GAYATRI DEVELOPERS,VADODARA vs. THE ACIT, CIRCLE-1(3), VADODARA

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1913/Ahd/2026 (Assessment Year: 2012-13) M/s. Gayatri Developers, ACIT, Vs. 255, Kadam Nagar, Circle 1(3), New Sama Road, Vadodara, Vadodara Gujarat-390024 [PAN : AAIFG 5483 F] (Appellant) .. (Respondent) Appellant represented by : Ms. Urvashi Shodhan, AR Respondent represented by: Shri Deependra Kumar, Sr DR Date of Hearing 22.07.2026 Date of Pronouncement 23.07.2026

O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal has been filed by the assessee against the order dated 22.02.2024 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2012-13.

“1. Ld. CIT (A) (NFAC) erred in law and on facts in confirming penalty levied by AO of Rs. 96,36,165/- invoking provisions of s. 271(1)(c) of the Act overlooking the fact that the appellant has neither concealed income nor furnished inaccurate particulars of income. 2. Ld. CIT (A) (NFAC) erroneously noted that the appellant failed to file any submissions in response to notice u/s 250 of the Act ignoring detailed reply dated 07.06.2023 dismissed the appeal without adjudicating various grounds raised by the appellant challenging levy of penalty. 3. Ld. CIT (A) (NFAC) erred in law and on facts in confirming penalty levied by AO on Rs. 3,00,00,000/- declared during survey proceedings offered in

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 2– the original return by the appellant accepted by Revenue without making any addition does not tantamount to concealment of income.

“In this case, the assessee e-filed return of income on 13.09.2012 declaring total income at Rs. 3,40,17,804/- Assessment proceedings u/s. 143(3) were completed on 19.03.2015 and thereby the total income was assessed at Rs.3,52,02,800/-. In this case, a survey u/s. 133A of Income-tax Act, 1961 was carried out at the business premises of the assessee on 10.01.2012. The assessee made total disclosure of Rs. 3,00,00,000/-which consisted of unaccounted investment in stock to the tune of Rs. 1,50,00,000/-, Rs. 1,00,00,000/- on account of cash balance lying in the custody of partner and Rs. 50,00,000/- on account of others. During the assessment proceedings. addition of Rs. 11,85,000/- was made on an estimated basis. Penalty proceedings u/s. 271(1)(c) of the Income-tax Act, 1961, were initiated separately. 2. Notice u/s.274 r.w.s. 271(1)(c) dated 19.03.2015 was issued and duly served upon the assessee to show-cause as to why penalty u/s. 271(1)(c) should not be imposed. In response to show cause notice issued, the assessee has submitted its reply vide letter dated 27.05.2015 and requested to keep the penalty proceedings in abeyance till disposal of the first appeal. Considering the request of the assessee, penalty proceedings were kept in abeyance.

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 3–

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 4– any explanation, or offers an explanation which is found to be false or which he is not able to substantiate and fails to prove its bona fide and that all the facts relating thereto and material to the computation of his/her total income have been disclosed, then the amount added or disallowed shall be deemed to represent the income in respect of which particulars have been concealed or furnished inaccurate. Therefore, I am satisfied that the assessee has concealed its income to the extent of Rs.3,00,00,000 and furnished inaccurate particulars of income to the extent of Rs.11,85,000 and hence this is a fit case for levy of penalty u/s. 271(1)(c) of the Act. Further, it is reasonably concluded that the assessee could not substantiate its case or furnish any satisfactory explanation. The assessee failed to bring any appreciable material on record to rebut the charge of concealing the particulars of income and furnishing inaccurate particulars of income to the tune of Rs. 3,11,85,000/- [11,85,000 + 3,00,00,000]. I am satisfied that in this case, the assessee has concealed the income and furnished inaccurate particulars of income thereby committing a default punishable u/s. 271(1)(c) of the Income-tax Act, 1961. Therefore, this is a fit case for the levy of penalty under u/s. 271(1)(c) of the Income-tax Act, 1961 and the same is being computed as under.- (a) Amount of income on which tax is sought to be evaded, as discussed above. Rs.3.11,85.000/- (b) Amount of tax sought to be evaded Rs.96,36,165/- (c) Minimum Penalty leviable u/s. 271(1)(c) @ 100% thereof Rs.96,36,165/- (d) Maximum Penalty leviable u/s. 271(1)(c) @ 300% thereof Rs.2,89,08,495/-

A minimum penalty of Rs. 96,36,165/- is hereby levied.”

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 5– assessed income, no penalty is leviable on Rs.3 crores. Further, Ld. AR submitted that the Assessing Officer made an addition of Rs.11,85,000/- on account of re-working of ratio of the land cost to work-in-progress on estimate basis and hence does not call for levy of penalty u/s 271(1)(c) of the Act on account of concealment of particulars nor furnishing of inaccurate particulars.

8.1 In this case, a survey was conducted on 10.01.2012 at the office and business premises of the assessee. The assessee had disclosed Rs.1,50,00,000/- on account of difference in value of work-in-progress as on the date of survey, Rs.1,00,00,000/- on account of cash balance and Rs.50,00,000/- on account of other counts. Subsequently, the assessee filed original return of income on 30.09.2012 for the AY 2012-13, affirming the undisclosed income of Rs.3,00,00,000/- to the regular business income of Rs.40,17,804/-. The return has been scrutinized and the Assessing Officer made addition of Rs.11,85,000/-

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 6– on account of difference of work-in-progress to percentage of land pertaining to AY 2011-12 to 2013-14. We have gone through the Explanation 3 and 4 to Section 271(1)(c) relied upon by the Revenue while levying penalty. The relevant portion of the Section is reproduced hereunder for the sake of reference:-

“271. (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— …… …….

[Explanation 3.—Where any person [***] fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the [***] Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.] Explanation 4.—For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded",—

[(a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income;] (b) in any case to which Explanation 3 applies, means the tax on the total income assessed [as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148]; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 7– such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished.]”

8.2 With regard to the levy of penalty on the quantum addition of Rs.11,85,000/-, we hold that the argument of the learned counsel for the assessee has to prevail as it carried substantial weight. The Hon’ble High Court have time and again held 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-corners of the said provision, penalty cannot be imposed. Sub-section (1) of Section 271 stipulates certain contingencies on the happening whereof the Assessing Officer can direct payment of penalty by the assessee. In this case, on the issue of estimation of the undisclosed amount of Rs.11,85,000/- neither falls (a) Concealed the particulars of his income; or (b) Furnished inaccurate particulars of such income. It is not the case of furnishing inaccurate particular of income, as the amount has been determined by the Assessing Officer by recomputing the available figures disclosed in the return itself.

8.3 With regard to the levy of penalty on the non-addition of Rs.3,00,00,000/- by the Assessing Officer, but on the income declared in the survey and disclosed by the assessee in the return, we hold that it is the case neither 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 nor income concealed by the assessee as no concealment was found based on the ITR filed by the assessee.

8.4 The Hon’ble Gujarat High Court, while dealing with the similar issue in the case of PCIT Vs. Shree Sai Developers in Tax Appeal No. 498 of 2019 wherein the Hon’ble Court relied on another judgment of High Court in the case of PCIT Vs. Valibhai Khanbhai Mankad in Tax Appeal No. 445 of 2015 decided on 07.09.2015, has held as under:- “……. ……..

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 8– 6.6 We may also refer to one decision of this High Court in the case of Principal Commissioner of Income Tax vs. Valibhai Khanbhai Mankad, Tax Appeal No.445 of 2015 decided on 7th September, 2015. In the said Assessing Officer had made disallowances and additions under Sub-section (3) of Section 143 of the Act. The Assessing Officer also initiated penalty proceedings under Section 271(1)(c) of the Act. The very same argument was canvassed before the coordinate Bench that the penalty had been levied by the Assessing Officer as the assessee had shown additional income after the same was detected during the course of survey action under Section 133A of the Act. It was argued before the coordinate Bench that the Tribunal had failed to appreciate the fact that the assessee had filed his return beyond the period prescribed under Sub-section (1) of Section 139 of the Act. It was also 2019 pointed out that the assessee had filed the return of income consequent to the survey under Section 133A of the Act and thereby could be said to have furnished inaccurate particulars of income. This Court negatived the contention referred to above and ultimately held as under: "5. From the findings recorded by the Tribunal, it is evident that the factum of deletion of addition in respect of non-deduction of tax by the assessee was not controverted by the revenue. The Tribunal has further found that the penalty had been levied on the amount which was reflected in the original return as income. That it was an undisputed fact that the assessee had declared this income in his original return of income, although it was a belated return. The Tribunal was of the view that as per the provisions of section 271(1)(c) of the Act, penalty can be imposed if the assessee had concealed the particulars of income or has furnished inaccurate particulars of such income. That in the present case, there was no dispute with regard to the fact that the particulars of income were reflected in the return of income. Moreover, it was not the case of the revenue that the returns of income filed were invalid and in fact, the Assessing Officer had proceeded on the basis of the return filed by the assessee and particulars furnished therein. From the findings recorded by the Tribunal, it is evident that the Tribunal has found as a matter of fact that there was no concealment of particulars of income on the part of the respondent assessee and in fact, the Assessing Officer had proceeded on the basis of the return filed by the assessee and particulars furnished therein. Under the circumstances, in the absence of any concealment of the particulars of income or furnishing of inaccurate particulars of income on the part of the assessee, no infirmity can be found in the impugned order passed by the Tribunal in confirming the order passed by the Commissioner (Appeals) in deleting the penalty under section 271(1)(c) of the Act. In the absence of any infirmity in the impugned

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 9– order passed by the Tribunal, it is not possible to state that the impugned order gives rise to any question of law much less, any substantial question of law so as to warrant interference. The appeal is accordingly dismissed."

8.5 Similarly, Hon’ble High Court of Delhi in the case of CIT Vs. SAS Pharmaceuticals, 335 ITR 259, has held as under:-

“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 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.”

8.6 The instant case has striking similarities in the sense that in this case also a survey has been conducted on 10.01.2012, the assessee has declared an amount of Rs.3,00,00,000/- during the survey and the same amount has been offered to tax in the return filed subsequent to the survey for the assessment year in question, to that extent the assessee made complete disclosure and offered the surrendered amount for taxation. Perceptibly, no penalty can be imposed unless the conditions postulated in the said provisions are duly and decidedly satisfied.

8.7 Ergo, in our considered opinion, it is not the case of concealment of income or furnishing inaccurate particular of income, as in the income tax

ITA No. 1913/Ahd/2026 Gayatri Developers Vs. ACIT Asst.Year : 2012-13 - 10– return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the income tax return. Hence, no penalty u/s 271(1)(c) is leviable.

The order pronounced in the open Court on 23.07.2026

Sd/- Sd/-

(RAHUL CHAUDHARY) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 23.07.2026 **btk आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent. 2. संबंिधतआयकरआयु�/ Concerned CIT 3. 4. आयकरआयु�(अपील) /The CIT(A)- 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड�फाईल /Guard file. देशानुसार/ BY ORDER, True Copy

सहायकपंजीकार (Dy./Asstt. Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad