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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP:
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-3, Chennai in ITA No.117/16-17/A-3 dated 29.09.2017. The Assessment was framed by DCIT, Corporate Circle 5(2), Chennai U/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’) for the
I.T.A. No.3223/Chny/2017 2 A.Y. 2013-14 vide order dated 14.03.2016. The penalty order (impugned order) is levied by DCIT, Corporate Circle 5(2), Chennai u/s. 271(1)(c) of the Act, vide order dated 26.09.2016.
The only issue in this appeal of Revenue is against the order of CIT(A) upholding the penalty levied by the AO u/s.271(1)(c) of the Act on account of additional income offered by the assessee during the course of survey u/s.133A of the Act for an amount of Rs.8 crores. The Revenue has raised the grounds on merits only.
Brief facts are that the assessee company is engaged in the business of sale of plots and developing of layouts. A survey u/s.133A of the Act was conducted on the business premises of the assessee on 01.10.2013, during which the assessee offered an income of Rs.8 crores for the relevant assessment year 2013- 14. Subsequently, the assessee filed its return of income on 30.04.2014 u/s.139(4) of the Act offering this income of Rs.8 crores. The AO subsequently reopened the assessment by issuing notice u/s.148 of the Act on 26.03.2015. In response, the assessee requested the AO to treat the return filed on 30.04.2014 as the return filed in response to notice u/s.148 of the Act vide letter dated 17.04.2015. The AO completed assessment
I.T.A. No.3223/Chny/2017 3 u/s.143(3) r.w.s. 147 of the Act accepting the returned income based on the details filed before him and assessed the income at Rs.7,66,84,322/-, which includes the income offered as additional income during the course of survey of Rs.8 crores. The AO initiated penalty proceedings u/s.271(1)(c) of the Act for concealment of income. For this, he made the following noting in the assessment order:- “6. Penalty u/s.271(1)(c) initiated separately for concealment of income.
The AO levied penalty by holding that there are certain cash payments made by the assessee outside the books of accounts and hence, he offered additional income of Rs.8 crores. The AO noted that this income the assessee would not have offered on its own but due to the Department. Therefore according to him, this is a fit case for levy of penalty u/s.271(1)(c) of the Act for concealment of income and furnishing of inaccurate particulars of income. Aggrieved against the penalty order, assessee preferred appeal before CIT(A).
The CIT(A) noted the fact that the assessee has admitted additional income of Rs.8 crores during the course of survey u/s.133A of the Act on 01.10.2013 and subsequently, it filed
I.T.A. No.3223/Chny/2017 4 return of income on 30.04.2014 admitting this additional income of Rs.8 crores and paid taxes accordingly. Thereafter assessment was reopened and reassessment was framed accepting the returned income in toto without any addition. The CIT(A) following various case laws deleted the penalty specifically by para 4.6 as under:- 4.6 In the appellant’s case the return of income for the assessment year 2013-14 was filed on 3/04/2014 which is within the time allowed u/s.139(4) of the Act and there was only a survey conducted in the premises of the appellant and not a search. Therefore the principles laid down in the above case laws are squarely apply to the appellant’s case and therefore no penalty could be Ievie‹1 on the sum of Rs. 8,00,00,000 offered by the appellant in the revised return of income.
5.1 The CIT(A) also allowed the appeal of assessee on jurisdictional issue that the AO initiated penalty proceedings for concealment of particulars of income and levied penalty in regard to furnishing of inaccurate particulars of income as noted in the assessment order and the penalty order respectively. According to CIT(A), the AO is not sure about the charge whether the assessee has committed default of concealment of particulars of income or of furnishing inaccurate particulars of income. According to CIT(A), the AO has quoted both the limbs of provisions of section 271(1)(c) of the Act. For this, he recorded his finding in para 4.7 and the relevant portion reads as under:-
I.T.A. No.3223/Chny/2017 5 4.7 The other legal objection of the AR that the assessing officer has not indicated in the penalty notice as to whether he has initiated penalty proceedings for furnishing of inaccurate particulars of income or for concealment of income. In the penalty order the assessing officer in para 6 of the order has clearly stated that it is a case of concealment of income and furnishing inaccurate particulars of income. The assessing officer has quoted both the limbs of section 271(1)(c). When the income returned was accepted in the assessment, there cannot be any concealment of income nor furnishing of any inaccurate particulars of income in the return filed. The assessing officer cannot levy penalty on both the counts and he has to indicate his satisfaction as to whether he initiated penalty proceedings u/s 271(1)(c) for concealment of income or for furnishing inaccurate particulars of income. Such satisfaction is mandatory as held by the Delhi High Court in the case of SAS Pharmaceuticals (335 ITYR 259). The Supreme Court has also dismissed the SLP filed by the department on 5/8/2016 and confirmed the view of the Delhi High Court. The penalty order cannot be sustained even on this ground.
Aggrieved, now Revenue is in appeal before the Tribunal.
At the outset, the ld.counsel for the assessee Shri S. Sridhar pointed out that the Revenue had challenged the deletion of penalty only on merits and there is no challenge to the jurisdictional issue that the penalty is also deleted on the issue of specific charge which remains unchallenged. The ld. Senior DR supported the order of AO levying penalty. He stated that the assessee would not have offered this additional income on its own but it was offered by the assessee in its return of income after survey was conducted and admitted the undisclosed income in
I.T.A. No.3223/Chny/2017 6 regard to certain cash payments made. Hence, he requested to restore the order of the AO levying penalty.
The ld.counsel for the assessee relied on the order of the CIT(A) on merits.
We have heard rival contentions and gone through facts and circumstances of the case. The above stated facts are admitted that the assessee offered a sum of Rs.8 crores during the course of survey and subsequently admitted this income in its return of income. There is no further addition to the returned income by the AO in the assessment order. The AO initiated penalty proceedings in regard to this additional income offered in the return of income for concealment of particulars of income u/s.271(1)(c) of the Act. The AO simpliciter levied penalty for concealment of particulars of income. We have gone through the provisions of section 271, sub-section (1), which itself makes it clear that recording of satisfaction of concealment of income by a person or furnishing of inaccurate particulars of such income which is a precondition for invoking the provisions of section 271(1)(c) of the Act. The AO admittedly accepted the return of income filed by the assessee after verification of information filed
I.T.A. No.3223/Chny/2017 7 and books of accounts examined. The assessment was completed accepting the returned income as per the revised return of income. The question is whether the assessee offered any explanation for concealment of particulars of income or furnishing of inaccurate particulars of income. We noted that the AO during the course of assessment proceedings had noticed that there are certain cash payments which came to his knowledge during the course of survey and assessee immediately surrendered the income and filed the return within the time allowed u/s.139(4) of the Act on 03.04.2014. We noted from the assessment order and that of the penalty order passed by the AO u/s.271(1)(c) of the Act that the AO could not substantiate the addition with any corroborative evidence of survey operations and the income offered by the assessee is just based on revised return of income. We are of the view that the assessee has co-operated, offered additional income in the return of income and paid taxes accordingly. In the facts in entirety, we are of the view that the AO has made the assessment without any credible documentary evidence found during the course of survey but only based on admission of the assessee during the course of survey proceedings. In such facts and circumstances, we are of the view that the issue is squarely covered by the Co-ordinate Bench
I.T.A. No.3223/Chny/2017 8 decision in the case of Shri D.Prabhu in ITA No.1177/Mds/2012 dated 24.03.2016, where it is held as under:- “The fact that due to survey operations, the assessee has voluntarily offered income in the assessment proceedings to the satisfaction of the Assessing Officer. The assessee has not contested the additions in the assessment order and paid the taxes including interest and produced the challans in the penalty proceedings but the ld. Assessing Officer though considered the facts of cooperation and payment of taxes but for survey this income was offered and taxed. The Department could not substantiate the addition with any corroborative evidence of survey operations and the income offered by the assessee is based on revised statement filed on 26.08.2010. Considering the factual aspects the Assessing Officer has only considered the income offered by the assessee and made assessment without any creditable documentary evidence found in the survey operations. The penalty proceedings are not automatic and every addition is not a gateway for levying penalty We draw support from the principles laid down in case of case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565, (Karnataka) were it was held that the penalty proceedings are not automatic and they are distinct and we also rely on jurisdictional High Court decision of CIT vs. S. Khader Khan & Son 300 ITR 0157 and accordingly we set aside the order of Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the penalty.”
Further, our view is fortified by the decision of Hon’ble Delhi High Court in the case of CIT vs. SAS Pharmaceuticals, 335 ITR 259, which has been considered by the CIT(A) and the Hon’ble Delhi High Court held as under:- 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
I.T.A. No.3223/Chny/2017 9 (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 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 assessee has to be in the income tax return filed by it. There is sufficient indication of this in the judgment of this Court 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
I.T.A. No.3223/Chny/2017 10 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.
As the issue is squarely covered and now Revenue could not controvert the above factual situation, we are of the view that the CIT(A) has rightly deleted the penalty and we confirm the same.
The second aspect that the Revenue has not challenged the issue on jurisdiction which has already become final and hence, we need not to adjudicate the same.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the court on 25th February, 2022 at Chennai. Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य /ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 25th February, 2022 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.