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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Pune dated 20-05-2016 for the assessment year 2010-11, confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
Notice of appeal was sent to the assessee through RPAD on the address mentioned in Form No. 36. The notice of appeal was duly served
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as is evident from the acknowledgment available on record. However, none appeared on behalf of the assessee on the date fixed. The assessee vide communication dated 07-12-2018 has filed written submissions and has expressly waived his right of appearance before the Tribunal. Therefore, the present appeal is taken up for hearing on the basis of documents on record, written submissions of the assessee and with the assistance of ld. DR.
The brief facts of the case as emanating from records are : The assessee is engaged in manufacturing and trading of wooden boxes. The assessee filed his return of income for the impugned assessment year on 14-10-2010 declaring total income of Rs.25,40,210/-. A survey action u/s. 133A of the Act was carried out at the business premises of the assessee on 23rd and 24th March, 2011. During survey proceedings, the assessee made declaration of additional income of Rs.1,50,000/-. Thereafter, the assessee filed revised return of income on 01-04-2011 declaring income of Rs.26,90,201/-. In scrutiny assessment proceedings, the Assessing Officer initiated penalty proceedings u/s. 271(1)(c) for concealment of Rs.1,50,000/- that was declared by the assessee in revised return. The Assessing Officer vide order dated 22-08-2013 levied penalty of Rs.66,160/- u/s. 271(1)(c) for concealment of income on the aforesaid declaration made by assessee.
Aggrieved by the order levying penalty, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order upheld levy of penalty and dismissed the appeal of assessee. Hence, the present appeal by the assessee. The assessee in present appeal has challenged the order of Commissioner of Income Tax (Appeals) confirming levy of penalty on following grounds :
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“1. On the facts and in the circumstances of the case and in law, the Order levying penalty u/s. 271 (1)(c) as confirmed by the learned CIT(A), is bad in law as the show cause notice issued u/s. 274 of the Act is defective, invalid, and bad in law for it does not specify as to whether penalty proceeding is being initiated for concealing particulars of income or furnishing inaccurate particulars of income.
On the facts and in the circumstances of the case and in law, the penalty order u/s.271 (1)(c) as confirmed by the learned CIT(A), is bad in law as the same has been passed without appreciating the submission/s of the appellant and without considering the fact that the appellant has voluntarily disclosed the income.
On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the penalty order passed by the learned AO without recording the requisite satisfaction regarding concealment of particulars of income or furnishing of inaccurate particulars as required by the provisions of section 271(1)(c) and therefore the levy of penalty is not justified/not tenable. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in conforming the Penalty Order passed by the AO, without appreciating that: (a) The noting/s in the diary has been found at the residence of a third party Mr. Rajendra Chopda and not with the Appellant. (b) The Appellant has made the disclosure voluntarily and to purchase peace of mind and avoid protracted litigation. (c) The learned AO has levied the penalty without any corroborating evidence whatsoever and merely on the basis of voluntary disclosure made by the Appellant by Revising his Return of Income. (d) The Appellant has co-operated with the department by paying all the taxes along with interest voluntarily before the initiation of reassessment proceedings.
On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the penalty order u/s.271(1)(c) without appreciating that:
(a) The learned AO has levied penalty at Rs.66,160/- which is wrong and which ought to have been levied at calculated tax of Rs.45,000/-.
(b) The learned AO has passed the Order on the conclusions that the appellant has will fully concealed the particulars of income to evade the tax, without any satisfaction regarding concealment of income and therefore in absence of such satisfaction being recorded the penalty proceeding are bad in law and without jurisdiction and authority.
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The appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal and/or to adduce and rely upon such further evidence/additional evidence and/or documents as may be required at any time during the appeal proceedings.”
The assessee has filed detailed written submissions and has placed reliance on various decisions to support his contentions. For the sake of brevity the elaborate written submissions filed by the assessee are not reproduced in the order.
Shri Yogesh Kumar representing the Department vehemently defended the impugned order. The ld. DR submitted that the assessee had filed original written of income for the assessment year 2010-11 on 14-10- 2010. Thereafter, survey action u/s. 133 was carried out on the assessee in March, 2011. The assessee declared additional income of Rs.1,50,000/- during survey. Thereafter, the assessee filed revised return of income for assessment year 2010-11 on 01-04-2011 declaring additional income of Rs.1,50,000/-. The penalty proceedings u/s. 271(1)(c) have been initiated in respect of the additional income offered by the assessee in the revised return. The ld. DR asserted that, but for survey action the assessee would not have declared additional income and the same would have escaped tax net. The ld. DR prayed for upholding the order of Commissioner of Income Tax (Appeals) and dismissing the appeal of assessee.
We have heard the submissions made by ld. DR and have perused the written submissions filed by the assessee. We have also examined various case laws on which the assessee has placed reliance.
In ground No. 1 of appeal the assessee has assailed the validity of show cause notice issued u/s. 274 of the Act. The contention of the
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assessee is that in the show cause notice the Assessing Officer has not struck off irrelevant limb of section 271(1)(c), therefore, the notice is vague. In the absence of valid notice, the penalty is unsustainable. We do not find merit in the submissions of assessee. A perusal of assessment order dated 08-02-2013 reveal that the Assessing Officer initiated penalty u/s. 271(1)(c) on the charge of concealment of income. Even in the order levying penalty dated 22-08-2013 the penalty has been levied on the charge of concealment. Thus, there was no ambiguity in the mind of Assessing Officer with respect to charge for levy of penalty. Merely, none striking of irrelevant clause in the notice issued u/s. 274 would not vitiate penalty proceedings. Our this view is supported by the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Smt. Kaushalya & Ors. reported as 216 ITR 660.
The decisions on which reliance has been placed by the assessee are either rendered by the Tribunal or Hon’ble non-jurisdictional High Courts. Since, there is a direct decision by the Hon’ble Jurisdictional High Court on the issue, the same has been respectfully followed. In so far as reliance on the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery reported as 392 ITR 4 is concerned, it is on a different issue and does not deal with ambiguity of charge in the notice issued u/s. 274 of the Act. Hence, the same would not support the cause of assessee. Consequently, the ground No. 1 raised in the appeal by the assessee is dismissed.
In ground No. 2 of the appeal the assessee has assailed levy of penalty on the ground that the assessee has voluntarily disclosed the income in the revised return and the same was accepted by the Assessing Officer, thus, the provisions of section 271(1)(c) are not attracted. A
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perusal of documents on record reveal that the assessee has filed original return of income on 14-10-2010 declaring income of Rs.25,40,210/-. Thereafter, survey action u/s. 133A was carried out at the business premises of the assessee in March, 2011. The assessee filed revised return of income u/s. 139(5) declaring income of Rs.26,90,201/- including additional income of Rs.1,50,000/- offered during survey. The revised return filed by the assessee was accepted by the Department as the assessee had filed the same within the period prescribed under the Act. The Assessing Officer in assessment proceedings u/s. 143(3) made ad hoc disallowance of Rs.1,50,000/- on the income returned by the assessee and assessed the total income at Rs.27,05,200/-. However, penalty proceedings were initiated in respect of additional income of Rs.1,50,000/- declared by the assessee in revised return.
A bare perusal of provisions of section 271 would show that the penalty u/s. 271(1)(c) can be levied if the Assessing Officer or the Commissioner of Income Tax or the Pr. Commissioner of Income Tax in the course of any proceedings under the Act are satisfied that the assessee has concealed the particulars of income or has furnished inaccurate particulars of such income. The expression “course of any proceedings” indicate proceedings arising consequent to filing of return of income. Thus, for initiating penalty under the provisions of section 271(1)(c) filing of return of income is an essential condition. It is thereafter a conclusion can be drawn that there was a concealment of income or furnishing of inaccurate particulars of income. In the present case, the Assessing Officer has initiated penalty on Rs.1,50,000/- i.e. the amount declared during survey action. The said amount was already declared by the assessee in return of income, therefore, there was no concealment of particulars of income or furnishing of inaccurate particulars of income in
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the revised return of income filed by the assessee. The assessment was completed on the said revised return filed by the assessee.
We find that the Co-ordinate Bench of the Tribunal in the case of Dilip Yeshwant Oak Vs. Assistant Commissioner of Income Tax reported as 138 TTJ 559 under similar set of facts deleted the penalty levied u/s. 271(1)(c) of the Act. The relevant extract of the findings of Tribunal on the issue are as under :
“13. Scope of the Penalty provision : Sec. 271(1)(c) of the Act is the relevant provision and main section, which is relevant for the present appeal reads as follows : "271(1). If the AO or the CIT(A) or the CIT in the course of any proceedings under this Act, is satisfied that any person— (a) and (b)........ (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, (d)....... he may direct that such person shall pay by way of penalty,— ......." The above provisions were explained by the apex Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. (2010) 230 CTR (SC) 320 : (2010) 36 DTR (SC) 449 : (2010) 322 ITR 158 (SC) and relevant held portion of the said judgment is as follows : "A glance at the provisions of s. 271(1)(c) of the IT Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word „particulars‟ used in s. 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. .... There can be no dispute that everything would depend upon the return filed by the assessee, 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. To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under s. 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate
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particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." Thus, the return of income or valid revised return is the basis or the starting point for arriving at the accuracy or inaccuracy of the particulars/claims "because that is the only document where the assessee can furnish the particulars of his income... To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous". In the light of the said settled position, we have examined the facts of the instant case, where the assessee furnished the valid revised return, which was accepted by the AO without pointing out a single inaccuracy and without making any further additions in the assessment. In such circumstances, we find that it is not a fit case for levy of penalty.”
The Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs. SAS Pharmaceuticals reported as 335 ITR 259 has held that the expression “in the course of any proceedings under this Act’ cannot have reference to survey proceedings. Concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in the return filed by it. No penalty can be imposed unless the conditions stipulated in the provisions were duly and unambiguously satisfied. Where the assessee was exposed during survey and had consequently made disclosure of income and the assessee had offered the disclosed income in the return filed thereafter and the Assessing Officer accepted the same, the provisions of section 271(1)(c) are not attracted. The relevant extract of the judgment of Hon’ble Delhi High Court in this context is reproduced here- in-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 s. 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-s. (1) of s. 271 stipulates certain contingencies on the happening whereof the AO or the CIT(A) may direct payment of penalty by the assessee. We are concerned herewith the fundamentality provided in cl. (c) of s. 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.
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It is not the case of furnishing inaccurate particulars of income, as in the IT return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the IT 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 IT return filed by the assessee, viz., whether concealment is to be found in the IT 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-s. (1) of s. 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 to 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 CIT(A). When the survey is conducted by a survey team, the question of satisfaction of AO or the CIT(A) or the CIT 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 assessee has to be in the IT return filed by it. There is sufficient indication of this in the judgment of this Court in the cases of CIT vs. Mohan Das Hassa Nand (1983) 34 CTR (Del) 361 : (1983) 141 ITR 203 (Del) 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 IT return filed by the assessee. This view gets supported by Explns. 4 as well as 5 and 5A of s. 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 as to whether this would attract penalty upon the assessee under the provisions of s. 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. Sec. 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 IT return and offered the surrendered amount for the purposes of tax.”
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In the instant case as we have observed earlier that the assessee has offered entire amount of disclosure made during survey in the revised return of income u/s. 139(5) and assessment was made on the said revised return. The Assessing Officer could not have initiated penalty proceedings u/s. 271(1)(c) in respect of additional income declared by the assessee in the revised return as there was no concealment of income or furnishing of inaccurate particulars of income by the assessee in the revised return filed. Thus, in view of the facts of the case and case laws discussed above, we find merit in this ground of appeal. Accordingly, the impugned order is set aside and ground No. 2 raised in the appeal is allowed.
In ground No. 3 of the appeal the assessee has assailed the order of Commissioner of Income Tax (Appeals) in confirming penalty on the ground that proper satisfaction has not been recorded by Assessing Officer at the time of initiation of penalty proceedings u/s. 271(1)(c) of the Act. We do not find any merit in this ground of appeal by the assessee there is no prescribed manner of recording satisfaction under the Act. As has been pointed earlier the Assessing Officer while initiating penalty has in an unambiguous manner mentioned specific charge for levy of penalty u/s. 271(1)(c) of the Act. Further, as per provisions of section 271(1B) directions for initiation of penalty u/s. 271(1)(c) in assessment / reassessment order shall be deemed to constitute satisfaction of the Assessing Officer.
The ground No. 4 of appeal is mere argumentative in nature and supports the other grounds and hence, requires no adjudication separately.
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In ground No. 5 of the appeal the assessee has raised an alternate contention without prejudice to the submissions made in the earlier grounds. Since, we have deleted levy of penalty and set aside the impugned order, the alternate contention raised by the assessee has become infructuous. Hence, ground No. 5 raised in the appeal is dismissed as infructuous.
In the result, the appeal of assessee is partly allowed in the terms aforesaid.
Order pronounced on Thursday, the 28th day of February, 2019.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 28th February, 2019. RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-2, Pune 3. 4. The Pr. CIT-1, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune