AD IDEAS PVT. LTD.,KOLKATA vs. A.C.I.T., CC - 3(3), KOLKATA

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ITA 1642/KOL/2026Status: DisposedITAT Kolkata03 September 2026AY 2016-201710 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty under Section 271(1)(c) can only be imposed if there is concealment of income or furnishing of inaccurate particulars in the income-tax return itself. Since the disclosed income was included in the return and accepted without variation, the penalty was not sustainable.

What were the facts?

During a survey, the assessee made a voluntary disclosure of income. Subsequently, the assessee filed a revised return including this disclosure, which was accepted by the Assessing Officer without any additions. Despite this, penalty proceedings under Section 271(1)(c) were initiated.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when income is voluntarily disclosed during a survey and subsequently included in the return, which is accepted without addition. Whether concealment or inaccurate particulars must be in the filed return for penalty to apply.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 133A,Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No 1641 & 1642 /KOL/2026 Assessment Year- 2015-16 M/s AD Ideas Pvt. Ltd..............................................................................................Appellant 22, AD Ideas House, Buroshibtala Main Road, 2nd Floor, Sahapur, Kolkata- 700038, [PAN No. AAGCA9620F]

Vs. ACIT, Central Circle-3(3)........................................,..……………....……….Respondent Kolkata- 700107 Appearances by: Rajeeva Kumar, Advocate, appeared on behalf of the Appellant. Kasturi Chakraborty, Sr. DR appeared on behalf of the Respondent. Date of concluding the hearing: July 23 2026 Date of pronouncing the order: September, 03 ,2026 ORDER Per Pradip Kumar Choubey, Judicial Member: Theseare the appeals filed by the assessee is directed against the order dated 20.02.2026 of the office of the National Faceless Appeal Centre (NFAC), Delhi passed under Section 271(1)(c) of the Assessment Year 2015-16 & 2016- 17 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”).

In both the appeals issues are similar and common hence taken up together for disposal by taking 1641/2026 as a lead case.

ITA No.1641/Kol/2026 2. The brief facts of the case of the assessee is that the assessee fled its original return of income under sec.139 of the Act on 30.09.2015 declaring total income of Rs. 31,20,100/-. A survey operation u/s 133A of the Income Tax Act was conducted against the assessee on 30.10.2019 and in consequence to the said operation, the assessee made a disclosure of income accounting to Rs. 45,00,000/- u/s 133A/132(4) of the IT. Act (ie. Rs. 26,26,837/- for the A.Y. 2015- 16 and Rs. 18,73,163/- for AY. 2016-17). Based on the information, the case was re-opened by issuing notice u/s 148 of the Act on 09.08.2021 and in response to the said notice, the assessee filed its return on 10.09.2021 declaring total income of Rs. 57,46.940/-. Notices u/s 143(2) & 14291) was served on 18.09.2021. The assessee has disclosed additional income of Rs. 26,26,837/- vide its disclosure petition dated 10.02.2020. The assessee has included said income in its return filed u/s 148 of the Income Tax Act. Further, it is to be noted that the Ld. AO has accepted that the assessee's return as filed u/s 148 and Assessment has been completed u/s 147/143(3) of the Act Dt. 11.10.2021 determining the same total income of Rs. 57,46,940/- as return filed u/s 148 of the I. T. Act.Consequently, the AO initiated penalty proceeding u/s 271(1)(c) of the Act and penalty amounting to Rs. 8,11,690/- being 100 percent of tax allegedly sought to be evaded, was levied vide order dt. 08.04.2022.

ITA No.1641/Kol/2026 Aggrieved by the said order assessee preferred appeal before the CIT(A) wherein appeal of the assessee has been dismissed.

3.

The Ld. AR challenges the very impugned order by taking following grounds:-

1.

That on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) confirming penalty u/s 271(1)(c) is bad in law and liable to be set aside. 2. That the Ld. CIT(A) erred in confirming penalty of 28,11,690/-u/s 271(1)(c) despite the fact that the assessed income is identical to the returned income and no addition has been made. 3. That the penalty u/s 271(1)(c) is unsustainable as there is neither concealment of income nor furnishing of inaccurate particulars by the appellant. 4. That the Ld. CIT(A) failed to appreciate that income disclosed in return filed u/s 148, which has been accepted without variation, cannot form the basis for levy of penalty. 5. That the Ld. CIT(A) erred in relying on third-party statements. without providing opportunity of cross-examination, violating principles of natural justice and the penalty has been levied mechanically without proper application of mind. 6. That the appellant craves leave to add, alter, amend or withdraw any ground at the time of hearing The Ld. AR has also cited a decision passed by the Hon’ble Delhi High Court in Commissioner of Income Tax vs SAS Pharmaceuticals reported in 2011(11) taxmann.com 207 (Delhi).

Contrary to that Ld. DR supports the impugned order.

4.

Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order we find that assessee is a private limited company engaged in business activities, filed its original income declaring total income of Rs. 31,20,100/-.Survey operation u/s 133A was conducted at the

ITA No.1641/Kol/2026 business premises, pursuant to which the assessee in order to avoid litigation made a voluntarily disclosure of income aggregating to Rs. 45,00,000/- including Rs. 26,26,837/- for the A.Y. 2015-16, based on such disclosure reassessment proceeding were initiated u/s 147 and assessee filed return declaring total income of Rs. 57,46,940/- and his income has been accepted without making any addition. We find that total income as per return u/s 148 has been disclosed by the assessee at Rs. 57,46,940/- and the total assessed income was the same. We have gone through the order passed by the Hon’ble High Court of Delhi as cited above and find that Hon’ble High Court of Delhi on this issue has passed an order which is essential to be reproduced herein below:-

A.K. Sikri. J. This appeal arises out of the order of the Income-tax Appellate Tribunal (the Tribal the Assessing Officer under the provisions of section 271(1Xc) of the Income-tax Act (hereinafter refered te brevity) vide which it has affirmed the order of the CIT(A) deleting the penalty of Rs. 32.39.393 imposed as the Act). It so happened that a survey was carried at the bensiness premises and godown of the respondent-assessee on 6-1-2003. In that survey, discrepancies in cash, stock and renovation were When the assessee was confreered with the of Rs.88.14.57% during the survey. Since the survey was conducted on 6-1-2003, Le.. in the financial year 2002-03 corresponding to the assessment year 2003-04, for that assessment year, the assessee had not filed the income-tax retum and naturally the occasion to file the income-tax return had not matured. When the income-tax return was ultimately filed by the assessee on 2-12-2003, the assessee declared its income Rs. 87.71,580 including the amount surrendered by the assessee itself. The assessment was framed including the surrendered amount While passing the assessment order, the Assessing Officer also decided to initiate penalty proceedings separately on the ground that the assessee had concealed the income. Show-cause notice was given to which the assessee submitted the reply stating that the assessee had itself voluntarily surrendered the amount to avoid litigation and to buy peace of mind and had not concealed any income. This explanation was not digested by the the Assessing Officer, who had the view that the surrender was made only when discrepancies were brought to the notice of the assessee, which were found in cash, stock as well as renovation of the premises done by the assessee. He, thus, was of the opinion that had there been no survey, the assessee would have succeeded in concealing the income and evading tax. On this premise, penalty of Rs. 32.39.393 was imposed.

ITA No.1641/Kol/2026 2. The CIT(A) deleted the penalty on the ground that there was no concealment of income as in the return filed by the assessee, the said income was duly reflected.

3.

The Tribunal has upheld the order of the CIT(A) and dismissed the appeal of the Revenue. It is in this factual context that the instant appeal is preferred by the Revenue, which was admitted on the following substantial questions of law: "(i) Whether ITAT was correct in lane in deleting the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act? (ii) Whether ITAT was correct in law in holding that no concealment was made by the assessee though the assessee had surrendered the amount of Rs. 88,14,676 during survey on account of discrepancies found in cash, stock and difference in renovation?" 4. The facts demonstrated bring forth the position that when the survey was conducted a couple of months before the close of financial year, Le, 6-1-2006, definitely discrepancies were found inasmuch as there was difference in cash, stock as well as renovation expenses are as follows:- “Difference in cash Rs. 22,80,876 Difference in stock Rs. 5,00,200 Renovation difference Rs. 60,33,580 Rs. 88,14,676

5.

The assessee accepted this difference and surrendered the amount. No attempt was made by the assessee even after this surrender to retract therefrom or to explain that there were no such discrepancies. In fact, the position was carried by including this amount even in the income-tax return filed by the assessee. Thus, no doubt, the assessee has surrendered certain income during the course of survey and discrepancies noticed by the survey team would suggest that the assessee was not maintaining proper accounts in respect to cash, stock and renovation expenses, etc. Therefore, there could be a possibility that but for this survey, the discrepancies brought to the notice of the assessee and physical verification of the stock and other accounts would have gone unnoticed and the assessee might have suppressed in the income-tax return as well. However, fact remains that it has disclosed this in the return filed by it. 6. In this context, the question would be as to whether the assessee can be inmposed penalty under section 271(1)(c) of the Act when the would be as to bet this income in the income-tax return filed by it and contends that it has voluntarily declared the same in the regular return filed for the relevant year' 7. To seek an answer, it would be necessary to look into the language of section 271(1)(c) of the Act. This provision reads as under 271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) to (b)

ITA No.1641/Kol/2026 (c)has concealed the particulars of his income or furnished inaccurate particulars of such income." 8. As pointed out above, the contention of the Department is that the intention of the assessee in maintaining false records relating to cash, stock and renovation, etc., was manifest, viz., to conceal the particulars of income and furnished inaccurate particulars of such income. It was contended that but for the said survey in which the assessee was exposed, he would have filed the income-tax return concealing the said income and therefore, provisions of section 271(1)(c) of the Act are clearly attracted. 9. The learned counsel for the assessee, on the other hand, contends that clause (c) of section 271(1) of the Act makes it crystal clear that the act of concealment' or 'furnishing inaccurate particulars' is relatable only in respect of a return being filed. Therefore, in a case where the stage of filing return itself had not been reached, there is no question of invocation of the penal provision of section 271 of the Act, as is the position in the present case. In the present case, the return was filed well within the prescribed time, le, on 2-12-2003 and in the said return the entire amount had been duly shown as income. Therefore, invoking a penal provision merely on the basis of assumption that the assessee 'would not have included the said amount while filing his return is completely erroneous and unsustainable. It is a settled position of law as enunciated in various judicial pronouncements that 'penalty cannot be based on presumptions and surmises It was also argued that the legislative intent in connection with section 271 of the Act is further fortified from the various Explanations provided in the said provision. In this regard, Explanation 4 is relevant wherein it is specifically provided as to what would be included in the expression the amount of tax sought to the evaded, which is the basis for imposition of penalty contemplated under section 271(1)(c) of the Act. The perusal of the said Explanation also clearly establishes the direct nexus between the concealment/inaccurate particular being furnished with the return filed. 10. To bolster this submission, the learned counsel for the assessee took refuge of Explanation 5 and Explanation SA of section 271 of the Act and submitted that these Explanations provide that in cases of search by way of deeming fiction, the liability towards penalty has been prescribed even in cases where the return of income for such year has not been furnished before the said date of search. Therefore, wherever the Legislature intended to impose a penal liability covering a case where return was yet to be filed, a deeming fiction has been consciously provided. In the absence of any such deeming fiction imposing penalty in a case of survey where return is yet to be filed, the penal provision of section 271 of the Act cannot be invoked as the mandatory ingredients thereof are not met at all. 11. He also sought to draw sustenance from the judgment of Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 wherein, inter alia, it has been held that unless the conditions under section 271(1)(c) of the Act exist in a particular case, penalty cannot be imposed and it was further held that 271 of the Act being a penal provision is required to be construed strictly. The following observations made in the said judgment were specifically referred to: "8. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise."

ITA No.1641/Kol/2026 12. After considering the respective submissions of the learned counsel for the parties, we are of the view that the argument of the learned counsel for the assessee has to prevail as it carried substantial weight. It is to be kept in mind that section 271(1)(c) of the Act is a penal provision and such a provision has to be strictly construed. Unless the case falls within the four-comers of the said provision, penalty cannot be imposed. Sub-section (1) of section 271 stipulates certain contingencies on the happening whereof the Assessing Officer 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 (6) 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 in 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 assessee had concealed the particular of his income, it would amount concealment in the course of any proceedings. The words in the course of any proceedings under this Act are prefaced by the satisfaction of the Assessing Officer or the Commissioner of Income-tax (Appeals). When the survey is conducted by a survey team, the question of satisfaction of Assessing Officer or the Commissioner (Appeals) or the Commissioner does not arise. We have to keep in mind that it is the Assessing Officer who initiated the penalty proceedings and directed the payment of penalty. He had not recorded any satisfaction during the course of survey. Decision to initiate penalty proceedings was taken while making assessment order. It is, thus, obvious that the expression 'in the course of any proceedings under this Act' cannot have the reference to survey proceedings, in this case. 15. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particular 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 203/13 Taxman 328 and in Reliance Petroproducts (P.) Ltd. (supra), 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 SA to section 271 of the Act as contended by the learned counsel for the respondent. 16. 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 imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey, may be. it would have not disclosed the income but for the said survey. However, there cannot be any

ITA No.1641/Kol/2026 penalty only on surmises, conjectures and possibilities. Section 271(1)(c) of the Act has to be construed strictly. Unless it is found that 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. 17. We, thus, answer the questions as formulated above, in favour of the assessee and against the revenue finding no fault with the decisions of the CIT(A) as well as the Tribunal. As a result, this appeal is dismissed.

5.

In view of the discussion made above and considering the judgment of the Delhi High Court, we find substance in the arguments of the assessee that penalty proceeding is bad in law, accordingly the penalty imposed is hereby deleted.

Appeal of the assessee is allowed.

6.The issue involves in this case are similar to the issue raised in ITA No. 1642/2026,hence the findings given in ITA No. 1641/2026 is applicable in ITA No. 1642/2026 as Mutatis Mutandis.

In the result, both the appeals are hereby allowed.

Kolkata, the 3rd September , 2026.

Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member

DC 8

ITA No.1641/Kol/2026 Dated: 03. 09.2026.

Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Manish Bhoi Deputy Registrar Kolkata Benches

ITA No.1641/Kol/2026

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