S. VEERAREDDY GARDENS, PATANCHERU,HYDERABAD vs. ITO, SANGAREDDY, SANGA REDDY

In this appeal, the assessee has raised several grounds however, the crux of the issue is that the Ld. CIT(A) has erred in confirming the penalty levied by the Ld. A.O. U/s. 271(1)(c) of the Act.

Brief facts of the case are that the assessee is a partnership firm engaged in the business of running Function Hall, earning income from letting out the function hall. A survey U/s. 133A of the Act was conducted at the business premises of the assessee on 21/01/2015 and it was noticed that though the assessee had started its business in the month of November, 2012, the assessee had neither filed the return of income within the due date as provided U/s. 139(1) of the Act nor maintained its books of account with respect to the running of the Function Hall for the relevant assessment year 2013-14. During the course of survey proceedings, from the rough books maintained by the assessee, the gross income of the assessee for the relevant assessment year was estimated at Rs. 19 lakhs and after deducting the expenditure related to the business amounting to Rs. 10,97,000/- the net income of the assessee was arrived at Rs. 8,03,000/-. Thereafter, the assessee filed its return of income for the relevant AY 2013-14 belatedly within the stipulated period U/s. 139(4) of the Act on 31/03/2015 admitting the total income of Rs. 8,03,000/-. Subsequently, the case was selected for scrutiny and the Ld. A.O. completed the assessment U/s. 143(3) of the Act by accepting the income returned by the assessee vide order dated 26/05/2015, however he invoked penal provisions U/s. 271(1)(c) of the Act and levied penalty of Rs. 2,50,000/- being 100% of tax sought to be evaded vide order dated 30.11.2015 by observing as under: -

On appeal, the Ld. CIT (A) upheld the order of the Ld. AO by agreeing with his view that the assessee had concealed its income by not filing the return of income within the due date U/s. 139(1) of the Act and even before the date of the survey.

From the facts of the case it is apparent that the main reasons for levying the penalty U/s. 271(1)(c) of the Act was that the assessee had not filed its return of income within the due date provided U/s. 139(1) of the Act and subsequently during the survey proceedings on 21/01/2015 the Revenue had unearthed the undisclosed income of the assessee at Rs. 8,03,000/- for the relevant assessment year 2013-2014.

At the outset, I do not find any merit in orders of the Ld. Revenue Authorities for having invoked the penal provision U/s. 271(1)(c) and further sustaining the penalty levied on the assessee. The provisions of section 139(4) of the Act permits the assessee to file belated return at any time before the end of the relevant assessment year or before the completion of the assessment whichever is earlier in case for any reason if the assessee has omitted to file the return of income within the stipulated period U/s. 139(1) of the Act. From the facts of the case it is apparent that the assessee has filed the return of income within the period specified U/s. 139(4) of the Act and in that return the assessee had disclosed the entire net income which was computed and admitted during the course of the scrutiny proceedings though it was subsequent

In the result, appeal of the assessee is allowed.