2023 (3) TMI 1095 - AT - Income Tax

Penalty levied u/s 271(1)(c) - assessee has made a surrender of income - As per AO assessee has failed to explain and substantiate the source of additional income which was offered only due to conduct of survey by the Income Tax Department which is covered by Explanation (1) to section 271(1) - HELD THAT - In the present case, since the AO has not noticed any difference between in the return income and the assessed income, the citations relied upon by the department are not applicable to the facts of the instant case as income under consideration forming the foundation of the penalty has not the one which was added by the AO beyond the income returned. Assessee has voluntary declared the income in the survey, and the return of income was accepted in the assessment without making any addition on that score. We hold that such income cannot constitute the basis for the imposition of penalty u/s 271(1)(c) of the Act. We, therefore, held that the impugned order passed by the ld. CIT(A) is perverse to the facts on the record and bad in law. Decided in favour of assessee.

Summary

Issues:
Challenge to penalty under section 271(1)(c) for Assessment Year 2016-17 based on surrendered income during survey u/s 133A.

Analysis:
The appeal was filed against the penalty imposed under section 271(1)(c) by the Assessing Officer, contending that the surrendered income of Rs.31 lacs was disclosed during a survey conducted under section 133A. However, the Assessing Officer accepted the return income as assessed income during the assessment proceedings. The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the assessee failed to explain the source of the additional income disclosed only due to the survey, covered by Explanation (1) to section 271(1)(c). The counsel argued that the surrender was made with a condition of no penal action and cited a judgment of the Punjab & Haryana High Court to support the contention that the addition based on the surrender should be deleted.

Upon considering the contentions and the facts, it was observed that the assessee indeed made a surrender of Rs.31 lacs with the condition of no penal action, and the Assessing Officer accepted the return income as assessed income during the assessment. Referring to a similar case, the Pune Bench of ITAT had deleted a penalty under section 271(1)(c) based on comparable facts. The judgment highlighted by the Pune Bench emphasized that the penalty for concealment is not applicable when there is no difference between the return income and the assessed income, as in the present case. The voluntary disclosure during the survey, accepted without additions in the assessment, was deemed insufficient to form the basis for imposing the penalty under section 271(1)(c).

Consequently, the impugned order of the Commissioner of Income Tax (Appeals) was set aside, and the penalty under section 271(1)(c) was deleted. The appeal of the assessee was allowed, emphasizing that the penalty was not justified based on the disclosed income during the survey, which was accepted without additions during assessment.

This comprehensive analysis of the judgment provides a detailed overview of the issues involved, the arguments presented, and the legal reasoning behind the decision to delete the penalty under section 271(1)(c) in the given case.