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Facts
The assessee, proprietor of Rupesh Corporation, engaged in job contract/road building, had an addition made to his income based on a survey and a voluntary disclosure of Rs. 31,25,160/-. The assessee paid the tax on this additional income. Subsequently, penalty proceedings were initiated.
Held
The Tribunal held that penalty cannot be levied on an addition made on an estimate basis when the assessee voluntarily disclosed additional income to buy peace. The penalty order was directed to be deleted.
Key Issues
Whether penalty under Section 271(1)(c) can be levied when the addition is based on an estimated voluntary disclosure and not on specific concealment or furnishing of inaccurate particulars?
Sections Cited
143(1), 147, 143(3), 133A, 271(1)(c)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The present penalty appeal filed by the assessee arises out of order dated 25/02/2025 passed by NFAC, Delhi for assessment year 2009-10 on following grounds of appeal:
“(1) On the facts & circumstances and in law the learned NATIONAL DELHI [NFAC(A)] erred in FACELESS APPEAL CENTER confirming
2 ITA 2505/Mum/2025; A.Y. 2009-10 Rupesh D Desai legal heir of late Pravin Desai the Penalty of Rs. 10,62,242/- being penalty imposed by ACIT 27(2) NAVI MUMBAI. (2) On the facts and circumstances and in law and in the interest of justice, the learned {NFAC(A) failed to appreciate that the all the notices were replied and submitted on line. (3) On the facts and circumstances Your Appellant prays that the penalty of RS. 10.62,242/- may be deleted.” Brief facts of the case are as under:
The assessee is an individual and proprietor of Rupesh Corporation and engaged in the business of Job Contract/Road Building etc. 2.1 The assessee is regularly assessed to tax under the Income Tax Act, 1961. The return of income was e filed on 30/09/2009 declaring total income of Rs. 1,87,31,630/-, The return was originally assessed u/s. 143(1) of the Act. Thereafter, notice u/s 147 was issued. The assessment was completed u/s 143(3) r.w.s.147 on 28/03/2015 determining total Income of Rs. 2,18,56,790/-after making addition of Rs. 31,25,160/- being profit element embedded in purchases of Rs.2,50,01,285/- treated as bogus purchases. 2.2 Subsequently, on the basis of survey u/s 133A of the Act carried out in assessee’s case and statement recorded during the survey proceedings, the partner of the assessee firm declared additional income of Rs.31,25,160/-. The assessee paid resultant tax arising on the additional income so declared. 2.3 It is submitted that appeal was preferred against the order passed under section 143(3) 147 on 24/04/2015, which was subsequently, withdrawn by the assessee.
3 ITA 2505/Mum/2025; A.Y. 2009-10 Rupesh D Desai legal heir of late Pravin Desai 2.4 Thereafter penalty proceeding was initiated and 100% penalty was imposed by Ld.AO of Rs. 10,62,242/-on 18/03/2019. Aggrieved by the penalty order passed by the Ld.AO the assessee preferred appeal before the Ld.CIT(A). 3. Before the Ld.CIT(A) the assessee contested the penalty levied. The Ld. CIT(A) dismissed the appeal by observing as under:
“6.2 Contentions of the Appellant: The appellant's contention is refuted as he himself declared the additional income of Rs. 31,25,160/-, for which taxes were duly paid. This acknowledgment constitutes an admission of concealment of income and the furnishing of inaccurate particulars in the original return. The appellant has submitted a lengthy argument about the distinction between concealment and inaccurate particulars, which is not tenable in this case. By voluntarily acknowledging the addition of Rs. 31,25,160/- and paying taxes thereon, the appellant implicitly accepted that he concealed specific income in his original return, thereby engaging in a deliberate misrepresentation of his income. "Concealment of income" refers to an intentional failure to report or disclose income earned during a financial year. This may include not reporting income, inflating deductions, suppressing profits, or misrepresenting facts related to income. "Inaccurate particulars of income" arise when a taxpayer reports income but offers incorrect details such as erroneous amounts or misdescriptions of the income source. 6.3 Delay in Filing Appeal: Furthermore, the appeal was filed after a delay of 1,327 days, with no sufficient justification provided other than the COVID-19 pandemic ("CARONA"). This delay reflects a lack of substantive grounds for contesting the penalty, other than the AO's reference to both limbs under Section 271(1)(c) in the penalty order. Given that the appellant has accepted the quantum addition and duly paid taxes for the same, it implies an acknowledgement of concealed income and inaccurate particulars reported in the original return. As penalty proceedings are consequential in nature, they are not subject to contest.”
4 ITA 2505/Mum/2025; A.Y. 2009-10 Rupesh D Desai legal heir of late Pravin Desai Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.
The Ld.AR at the outset, submitted that, the assessing officer initiated penalty for furnishing inaccurate income thereby concealment of income. He submitted that, the assessee himself offered additional income during the course of the survey and the taxes were duly paid by the assessee on the same. The Ld.AR submitted that, the assessee withdrew the appeal against the quantum addition, establishing bonafieds of the income being offered to tax. The Ld.AR submitted that what was offered by the assessee was on estimate basis without there being sufficient evidence in respect of the same. The Ld.AR submitted that, the penalty levied may be deleted having regard to the fact that, the assessee has not disputed the quantum addition.
4.1 On the contrary, the Ld.DR relied on the orders passed by the authorities below.
We have perused the submissions advance by both sides in the light of record placed before us.
It is evident from the observation of the Ld.AO that the addition was made based on the voluntary discloser made by the assessee on estimate basis. The Ld.AO did not carry out any further investigation there after except for the notices u/s. 133(6) being issued to parties that was returned back. It is noted that 12.5% of the aggregate value of the purchasers were added in the hands of the assessee on estimation. In our opinion, penalty cannot be levied on addition made of estimate basis, unless a 5 ITA 2505/Mum/2025; A.Y. 2009-10 Rupesh D Desai legal heir of late Pravin Desai clear finding was given about the assessee having furnished inaccurate particulars which is one of the the condition precedent u/s.271(1)(c). In fact it is noted that the assessee offered additional income to buy peace uncer such circumstances penalty does not get attracted. Similar observation was made by the Hon’ble Karnatka High Court in case of Ld. CIT(A) vs. Parasmal Baburao Jain reported in 2012 208 taxmann.com 303 and various other decisions of co-ordinate benches of this Tribunal. We therefore, direct the Ld.AO to delete the penalty levied. Accordingly, the grounds raised by the assessee stands allowed. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open court on 31/10/2025