2022 (8) TMI 747 - AT - Income Tax

Penalty u/s 271(1)(c) - penalty imposed on the amount offered by the assessee in the return of income pursuant to survey - HELD THAT - As the reported income and the assessed income of the assessee remain the same. The AO has imposed penalty only with reference to the amount which was suo motu declared by the assessee in the return. In that view of the matter, the ratio laid down in MAK data Pvt. Ltd . 2013 (11) TMI 14 - SUPREME COURT has no application to the facts of the extant case as the income under consideration, forming the foundation for the penalty, is not the one which was added by the AO beyond the income returned. In view of the fact that the assessee voluntarily offered the income, declared in the survey, in the return of income and the assessment was made without making any addition on that score, we hold that such an income cannot constitute the bedrock for the imposition of penalty u/s.271(1)(c) of the Act. We, therefore, affirm the impugned order. Revenue Appeal is dismissed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for additional income declared during survey u/s.133A.

Analysis:
The appeal pertains to the deletion of a penalty of Rs.1,99,19,766/- imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961, in relation to the assessment year 2013-14. The assessee declared additional income of Rs.6.44 crore during a survey conducted under section 133A, which was included in the return of income. The Assessing Officer accepted the returned income but imposed a penalty on the surrendered income, leading to the question of whether the penalty was justified.

Explanation 1 to section 271(1) states that if the assessee fails to offer an explanation or offers a false explanation regarding material facts related to income computation, the added or disallowed amount shall be deemed as concealed income. However, this penalty provision applies when income is not offered in the return. In this case, the additional income was voluntarily declared in the return after the survey, and no addition was made by the Assessing Officer. Therefore, the penalty under section 271(1)(c) cannot be imposed on income already disclosed in the return.

The judgment in MAK Data Pvt. Ltd. Vs. CIT (2013) 358 ITR 593 (SC) is referenced, where the Supreme Court upheld a penalty when the reported income was lower than the assessed income due to non-disclosure during survey. However, in the present case, the reported and assessed income remained the same, and the penalty was imposed solely on the voluntarily declared income. As the disclosed income formed the basis for assessment without any addition, the penalty was deemed unwarranted. Thus, the penalty was deleted, affirming the decision of the CIT(A)-8, Pune.

In conclusion, the Tribunal dismissed the appeal, emphasizing that the penalty under section 271(1)(c) cannot be levied on income already declared in the return, especially when no additions are made by the Assessing Officer. The judgment highlights the importance of voluntary disclosure and its impact on penalty imposition, distinguishing cases where undisclosed income leads to penalties.