat High Court on the above issue we direct the Ld. assessing officer to delete the penalty on this count too. It is apparent that during the year the income of the assessee disclosed by him during the course of survey as beer extrapolation of the records pertaining to earlier year found during the course of survey. The revenue is also not brought on any material on record for the purpose of levy of the penalty that similar situation prevailed the impugned assessment year also which was prevailing in the year 2002. Before us neither the revenue nor the assessee could show us that how the amount of rupees ₹ 12,000 per day regarding the professional fees has been estimated by the assessee and the relevant documents pertaining thereto. In view of this we are of the opinion that amount of disclosure made by the assessee was only on estimate basis based on the documents pertaining to earlier years. Addition has been made on estimated basis and that too without any material pertaining to that year, therefore, the disclosure made by the assessee is voluntary in nature, in the revised return, which is within time and cognizance of which has been taken by AO while framing the assessment order, therefore, the penalty under section 271 (1)(C) cannot be levied on such addition - Decided in favour of assessee.

Issues Involved:
1. Legitimacy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of revised return filed by the assessee.
3. Impact of survey findings on the penalty.
4. Nature of income disclosure by the assessee.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The core issue revolves around whether the penalty imposed under Section 271(1)(c) for concealment of income is justified. The assessee contended that the penalty was unwarranted as the additional income was disclosed voluntarily to maintain peace and under the precondition that no penalty would be levied. The assessing officer, however, rejected this contention and imposed a penalty of ?7,23,673 based on the alleged concealment of income amounting to ?21,92,950. The Tribunal, following the principles laid down by the Hon'ble Gujarat High Court in CIT vs. Girish Devcahnd Rajani, held that the penalty could not be levied if the disclosure was made voluntarily and not based on specific detection by the revenue authorities.

2. Validity of Revised Return Filed by the Assessee:
The assessee filed a revised return on 14/01/2005, increasing the total income to ?24,96,700 from the originally declared ?3,03,750. This revision was made subsequent to a survey conducted on 16/12/2004. The Tribunal noted that the revised return was filed within the prescribed time limit under Section 139(5) and was accepted by the assessing officer. Referencing the Gujarat High Court's decision, the Tribunal concluded that if the revised return is filed voluntarily and within the time limit, no penalty under Section 271(1)(c) is applicable.

3. Impact of Survey Findings on the Penalty:
During the survey, various documents were impounded, indicating that the assessee's average professional receipts were approximately ?12,000 per day, which was not reflected in the original return. The assessee subsequently surrendered ?60 lakhs for the assessment years 2004-05 and 2005-06. The Tribunal observed that the estimation of ?12,000 per day was not supported by concrete evidence and was merely an extrapolation of records from an earlier year (2002). It was emphasized that the penalty for concealment could not be levied solely based on an estimated figure without substantial material evidence.

4. Nature of Income Disclosure by the Assessee:
The Tribunal highlighted that the disclosure made by the assessee was voluntary and not a result of any specific detection by the revenue authorities. It was noted that the documents impounded during the survey pertained to the year 2002 and not the assessment year in question (2004-05). The Tribunal concluded that the additional income disclosed in the revised return was based on an estimate and not on any incriminating material found during the survey. Consequently, the penalty under Section 271(1)(c) was deemed unjustified.

Conclusion:
The Tribunal, after considering the rival contentions and the legal precedents, directed the assessing officer to delete the penalty of ?7,23,673. The appeal of the assessee was allowed, and it was concluded that the penalty under Section 271(1)(c) could not be levied on the basis of estimated income disclosed voluntarily in the revised return. The order was pronounced in the open court on 18/09/2017.

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