SABITHA REPALLE ,VIKARABAD vs. INCOME TAX OFFICER ,WARD -1, VIKRARABAD

All these appeals were filed by the assessees with delay of 12 or 16 days. Assessees have filed affidavits praying for condoning the delay. In the affidavit, the assessees explained that the Hon’ble Supreme Court in M.A.No.665/2021 in a suo moto W.P.No.3 of 2020 extended the time limit for filing appeals, applications, petitions etc., from time to time and disposed of the matter on 10.01.2022 with the following directions: (1) The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation as many be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings. (2) Consequently, the balance period of limitation remaining as on 03.01.2021, if any, shall become available with effect from 01.03.2022. (3) In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining all persons shall have a limitation of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining with effect from 01.03.2022, is greater than 90 days, that longer period shall apply.

The learned counsel Shri A.V Raghu Ram appearing for the assessees submitted that as the Hon’ble Supreme Court enlarged the time limits for filing appeals, applications, petitions etc., the limitation of which expired between March 2020 to 28.02.2022, it should be treated as if there is no delay in filing the appeals. Without prejudice to the above, it is submitted that the delay of 12 and 16 days in respective appeals is on account of the order not being served on the Assessees. It is submitted that in few appeals assessee sought adjournment and in few other appeals there was not even a notice of hearing served on the Assessees. It is submitted that the fact of orders being passed has come to their knowledge when the Revenue Authorities insisted for payment of tax as the appeals were dismissed by the Ld. CIT (A).

The Ld. CIT D.R. Shri Y.V.S.T Sai appearing for the Revenue submits that the delay may be considered on merits in view of the judgement of the Hon’ble Supreme Court order and in view of pandemic times.

Having considered the rival submissions, on perusing the affidavits filed and considering the decision of the Hon’ble Supreme Court extending the time limit from time to time in filing appeals in pandemic times I condone the delay of 12 and 16 days in filing the respective appeals and admit all the appeals for adjudication on merits.

Coming to the merits, all these eight appeals are filed by Dr. Anand Methuku and Dr. Sabitha Repalle both husband and wife and their partnership firm Sabitha Anand Hospital for different assessment years on the common issue of penalty levied u/s 271(1)(c) of the Act. Hence, the same are heard together and are being disposed of by this consolidated order for the sake of convenience.

Briefly the stated facts are that a survey operation u/s 133A was carried out in the premises of M/s. Sabitha Anand Hospitals a partnership firm on 27.09.2016. Dr. Methuku Anand and Dr. Repalle Sabitha, both husband and wife, who are Doctors are partners in the firm. In the course of survey, the partners have admitted additional income and filed returns accordingly by the partnership firm and also both the partners. In the case of partnership firm assessment was completed u/s 143(3) accepting the additional income offered by the partners in the affidavit during survey proceedings. Whereas in the cases of partners i.e., Methuku Anand and Dr. Repalle Sabitha, 147 notice was issued consequent to survey and to assess the additional income offered by the partners in the course of survey proceedings. Accordingly, the assessments were completed in individual hands u/s 143(3) r.w.s 147 of the Act. While completing the assessments in all these cases, the Assessing Officer accepted the additional income offered by the partners during survey proceedings.

Subsequently, penalty proceedings were initiated u/s 271(1)(c) of the Act and in response to notice issued as to why penalty should not be levied, the assessee furnished its reply stating that an affidavit was filed in the course of survey offering an additional income and agreeing not to levy penalty in respect of additional income without protracting the litigation and conduct the business peacefully. However, the Assessing Officer levied penalty u/s 271(1)(c) observing that had survey not been conducted and the assessment not taken up for scrutiny, the assessee would not have offered this income and therefore, there is concealment of income by the assessee.

On appeal, the learned CIT (A) sustained the order levying penalty u/s 271(1)(c) of the Act placing reliance on the decision of Hon’ble Supreme Court in the case of MAK Data Pvt. Ltd Vs. CIT 358 ITR 593 (SC). The learned CIT (A) also relied on the decision of Hon’ble Gujarat High Court in the case of L.M.P. Precision Engineering Ltd Vs. DCIT reported in 330 ITR 93 and also the decision of Rajkot Bench of the Tribunal in the case of Kashish Enterprises in dt.15.10.2018.

The learned counsel Shri A.V.Raghu Ram appearing for the assessees submits that assessees are regular income tax assessees. Pursuant to survey operation on 27.09.2016, an affidavit was filed on 23.01.2017 on behalf of assessees herein, offering additional incomes for respective assessment years. The offer was followed up with admitting the additional incomes in the returns filed for respective assessment years. It is submitted that while the returns of incomes for Assessment Years 2016-17 are regular returns filed within due dates, returns of income for other assessment years i.e., A.Y 2013-14 to 2015-16 are filed in response to notices issued u/s 148 of the Act. The returns of incomes are filed admitting additional incomes as undertaken in the affidavit filed on 23.01.2017.

The Ld. AR referring to assessment order, penalty order submitted that there is no reference to any incriminating materials, whatsoever. The Ld.AR submitted that the additional income admitted is not based on material unearthed in the course of survey nor any incriminating material is pointed out in any of the orders passed by the authorities below. The Ld. AR submits that the additional income offered in respective assessment years is voluntary and has no co-relation to the outcome of survey operation. It is submitted that in the course of survey proceedings u/s 133A of the Act, the Department has not detected any concealment of income by the assessee, no discrepancies were found in the books of accounts maintained, no documents or papers suggesting any concealment were seized or impounded by the Department. The disclosure made by the assessee was absolutely voluntary to avoid any further litigation and co-operated with the Department by offering additional income. Admittedly, there is no basis for offering additional income as the Department did not detect or unearthed any concealed income of the assessee.

The learned A.R further submitted that the cases laws relied on by the learned CIT (A) in sustaining the penalty are totally misplaced and they are distinguishable on facts. The learned A.R submits that in all those cases, materials were found and seized and undisclosed income was unearthed by the Department. Ld. A.R submits that in the case of Mak Data (P) Ltd., there was a reference to the incriminating material unearthed and impounded in the course of survey of its sister concern and even after that no income was offered in the regular return of income filed. Only in the course of assessment proceedings when the incriminating material was pointed out the assessee surrendered additional income. In these circumstances the hon’ble supreme court held that the income surrendered by the assessee is not voluntary.

The Ld. A.R referring to judgement of Gujarat High Court in the case of LMP Precision Engineering Ltd., and the Rajkot Bench of ITAT submitted that both these decisions were rendered in the back drop of incriminating materials found. It is submitted that the distinguishing factor of the assessees case with that of the above decisions is that there is no incriminating material unearthed in the assessees cases. The Ld A.R submitted that there is absolutely no discussion either in the assessment order or penalty order or in the appellate order with respect to material based on which the additional income offered by the assessees can be categorised as ‘not voluntary’.

On the other hand, the ld. D.R. submits that but for the survey, the assessee would not have surrendered the additional income and therefore, income is not voluntarily offered by the assessee. The Ld. DR submitted that there would have been some material based on which the additional income would have been offered by the appellants and therefore it cannot be taken that the admission of additional income to be voluntary. The Ld. DR pointed out that assessments for assessment years 2013-14 to 2015-16 made in this batch of appeals are pursuant to notice issued u/s 148 of the Act, though the returned income was accepted by the AO. Therefore it is the submission of the Ld. DR that the Assessing Officer has rightly levied penalty for concealment of income.

In reply, the learned counsel for the assessee submits that either in the assessment order or in the penalty order, there is no reference to seized materials or impounded materials by the Assessing Officer suggesting any concealment of income or discrepancies found in the course of survey. And therefore, the offer made by the assessee including the partners cannot be said that it is not on voluntary basis. Reliance was placed by the learned counsel in the case of CIT Vs. M/s. SAS Pharmaceuticals reported in 335 ITR 259 (Delhi) for the proposition that when assessee discloses particulars of income and surrender in return consequent to survey proceedings, penalty cannot be imposed.

Heard the rival contentions, perused the orders of the authorities below and the case laws relied on before me. On perusal of the assessment order as well as the penalty order in all these cases, it is observed that the Assessing Officer has not pointed out any discrepancies found in the course of survey proceedings. There is no finding that some materials were impounded or seized suggesting that there is concealment of income unearthed in the course of survey proceedings. In fact, it is the finding of the Assessing Officer in the assessment order that the partners of Sabitha Anand Hospitals furnished affidavit during the course of survey proceedings offering additional income. Except this finding by the AO in the assessment and penalty order, nothing is recorded about the incriminating material found or any discrepancies found in the course of survey proceedings. There is no finding whatsoever to any incriminating materials based on which the assessees were probably forced to admit additional income.

The learned CIT (A) while confirming the penalty in all these cases referred to the decision of the Hon’ble Supreme Court in the case of MAC Data Limited (supra) and the decision of Hon’ble Gujarat High Court in the case of M.P. Precision Engineering Ltd Vs. DCIT (supra) and also the decision of Rajkot Bench of the Tribunal in the case of Kashish Enterprises (supra). On perusal of these judgments, it is noticed that the facts in these cases were different than the facts in the case on hand. The judgments relied upon by the learned CIT (A) suggests that either there is survey or search proceedings and the Department detected/unearthed undisclosed income in all these cases by finding discrepancies as well as by impounding the documents. However, in the case on hand, there is nothing on record to suggest that the Assessing Officer or the survey team have detected any discrepancies or impounded any documents suggesting that there is any concealed income was unearthed. Mere voluntary disclosure by the assessee cannot lead to any concealment of income. There may be hundred and one reasons in disclosing additional income by the assessee, unless the Revenue authorities detects any incriminating materials/documents suggesting that there is undisclosed income by the assessee, the voluntary disclosure made by the assessee cannot be said to be concealed income. Mere voluntary disclosure by the assessee does not lead to any concealment of income. Therefore, the reliance placed by the ld. CIT (A) on the decisions referred to above appears to be misplaced as these decisions have no application to the facts of the assessees cases and are distinguishable on facts.

In view of the above, I hold that as the Assessing Officer merely accepted income offered in the course of survey proceedings without there being any discrepancies found, undisclosed income unearthed in survey proceedings, there is no concealment of income by the assessees and the penalty levied u/s 271(1)(c) of the Act cannot be sustained. Accordingly, I direct the Assessing Officer to delete the penalty levied u/s 271(1)(c) of the Act in all these cases.

In the result, all the appeals of the assessee are allowed.