9911796707
TMI Blog2014 (8) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessee during the course of survey operations conducted by the department at his business premises on 2.8.2007 u/s 133A of the Act. During the course of survey operations, certain incriminating documents were found and one of the partners of the assessee firm Shri Jayantibhai D Shah declared additional income of Rs. 1,55,00,000/- in respect of following items : 1.Unaccouned cash loan advanced Rs.70,00,000 2.Unaccounted expenditure on account of purchase of plot Rs.35,00,000 3.Unaccouned expenses incurred to remove slum dwellers Rs.30,00,000 4.Unacounted purchase of building material Rs.7,25,000 5.To cover up the discrepancies Rs.12,75,000 Total Rs.1,55,00,000 4. At that point of time the Assessee had not filed the return of income for the year ended on 31.3.2007 i.e. assessment year 2007-08, even though the previous year had already ended. Hence the Assessee included the above said amount of Rs. 1.55 crores in the total income returned by it for the above said assessment year. The income so declared by the Assessee was accepted by the AO in the assessment proceedings. 5. The AO initiated penalty proceedings u/s 271(1)(c) of the Act, as he was of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a Statutory proceeding, since it is only one of the methodologies provided in the Act to collect evidences against the Assessee. It was also submitted that the AO could not have arrived at satisfaction during the survey operations, since it was not a proceeding. It was further submitted that the initiation of penalty proceedings would depend upon the income declared in the return of income filed by an assessee. It was also submitted that the penalty imposed u/s 271(1)(c) is computed on the amount of tax sought to be evaded. The expression "amount of tax sought to be evaded" is defined in Explanation 4 u/s 271 of the Act. It was submitted that, since the Assessee has included the amount declared during the course of survey in its return of income, the assessed income and the returned income being the same in respect of Rs. 1.05 crores referred above, the computation provision provided in Explanation 4 fails. It was submitted that the penalty cannot be levied if the computation provision fails. It was further submitted that the Assessee has furnished details relating to the Rs. 1.05 crores in its return of income and hence it cannot be said that the Assessee has concealed the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed an income of Rs. 1.5 crore for A.Y. 2007-08 in response to the survey operations. All the taxes on disclosed income have been paid before the date of audit and the income declared has been appropriately accounted. It is also relevant to point out that the A.O has not disturbed the returned income so far as the disclosure is concerned. It is a well settled legal position that the default of concealment of income or furnishing inaccurate particulars of income is committed only at the time of filing of return of income except in certain specific situations provided under the Act. The situations where concealment of income or furnishing inaccurate particulars of income, may be deemed are in the cases where search and seizure operations have been carried out and provisions of either Explanation 5 to section 271(1)(c) or section 271AAA are applicable. Another such situation is where Explanation 3 to section 271(1)(c) is applicable. Undisputedly, no such situation exists in the appellant's case by which the income disclosed in the return of income filed before the due date u/s. 139(1) can be deemed to be income in respect of which particulars have been concealed or Inaccurate part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to the impugned addition, viz., advancing of cash loans as well as purchase of land, were unearthed by the department during the course of survey operations only. He further submitted that the survey operations were conducted on 02-08-2007 and on that date the previous year relating to the assessment year 2007-08 has already ended and it was a fact that the assessee had not recorded the transactions relating to the above said items in its books of account. Accordingly, the Ld D.R contended that the assessee was constrained to declare the income relating to these investments only as a consequence of survey operations and the assessee would not have declared the above said items in its return of income, if the survey operations had not taken place. The Ld D.R submitted that the incriminating documents unearthed during the course of survey operations have also established the fact about the concealment of income. Accordingly he submitted that the concealment cannot be made good by simply declaring those items in the return of income filed subsequently. 10. On the contrary, the Ld A.R placed strong reliance on the decision rendered by Hon'ble Supreme Court in the case of Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after detection by the survey team. Accordingly, he contended that the penalty levied by the AO should be sustained. 12. We have heard the rival contentions and carefully perused the record. There is no dispute with regard to the fact that the assessee had not accounted the transactions relating to Cash loan and purchase of land in its books of account relating to the assessment year 2007-08 by the time the survey operations were conducted, i.e. on 02-08-2007. There is also no dispute that the books of account relating to the AY 2007-08 were incomplete. Since the AO had accepted this fact, he did not levy penalty in respect of three other items aggregating to Rs. 50.00 lakhs. Since the books of account were incomplete, it is the contention of the assessee that it cannot be presumed that the assessee would not have accounted the income relating to cash loan and purchase of land. It was further submitted that the assessee has included the amount of Rs. 1.55 crores declared during the course of survey operation in its return of income filed for AY 2007-08 and paid the tax thereon. It was also submitted that the AO has accepted the said return of income in so far as it relates to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under this Act' cannot have the reference to survey proceedings, in this case. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be in the income-tax return filed by it. There is sufficient indication of this in the judgment of this Court in the case of CIT v. Mohan Das Hassa Nand [1983] 141 ITR 203(Delhi) in Reliance Petroproducts (P.) Ltd. (2010) 322 ITR 158 (SC), the Supreme Court has clinched this aspect, viz., the assessee can furnish the particulars of income in his return and everything would depend upon the income-tax return filed by the assessee. This view gets supported by Explanation 4 as well as Explanations 5 and 5A to section 271 of the Act as contended by the learned counsel for the respondent. No doubt, the discrepancies were found during the survey. This has yielded income from the assessee in the form of amount surrendered by the assessee. Presently, we are not concerned with the assessment of income, but the moot question is to whether this would attract penalty upon the assessee under the provisions of section 271(1)(c) of the Act. Obviously, no penalty can be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. 16. In the instant case, the income surrendered during the course of survey has been duly offered in the return of income filed by the assessee. It is also a fact that the assessee has accounted for the Cash loan and land value aggregating to Rs. 1.05 crores in the books of account by making corresponding credit to the Capital Account, which fact proves that both the items cannot be said to have been omitted to be accounted due to incomplete nature of books of accounts. The entry passed by the assessee clearly shows that the assessee has used its unaccounted money only to give cash loans and to purchase the land. Hence, as contended by Ld D.R, there is a possibility that the assessee might not have disclosed those items, had the survey operation was not there. 17. However, the Hon'ble Delhi High Court has expressed the view that the penalty cannot be imposed on surmises, conjectures and possibilities. It has held that Section 271(1)(c) of the Act has to be construed strictly. It has also held that unless it is found that there is actually a concealment or non-disclosure of particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X
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