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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-12, Ahmedabad, dated 12/07/2018 arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2014-2015.
The only issue raised by the Revenue is that the learned CIT (A) erred in deleting the penalty imposed under section 271(1)(c) of the Act.
The facts in brief are that the assessee is a partnership firm. During the year under consideration a survey under section 133A dated 25-03-2014 was carried out in case of “Mangala Group” in which assessee firm was also covered. During the survey proceeding one of the partner of the assessee firm namely Shri Manish K Patel while recording statement under section 131(1A) admitted to offer an undisclosed income of Rs. 10 Crores. In Consequence the assessee firm in its return of income disclosed the amount of undisclosed income as accepted during survey operation. The AO accepted the return income during assessment proceeding under section 143(3) of the Act. However, the AO initiated penalty proceeding under section 271(1)(c) of the Act and issued notice dated 23-12-2016.
3.1 The assessee in response to the notice submitted that it has incorporated all the income in its return of income which was accepted in assessment proceeding. Therefore the question of concealment of income or furnishing inaccurate particulars of income does not arise. As such, to invoke the provision of section 271(1)(c) the AO must satisfy himself during any proceeding under this Act that income was concealed or inaccurate particular has been furnished.
3.2 However, the AO rejected the explanation and contention advanced by the assessee and held that the undisclosed income of Rs. 10 Crore was only offered after the same was detected during the course of survey operation. If survey would not have been carried out then the assessee would not have offered the impugned income. The AO further held that in view of Hon’ble Supreme Court judgment in case of Dharmendra Textile Processors for levying penalty means-rea need not be proved. Accordingly the AO imposed penalty amounting to Rs. 3,39,78,900/- equivalent to 100% of tax sought to be evaded.
3.3 The assessee carried the issue before the learned CIT (A) who deleted the penalty imposed by the AO by observing as under: 5.1 The penalty order is perused and the appellant's submission is considered. The undisputed fact of the present case are that during the course of survey proceedings, partner of the appellant firm has admitted undisclosed income of Rs 10 crore for the still ongoing FY (rt AY 2014-15) and such amount was duly offered as income in return of income filed for current assessment year 2014- 15. It is observed that on the date of survey proceedings, due date of filing return of income has not expired and income shown in original income is assessed by AO as such in assessment order passed u/s 143(3). The AO has not made any addition in assessment proceedings and has accepted the fact that appellant has provided necessary explanation as were called in assessment proceedings. The AO has levied penalty u/s 271(l)(c) mainly on the premise that had survey been not carried out in case of appellant firm, it would not have disclosed such amount as income and that not showing income in regular books of account as on the date of survey clearly means that appellant has furnished inaccurate particulars of income. However, this argument of appellant cannot be accepted because on the date of survey, complete books of accounts were not prepared and even financial year has not ended. The reason for imposing penalty is nothing but a conjecture. The AO has not disputed the fact that amount owned up as undisclosed income was duly shown in return of income. Thus there is neither a case of concealment of particulars income nor a case of furnishing inaccurate particulars of income. It is observed that Explanation 1 to section 271(l)(c) of the Act may be applicable only when there is variation in returned income and assessed income meaning thereby that penalty may lie when AO has made addition or disallowance in assessment order which is not the case here. Even Explanation 4 to section 271(l)(c) of the Act stipulates that penalty may leviable on difference between assessed income and assessed income reduced by additions made in assessment order. As there is no variation in returned income and assessed income, explanations referred supra are not applicable in the present case.
Being aggrieved the order of the learned CIT (A) the Revenue is in appeal before us.
Both the learned DR and the learned AR before us vehemently supported the order of the authorities below as favourable to them.
We have heard the rival contention of both the parties and perused the material available on records. The fact of the case has already been elaborated in the previous paragraph. Hence we are not inclined to repeat the same for the sake of brevity. The only issue for our adjudication is that whether the learned CIT (A) was justified in deleting the penalty imposed under section 271(1)(c) of the Act in the given facts and circumstances. Before going into the matter on hand we think appropriate to analyze the provision of section 271(1)(c) of the Act which reads as under:
79271. (1) If the 80[Assessing] Officer or the 81[***] 82[Commissioner (Appeals)] 83[or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person— (a) XXXXXXXXXXXXXXXXXXXXXXX (b) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXor (c) has concealed the particulars of his income or 88[* * *] furnished inaccurate particulars of 89[such income, or]90 91[(d) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX he may direct that such person shall pay by way of penalty,— (i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX92[* * *] 93[(ii) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 96[(iii) in the cases referred to in clause (c) 97[or clause (d)], 98[in addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed 99[three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his income 1[or fringe benefits] or the furnishing of inaccurate particulars of such income 1[or fringe benefits]. 2[* * *] 3[Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,— (A) such person fails to offer an explanation or offers an explanation which is found by the 4[Assessing] Officer or the 5[***] 6[Commissioner (Appeals)] 7[or the Commissioner] to be false, or (B) such person offers an explanation which he is not able to substantiate 8[and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
On perusal of the above provision what is inferred is that, if the AO or the learned CIT (A) during any proceedings under this Act is satisfied that the assessee has concealed or furnish inaccurate particular of income then he/she may impose penalty. The provision of explanation-1 attached to the section also cover the situation; (a) where the assessee failed to offer an explanation or explanation offered found to be false with regard to any facts or material in the computation of income, or (b) where the assessee fails to substantiate the explanation offered and also failed to prove that such explanation is bona fide and has disclosed all the material facts related to the same, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
7.2 Now in view of the above discussion we proceed to adjudicate the issue on hand in the given facts and circumstances. We find that when the survey proceeding dated 25-0302014 was conducted at the assessee premises the financial year was not ended and also there was plenty of time for filing the return of income under the provision of section 139(1) of the Act. Subsequently the assessee incorporated the amount of income which was admitted during survey in the computation of income. Further the AO also accepted the returned income while finalizing assessment proceeding under section 143(3) dated 23-12-2016. In other words the AO was satisfied for the income disclosed in the computation of income. Thus the AO was not justified in invoking the penalty proceeding for concealment of income or furnishing inaccurate particulars of income for the reason that there was no disallowance/ addition to the total income of the assessee during the assessment proceedings. The presumption of the AO that the assessee would not have disclosed the income in return in future is mere a suspicion having no any base. The assessee cannot be visited with penalty only on the basis of suspicion or presumption. Therefore we do not find any reason to interfere in order of the learned CIT (A). Hence, the ground of appeal of the Revenue is dismissed.
In the result the appeal filed by the Revenue is dismissed.
Order pronounced in the Court on 02/03/2021 at Ahmedabad.