PRADEEP SWEETS PVT LTD,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, PUNE

आदेश / ORDER

PER VIKAS AWASTHY, JM :

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals) – 6, Pune dated 21.12.2016 for the assessment year 2012-13 vide which the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act”) has been upheld.

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lacs for the impugned assessment year. The assessee thereafter, in

its return of income declared the additional income disclosed during

survey action. The Assessing Officer (AO) while framing assessment

u/s 143(3) of the Act initiated penalty proceedings u/s 271(1)(c) of the

Act in respect of the aforesaid income disclosed in the return of

income. The ld.A.R. submitted that the Hon’ble Delhi High Court in

the case of CIT Vs. S.A.S. Pharmaceuticals reported as 335 ITR 259

has held that no penalty u/s 271(1)(c) for concealment is leviable

where the assessee in his return of income has declared the income

disclosed during survey action. Concealment of particulars of income

or furnishing of inaccurate particulars of income by the assessee has

to be in the income tax return. Since, the assessee has disclosed the

additional income in return, there is no question of concealment of

income or furnishing inaccurate particulars of income. The Pune

Bench of Tribunal in various cases has been consistently taking a

similar view and has deleted penalty levied u/s 271(1)(c) on such

disclosures made in return of income after survey action. To further

buttress his submissions, ld.A.R. placed reliance on the following

decisions :

i. Ashok S. Agarwal Vs. DCIT, Circle-8, Pune (ITA No.1227/PUN/2016).

ii. Nandkishore Tulsidas Kathore Vs. ACIT Central, Cir 1, Nasik (ITA No.2174 to 2180/PUN/2014).

2.1. The ld.A.R. further contended that the penalty levied u/s

271(1)(c) is liable to be knocked down on account of different charges

of Sec.271(1)(c) being invoked at the time of recording satisfaction and

levy of penalty. The ld.A.R. pointed that at the time of recording

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satisfaction for initiating penalty proceedings u/s 271(1)(c), the AO has

mentioned concealment of income. However, while passing the order

levying penalty, the AO has mentioned that the penalty is levied for

furnishing inaccurate particulars of income. The manner in which

penalty has been levied is contrary to the law laid down by the Hon’ble

jurisdictional High Court in the case of CIT Vs. Samson Perinchery

reported as (2017) 392 ITR 4 (Bom).

Department vehemently defended the impugned order confirming levy

of penalty u/s 271(1)(c) of the Act.

rival sides and have perused the orders of authorities below.

income declared by assessee in the return of income filed consequent

to survey action. During survey, certain incriminating documents

were found. The assessee disclosed additional income of Rs.45 lacs on

account of unaccounted sales during the impugned assessment year.

The additional income disclosed during survey was offered to tax by

the assessee in return of income.

assessee has concealed particulars of his income or has furnished

inaccurate particulars of income in the return. Penalty u/s 271(1)(c)

of the Act is not the consequence of additional income declared during

survey. In the instant case, the AO during assessment proceedings

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has accepted the return filed by the assessee with the additional

income of Rs.45 lacs disclosed during survey action. Thus, there was

no concealment of income or furnishing of inaccurate particulars of

income in the return qua Rs.45 lacs. The Hon’ble Bombay High Court

in the case of CIT Vs. S.A.S. Pharmaceuticals (supra) while dealing

with a similar issue in a very explicit manner has explained the

meaning of expression “in the course of any proceedings under this

Act” used in Section 271(1)(c) of the Act. The Hon’ble Court deleted

the penalty levied u/s 271(1)(c) on the disclosure made during survey

and offered to tax in the return of income. The relevant extract of the

judgment is reproduced herein below :

“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-corners of the said provision, penalty cannot be imposed. Sub-section (1) of Section 271 stipulates certain contingencies on the happening whereof the AO 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 AO is satisfied that the assessee has either; (a) Concealed the particulars of his income; or (b) 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 to 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 AO or the Commissioner of Income Tax (Appeals). When the survey is conducted by a survey team, the question of

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satisfaction of AO or the Commissioner (Appeals) or the Commissioner does not arise. We have to keep in mind that it is the AO 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 as in the case of Commissioner of Income Tax, Delhi-I Vs. Mohan Das Hassa Nand 141 ITR 203 and in Reliance Petroproducts Pvt. 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 5 and 5A of 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 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.”

DCIT (supra) and Nandkishore Tulsidas Kathore Vs. ACIT (supra) and

in various other cases, deleted penalty levied u/s 271(1)(c) of the Act

under similar circumstances by following the ratio laid down in the

case of CIT Vs. S.A.S. Pharmaceuticals (supra). Thus, we find merit in

the appeal of assessee. The penalty levied u/s 271(1)(c) of the Act on

the amount disclosed in the return of income is unwarranted.

mentioning different limbs of Sec.271(1)(c) of the Act while recording

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satisfaction for initiating penalty proceedings and at the time of levying

of penalty. A perusal of the assessment order shows that penalty

proceedings u/s 271(1)(c) of the Act were initiated for concealing

income, whereas, in penalty order the AO has levied penalty u/s

271(1)(c) of the Act for furnishing inaccurate particulars of income.

This shows ambiguity in the mind of AO with regard to charge for levy

of penalty u/s 271(1)(c) of the Act. The Hon’ble Jurisdictional High

Court in the case of CIT Vs. Samson Perinchery (supra) has held “that

the order imposing penalty has to be made only on the ground of which

the penalty proceedings has been intiated, and it canot be on a fresh

ground of which the assessee has no notice.”

271(1)(c) of the Act and the charge at the time of levy of penalty should

be consistent. The penalty cannot be levied on a charge different from

the one for which it is being initiated. Therefore, the penalty

proceedings u/s 271(1)(c) of the Act are liable to be set aside on this

ground as well.

the assessee is allowed.

Order pronounced on Wednesday, the 08th day of May, 2019.

Sd/- Sd/- (R.S. SYAL) (VIKAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER

पुणे Pune; �दनांक Dated : 08th May, 2019. Yamini

ITA No.408/PUN/2017

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

// // True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.