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TMI Blog2020 (1) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued u/s 274 and the consequent impugned penalty order dated 23.07.2019, is quite vague and does not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated and/or imposed i.e., whether for concealment particulars of income or furnishing of inaccurate particulars of income. The impugned penalty order being contrary to the judicial principle laid down kindly be quashed. 4. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing." 2. The assessee is an individual and derives income from business and profession. There was a survey under section 133A of the IT Act on 4th March, 2016 at the business premises of the assessee. During the course of survey, a diary was found and impounded marked as Annexure-A Exhibit-1. The said diary contains certain entries of advances given to various persons by the assessee to the tune of Rs. 3 crores. In the statement recorded under section 133A of the IT Act on 5th March, 2016 the assessee admitted the above amount of Rs. 3 crores as his undisclosed income. The assessee thereafter filed his return of income on 17.10.2016 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has declared the income in the return of income, the said Explanation 5A is not applicable for deeming the said surrender/declaration of income in the return of income as concealment of particulars of income. In support of his contention, he has relied upon the decision of Hon'ble Delhi High Court in case of CIT vs. S.A.S. Pharmaceuticals, 335 ITR 259 (Del.) and submitted that the Hon'ble High Court has held that when the assessee has declared the income including the amount surrendered by it during the course of survey, then the assessment framed including the surrendered amount without making any addition would not amount to furnishing of inaccurate particulars of income or concealment of particulars of income. It is necessary that concealment of particulars of income or furnishing inaccurate particulars of income has to be in the income tax return filed by the assessee. Therefore there is no concealment of income as in the return of income filed by the assessee the said income was duly declared. He has also relied upon the following decisions :- AO vs. Shri Harbanslal Sethi In ITA No. 455/JP/2017 for A.Y. 2011-12. Harish Kumar Raimalani vs. ITO In ITA No. 834/JP/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings or in the penalty proceedings. The only question arises for our consideration is when the assessee has declared the said income of Rs. 3 crore in the return of income filed under section 139(1) and the AO has not disturbed the returned income to that extent, then whether it would amount to concealment of particulars of income or furnishing inaccurate particulars of income for attracting provisions of section 271(1)(c) of the Act. We find that the AO while levying the penalty on this amount has given much emphasis to the Explanation 5A to section 271(1)(c) of the Act. The relevant part of the order of the AO passed under section 271(1)(c) in para 7 is as under :- "7. The provisions of section 271(1)(c) of the I.T. Act and relevant explanation is under:- 271(1)(c): If the Assessing Officer in the course of any proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, it may direct that such person shall pay by way of penalty in addition to any tax payable by him, a sum which shall not less than but which shall not exceed three times, the amount of tax sought to be evaded by rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the Act and in the light of above discussion, I hold the assessee is defaulter for concealing particulars of his income and find his to be a fit case for imposition of penalty as provided for in section 271(1)(c) of the Act." Thus it is clear that the AO has levied the penalty by invoking the Explanation 5A to section 271(1)(c) of the Act. At the outset, it is to be noted that the Explanation 5A is relevant only when there is a search and seizure action under section 132 of the Act carried out after 1st June, 2007 and consequently during the course of search and seizure action if assessee is found to be owner of money, bullion, jewellery and other valuables or any income based on the entries in the books of account etc. then notwithstanding that such income is declared by the assessee in the return of income furnished on or after the date of search for the purpose of section 271(1)(c), he shall be deemed to have concealed the particulars of income or furnished inaccurate particulars of income. Therefore, the applicability of Explanation 5A is exclusively in the case of search and seizure action under section 132 of the Act and the said deeming provision cannot be app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income separately. The tax was paid by March 2011 and remained with the department till the time the return was taken up for scrutiny in November, 2014, when the fact of non disclosure of the additional income was brought up by the AO by issuing a show cause notice." " On the basis of the decisions relied upon courts have formed a view that - a. Penalty is not an automatic consequence of addition to income; b. Penalty under section 271(1)(c) of the Act can come into play only when the conditions laid down under that section are satisfied ; c. Concealment of income cannot be a passive situation and it implies that the person concealing the income is hiding, covering up or camouflaging an income ; d. Penalty is not leviable in case where assessee is able to provide a 'bona fide' explanation ; and e. Penalty is not leviable in cases where assessee made errors, under bona fide beliefs. It is not necessary that the claimed bona fide belief must be substantiated with some documentary evidence. The claim of bona fide belief can also be substantiated by circumstantial evidence when possibility of documentary evidence cannot be expected. Since the entire process in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or the Commissioner (Appeals) may direct payment of penalty by the assessee. We are concerned herewith the fundamentality provided in clause (c) of section 271(1) of the Act, which authorizes imposition of penalty when the Assessing Officer is satisfied that the assessee has either; (a) Concealed the particulars of his income; or (b) Furnished inaccurate particulars of such income. 13. It is not the case of furnishing inaccurate particular of income, as in the income-tax return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the income-tax return. The question is whether the particulars of income were concealed by the assessee or not. It would depend upon the issue as to whether this concealment has reference to the income-tax return filed by the assessee, viz., whether concealment is to be found in the income-tax return. 14. We may, first of all, reject the contention of the learned counsel for the revenue relying upon the expression 'in the course of any proceedings under this Act' occurring in sub-section (1) of section 271 of the Act and contending that even during survey when it was found that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is actually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the income-tax return and offered the surrendered amount for the purposes of tax." Thus the Hon'ble High Court has held that the 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. Even if some discrepancies were found during the survey resulting in surrender of income by the assessee, once the assessee has declared the said income in the return of income filed under section 139(1) of the Act, then the penalty cannot be levied on the surmises, conjectures and possibilities that the assessee would not have disclosed the income but for survey. Accordingly, following the earlier decision of this Tribunal as well as the decision of Hon'ble Delhi High Court in case of CIT vs. SAS Pharmaceuticals (supra), the penalty levied by the AO and confirmed by the ld. CIT (Appeals) in respect of the amount of Rs. 3 crore is not sustainable, the same is deleted. As regards the penalty levied by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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