ASSISSTANT COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1), VADODARA, VADODARA vs. RADHIKA JEWELLERS, VADODARA

Aggrieved against the penalty order, assessee filed an appeal before Ld. CIT(A) who deleted the penalty by holding that additional income surrendered by the assessee during the survey action and the same was declared in the regular Return of Income which was filed within the prescribed time, hence no penalty would be exigible in such cases by observing as follows: “The main crux of the submissions made by the appellant is that penalty on the amount disclosed during survey proceedings cannot be levied for the reason that a) it was a voluntary declaration and b) as on date of survey, the financial year was not yet over and therefore the amount declared during survey constituted the income of the year under consideration. The appellant further states that the income admitted during survey is shown in the return of income and is accepted during assessment proceedings. The appellant further states that there is no concealment, no inaccurate particulars in respect of the Income declared during survey proceedings. Further, the addition made to the return Income, is of Rs.1,31,263/- which comprises of disallowance on account of PF (31,950/- ), subscription expenses (Rs.6000/-) and out of car and petrol expenses (Rs.93,313/-). The AO has, in para 5 of the penalty order, tried to justify the levy of penalty on the additional income declared during survey proceedings. The reasoning offered by the AO is that the amount declared was detected consequent to the survey proceedings and that this amount would not have been brought to tax, had no survey taken place in this case. This logic of the AO while levying penalty does not hold good, as the declared income represented the income of the year which was not yet closed as on date of survey. Further, the appellant has, in its submissions (reproduced above), relied on the various judgments, which in a nutshell state that where certain income is surrendered by the assessee during survey and the same was shown by it in regular return of income which was filed within prescribed time, no penalty would be exigible in such cases. Further, on the addition of Rs.1,31,263/-which is made over and above the returned income, no penalty is leviable as the amount represents disallowance of certain expenses and no concealment is detected/proved by the AO. Thus considering all the facts of the case, the submissions made by the AO and the rulings of various courts, there is no ground for levy of penalty and accordingly the penalty of Rs.62,11,054/- levied u/s 271(1)(c) of the Act is hereby directed to be deleted.”

[1] On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s. 271(1)(c) of Rs. 62,11,050/- made on account of the disclosure made during the survey proceedings, without appreciating the facts that the disclosure was on account of the detection made during the course of survey proceedings, and mere disclosure of the same would not absolve the assessee from penalty u/s. 271(1)(c) of the Act. [2] The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before the hearing of appeal.

5. Heard rival submissions and perused the materials available on record. It is undisputed fact that the Partner of the assessee Firm admitted undisclosed stock of Rs.1,69,25,900/- and undisclosed cash of Rs.31,74,600/- both totaling to Rs.2,01,00,500/-. The above unaccounted stock found during the course of survey on 12- 10-2012 were duly recorded by the assessee firm in the books of accounts and Return of Income filed and also paid taxes thereon as business income. The above returned income was accepted by the assessing officer as business income while framing the regular assessment u/s. 143(3) on 28-01-2016, however disallowances were made on account of late payment of Provident Fund of Rs.31,950/-, subscription expenses of Rs.6,000/- and out of Car and petrol expenses of Rs.93,313/- and no addition is made out on account of ‘business income’. However, the assessing officer initiated penalty proceedings and levied minimum penalty of Rs.62,11,054/- under section 271(1)(c) of the Act for concealment of income. The assessing officer did not dispute the disclosure made in the profit and loss account by the assessee Firm, notes to accounts and Annexure-F to Tax Audit Report. Further the Ld. A.O. accepted the above disclosures of income as ‘business income’ and neither considered the same as undisclosed income under section 68 to 69D of the Act nor made any separate addition in this regard.

5.1. Once the particulars of income disclosed by the assessee and not disputed by the A.O., there cannot be question of any concealment of income by the assessee. It is settled principle of law that penalty cannot be levied on the basis of presumptions, surmises or conjectures. Section 271(1)(c) is a penal provision which require to be construed strictly, unless the conditions prescribed under the section is satisfied, penalty cannot be levied. The assessee Partnership Firm has admitted undisclosed unaccounted stock and cash as ‘business income’ at the time of survey as well as during the assessment proceedings. No material has been brought on record during the survey to disprove the assessee’s contention regarding the source of business income which was out of business of gold and silver ornaments. Therefore the income has been credited into the profit and loss account and have never been considered as “other sources of income” which has been accepted by the assessing officer in the regular assessment proceedings.

6.1. Other judicial precedents referred by the assessee are also supports the case of the assessee. Thus we do not find any infirmity in the order passed by the Ld. CIT(A) deleting the penalty levied u/s. 271(1)(c) of the Act. Thus the ground raised by the Revenue is devoid of merits and liable to be dismissed.

Order pronounced in the open court on 07-01-2026