THE PRINCIPAL COMMISSIOENR OF INCOME TAX (CENTRAL), SURAT vs. SHREE SAI DEVELOPERS

Facts

The Revenue has filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2012-13. A survey under Section 133A was conducted on the assessee, Shree Sai Developers, on July 17, 2012. During the survey, the assessee declared unaccounted income of Rs. 1,78,50,000. Subsequently, the assessee filed its return of income on September 28, 2012, including this declared income. The assessment under Section 143(3) was completed on March 30, 2015, accepting the returned income. The Assessing Officer (AO) levied a penalty of Rs. 55,15,650 under Section 271(1)(c) for furnishing inaccurate particulars. The Commissioner of Income Tax (Appeals) deleted the penalty, and the ITAT affirmed this deletion. The Revenue is now appealing this decision.

Held

The Tribunal held that the basis for levying penalty under Section 271(1)(c) is the return of income. If an amount is shown in the return, it cannot be considered as concealment or furnishing of inaccurate particulars. Concealment cannot occur prior to filing the return. The Tribunal clarified that proceedings under Section 271(1)(c) arise when the AO scrutinizes the return and finds additional income. Survey proceedings under Section 133A are for evidence collection and do not, by themselves, create a liability or constitute a statutory proceeding for penalty imposition. The Tribunal distinguished the case of Mak Data Pvt. Ltd. by noting that in the present case, the amount disclosed during the survey was duly included in the original return of income filed after the survey. The High Court affirmed the Tribunal's view, stating that there was no concealment or furnishing of inaccurate particulars as the income was reflected in the original return. The appeal was dismissed.

Key Issues

1. Whether, on the facts and in law, the Appellate Tribunal was right in deleting the penalty of Rs. 55,15,650 levied under Section 271(1)(c) of the Act? The Revenue argued that the penalty is attracted for concealment detected in the course of any proceeding under the Act, including survey proceedings under Section 133A(1), and that the assessee's intention to avoid taxes was clear as diary entries were not initially in the books. The Revenue also contended that Explanation 4(a) to Section 271(1)(c) does not limit the penalty to the difference between assessed and returned income. The assessee argued that since the declared income was included in the return of income, there was no concealment or furnishing of inaccurate particulars. The Tribunal held that concealment or inaccurate particulars can only arise after the return of income is filed and scrutinized, and that survey proceedings are for evidence collection, not statutory proceedings that create liability. The Tribunal distinguished the case of Mak Data Pvt. Ltd. vs. CIT, noting that in this case, the disclosed amount was included in the original return.