2018 (3) TMI 1097 - AT - Income Tax

Penalty imposed u/s 271(1)(c)- deliberate attempt to conceal the income by filing inaccurate particulars of income - undisclosed sales and the addition made under section 69C - CIT-A reducing penalty to 100% from 200% - Held that - We note that the assessee disclosed the income of 46, 00, 000/- only after the survey proceedings thus we up hold the levy of penalty and reversed the order of ld. CIT (A) qua this issue in respect of the income disclosed by the assessee. Penalty in respect of undisclosed sales though the addition made by the AO was sustained by this Tribunal and the same has attained the finality however we find that the penalty equivalent to 100% of tax to be evaded on this amount is a reasonable and proper decision taken by the ld. CIT (A) which does not require any interference. Accordingly we uphold the finding of the ld. CIT (A) qua this issue. Penalty in respect of disallowance made under section 40(a)(ia) - Held that - The disallowance was made only because of non deduction of TDS by the assessee. When the claim of expenditure other-wise not found to be bogus or patently impermissible the disallowance made by the AO by invoking the provisions of section 40(a)(ia) would not lead to conclusion that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. Once the case of disallowance under section 40(a)(ia) does not fall under the category of concealment of particulars of income or inaccurate particulars of income the mere disallowance because of non compliance of the provisions of the Act ipso facto would not lead to levy of penalty. No error or illegality in the order of the ld. CIT (A) in deleting the penalty. Addition made under section 69C was due to the reason that the assessee failed to explain the source of said expenses. Accordingly we concur with the view of ld. CIT (A) to restrict the penalty to 100% of the tax to be evaded of such income. The order of ld. CIT (A) is upheld. Penalty on the addition/disallowance made under section 24(a) - Held that - The said addition was deleted by the Tribunal in the appeal filed by the assessee against the revision order. This fact of deletion of the addition has not been disputed by the revenue. Accordingly when the Tribunal has already deleted the addition then the penalty under section 271(1)(c) has no leg to stand. Accordingly we do not find any error or illegality in the order of the ld. CIT (A) qua this issue. - Appeal of revenue partly allowed.

Summary

Issues Involved:
1. Deletion and restriction of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Voluntariness of income disclosure post-survey.
3. Penalty on undisclosed sales.
4. Penalty on disallowance under Section 40(a)(ia).
5. Penalty on addition under Section 69C.
6. Penalty on addition/disallowance under Section 24(a) pursuant to the revision order under Section 263.

Detailed Analysis:

1. Deletion and Restriction of Penalty under Section 271(1)(c):

The revenue challenged the order of the CIT(A) which deleted and restricted the penalty imposed by the AO under Section 271(1)(c) of the Income Tax Act, 1961. The AO had levied a penalty of ?46,67,060/- for the assessment year 2005-06, which was 200% of the tax evaded on an amount of ?63,77,074/-. This included penalties for various discrepancies found during a survey conducted at the assessee's business premises. The CIT(A) deleted the penalty on certain items and reduced it to 100% for others.

2. Voluntariness of Income Disclosure Post-Survey:

The assessee revised its return of income declaring a profit of ?23,41,516/- after a survey conducted on 10th March 2006, which revealed various discrepancies. The AO initiated penalty proceedings for the disclosure of ?46,00,000/- in the revised return, arguing it was not voluntary but prompted by the survey. The CIT(A) treated the disclosure as voluntary and not as concealment of income. However, the Tribunal reversed this decision, citing precedents that disclosure post-survey is not voluntary and upheld the penalty.

3. Penalty on Undisclosed Sales:

The CIT(A) reduced the penalty on undisclosed sales of ?5,04,985/- from 200% to 100%. The Tribunal upheld this decision, finding the reduction to 100% reasonable and proper, and did not interfere with the CIT(A)'s judgment.

4. Penalty on Disallowance under Section 40(a)(ia):

The AO levied a penalty for disallowance under Section 40(a)(ia) due to non-compliance with TDS provisions. The CIT(A) deleted this penalty, noting that the disallowance was not due to the expenditure being bogus but due to TDS non-compliance. The Tribunal agreed, stating that disallowance under Section 40(a)(ia) does not constitute concealment of income or furnishing inaccurate particulars, and upheld the CIT(A)'s order.

5. Penalty on Addition under Section 69C:

The AO made an addition under Section 69C due to unexplained expenditure, which was confirmed and attained finality. The CIT(A) restricted the penalty to 100% of the tax to be evaded on this amount. The Tribunal upheld this decision, agreeing that the restriction to 100% was appropriate.

6. Penalty on Addition/Disallowance under Section 24(a) Pursuant to Revision Order under Section 263:

The CIT(A) deleted the penalty on an addition of ?1,92,000/- under Section 24(a) following a revision order under Section 263. The Tribunal had already deleted this addition in the assessee's appeal against the revision order. The Tribunal upheld the CIT(A)'s decision, noting that since the addition was deleted, the penalty had no basis.

Conclusion:

The appeal by the revenue was partly allowed. The Tribunal upheld the CIT(A)'s decisions on several issues, including the deletion of penalties for disallowance under Section 40(a)(ia) and the addition under Section 24(a). However, it reversed the CIT(A)'s decision on the voluntary disclosure of ?46,00,000/-, upholding the AO's penalty imposition. The Tribunal found the CIT(A)'s reduction of penalties on undisclosed sales and unexplained expenditure to 100% reasonable and upheld these decisions.