SMT. SANTOSH RAGHUVANSHI,AJMER vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, AJMER

In this appeal, the assessee is basically aggrieved for levy of penalty of Rs. 67,100/- U/s 271(1)(c) of the Act.

2 ITA 927/JP/2018 Smt. Santosh Raghuvanshi Vs DCIT 3. Rival contentions have been heard and record perused. The facts in brief are that an income tax survey in terms of 133A was held on 15/10/2010 on assessee premises and during the course of survey proceedings, the assessee due to non completion of books of accounts had surrendered, a sun of Rs. 25,48,246/- for excess stock. The assessee filed his return of income for the A.Y. 2011-12 on 29/09/2011 declaring total income of Rs. 24,65,220/-.

The assessment was made by the A.O. after making addition of Rs. 12,98,246/-. During the course of appeal out of quantum addition of Rs. 12,98,246/- addition of Rs. 10,81,373/- was deleted by the ld. CIT(A), Ajmer vide appeal No. 416/2013-14 dated 01/12/2015.

The A.O. levied penalty against the addition of Rs. 2,16,873/- upheld by the ld. CIT(A) in quantum appeal, assessee filed appeal before the ld. CIT(A) against the penalty order. The ld. CIT(A) has rejected the assessee’s appeal for levy of penalty U/s 271(1)(c) vide his order for appeal No. 92/2017-18 dated 17/05/2018 stated as per para 4.3 that “I have gone through the penalty order, statement of facts, grounds of appeal and written submission carefully. It is seen that an addition of Rs. 12,98,246/- (Rs. 2548246.00 – Rs. 12,50,000.00) was 3 ITA 927/JP/2018 Smt. Santosh Raghuvanshi Vs DCIT made by the A.O. on account of excess stock found during the course of survey, which was not disclosed by the assessee while filing return of income. The addition was reduced to Rs. 2,16,872/- vide CIT(A), Ajmer order dated 01/05/2015. Thus, it is clear that the assessee had not disclosed unexplained investment of Rs. 2,16,873/- made by her in the stock. Therefore, the penalty of Rs. 67,100/- levied by the A.O. in respect of the addition of Rs. 2,16,873/- made on account of the unexplained investment made in the stock, is hereby confirmed.”

I have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that during the course of assessment proceedings, the A.O. has not given the finding that the working given by the assessee was wrong or inaccurate. During the course of assessment proceedings also, the A.O. has not been able to prove that the evidence submitted by the assessee for working out the valuation of the stock, found during survey, was false or fabricated. It is also clear from the record that the assessee has not challenged the quantity of stock found during the course of survey. She has merely filed a revised valuation of the stock found during the survey which is based on the purchase bills filed by the assessee. All these clearly states that the assessee had not malafide intention to conceal the 4 ITA 927/JP/2018 Smt. Santosh Raghuvanshi Vs DCIT particulars of income. The assessee had merely to purchase mental peace had stated a higher lump sum figure without reconciliation towards excess stock for completion of survey proceedings. Later on, after proper reconciliation the actual surrender towards excess stock was made in his return of income.

It is settled position in law that the assessment proceedings and penalty proceedings are two independent and separate proceedings. Therefore, mere addition to the declared income during assessment proceedings would not ipso facto lead to an imposition of penalty upon the party. The imposition of penalty U/s 271(1)(c) of the Act can only take place where there has been either concealment of income or filing of inaccurate particulars of income on the part of the respondent and the explanation is not found satisfactory.

Furthermore, where the assessee commits any “Bonafide Mistake” than “Deliberate Mistake” and the bonafide mistake as committed is also based on expert advice, it cannot be alleged as “Concealment” or “Inaccurate Particulars” and no penalty can be levied U/s 271(1)(c) of the Act.

In the result appeal of the assessee is allowed.