2020 (3) TMI 1171 - AT - Income Tax

Penalty levied u/s.271(1)(c) - concealment of income - disclosure of on- money income was made only due to the survey action by the Department and the on-money income was not accounted for in the regular books of account of the assessee on the date of survey - HELD THAT - Assessee had offered the amount as additional business income pursuant to survey operation for the ongoing year, which was duly incorporated in the books of accounts and in the regular return of income with taxes duly paid. Since the Assessing Officer was of the view that the unaccounted income of ₹ 3.8 crores was offered to tax by the assessee. As the same came to the surface only because of survey and that had there been no survey, then that amount could not have been brought to tax. Therefore, it was held that the onmoney received was unaccounted income which was admitted by the assessee when it was confronted with the diary during the survey. However, we are of the view that the conclusion of the AO that amount was not finding mention in the regular books of accounts is over-sweeping over statement, because the fact remains that the books of accounts were not closed , then as the year was yet not over. It was not the case of the Revenue that the books were completed, accounts were audited and returns were filed and thereafter only the unaccounted income of ₹ 3.8 crores came to the surface because of the survey by the Department. This particular facts, according to us, is the inherent disability/challenge in any disclosure if it pertains to the ongoing financial year . The year in the case of the assessee being the first year of operation, it cannot even be implied that that the amount pertained to earlier year(s) of its business. See R UMEDBHAI JEWELLERS PVT. LTD 2016 (9) TMI 9 - GUJARAT HIGH COURT - Decided against revenue.

Summary

Issues:
1. Appeal against deletion of penalty u/s.271(1)(c) of the Income Tax Act.

Analysis:

Issue 1: Appeal against deletion of penalty u/s.271(1)(c) of the Income Tax Act

The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the deletion of penalty u/s.271(1)(c) of the Act. The Revenue contended that the penalty was justified as the disclosure of "on-money" income was made only due to the survey action by the Department and was not accounted for in the regular books of account of the assessee at the time of survey. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal and deleted the penalty. The Revenue argued that the deletion of penalty was erroneous as the on-money income was not reflected in the regular books of accounts. On the other hand, the assessee relied on the decision of the Hon'ble Gujarat High Court in a similar case. The Tribunal analyzed the facts and held that the assessee had disclosed the additional business income during a survey operation, which was duly incorporated in the books of accounts and the return of income with taxes paid. The Tribunal noted that the on-money income was admitted by the assessee during the survey and that the conclusion of the Assessing Officer regarding the non-inclusion of the amount in the regular books of accounts was flawed. The Tribunal also referred to the decision of the Hon'ble Gujarat High Court, which held that if the disclosed income during the survey was offered to tax and no further addition was made during assessment, the penalty for furnishing inaccurate particulars of income would not apply. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal, citing no new facts or circumstances presented to warrant interference.