M/S. MITTAL ENTERPRISES,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

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ITA 1228/PUN/2016Status: DisposedITAT Pune08 October 2018AY 2007-086 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty under Section 271(1)(c) is not leviable when additional income is disclosed and offered to tax in the return before the end of the financial year, especially when the survey occurred before the financial year ended and the return was filed incorporating the disclosure. The Tribunal followed previous judgments that emphasized strict construction of penal provisions and the requirement for concealment to be in the filed return.

What were the facts?

During a survey, the assessee offered additional income of Rs. 20 lakhs due to discrepancies in physical stock. This additional income was included in the return and taxes were paid. However, the AO initiated penalty proceedings under Section 271(1)(c) for concealment of income.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied for income disclosed during a survey and offered to tax in the return filed before the end of the financial year.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 133A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM

For Appellant: Shri Suresh Khandelwal
For Respondent: Shri Sudhendu Das
Hearing: 08.10.2018Pronounced: 08.10.2018

आदेश / ORDER

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the assessee against the order of CIT(A)-9, Pune, dated 07-04-2016 for the A.Y. 2007-08.

2.

Briefly stated relevant facts of the case include that the assessee is a company engaged in the business of trading of construction material. Assessee filed the return of income declaring total income of Rs.20,12,620/-. There was survey action u/s.133A of the Act on the assessee on 13-03-2007. AO noticed certain discrepancies in the

2 ITA No.1228/PUN/2016 M/s. Mittal Enterprises

physical stock found at the business premises of the assessee. On this

account, assessee offered additional income of Rs.20 lakhs Statement of

Mr. Chandrakant Suvalal Agarwal was recorded. The said additional

income was considered in the books of accounts as additional income

and paid the requisite taxes. The income returned by the assessee was

accepted by the AO. Penalty proceedings u/s.274 r.w.s. 271(1)(c) of the

Act are initiated for concealment of income and eventually levied penalty

of Rs.6,77,448/-.

3.

In the First Appellate proceedings, the CIT(A) confirmed the

penalty levied by the AO. Aggrieved with the order of CIT(A), the

assessee filed the present appeal with the following grounds :

“1. On facts and circumstances prevailing in the case and as per provisions of law it be held that penalty u/s.271(1)(c) levied by the AO & confirmed by the Ist appellate authority is contrary to the provisions of law, unjustified & unwarranted. It further be held that the case of the appellant is not covered by the mischief of provisions of sec.271(1)(c) of the Act warranting, justifying levy of any penalty in terms of the said section & there is no scope for levy of penalty u/s.271(1)(c) of the Act. The penalty levied by the AO be deleted. 2. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.”

4.

Before us, Ld. Counsel for the assessee submitted that the issue

raised in the appeal relates to levy of penalty u/s.271(1)(c) of the Act in

respect of said additional income of Rs.20 lakhs disclosed during the

course of survey action held in the month of March, 2007. The said

addition is relatable to the excess stock crystallized during the survey

action. The additional income so offered by the assessee was included in

the return of income filed by the assessee and paid the taxes. However,

on completion of the assessment, the AO vide his order dated 30-06-

2010 levied the penalty of Rs.6,77,448/-.

3 ITA No.1228/PUN/2016 M/s. Mittal Enterprises

4.1 On this issue, the case of the assessee is that the penalty is not

leviable as concealment of income when the additional income so

disclosed is relatable to the assessment year relevant to the previous

year which has not been ended and the return of income was duly

furnished after incorporating the inaccuracies and the additional

income. For this proposition, Ld. Counsel relied on the judgment of

Hon’ble Delhi High Court in the case of CIT Vs. SAS Pharmaceuticals

reported in 11 taxmann.com 207 (Delhi) on one side and the decision of

Pune Bench of the Tribunal in the case of Chandrakant S. Agarwal (HUF)

(partner of the firm) Vs. DCIT in ITANo.1103/PUN/2016, dated 20-06-

2018 and another related case in the case of Ashok S. Agarwal Vs. DCIT

in ITA No.1227/PUN/2018, dated 05-06-2018.

5.

Ld. DR for the Revenue relied heavily on the orders of the AO and

the CIT(A).

6.

We heard both the sides and perused the orders of the Revenue

and the decisions relied on by the Ld. Counsel for the assessee. We

perused the order of Tribunal in the case of Chandrakant S. Agarwal

(HUF) where an identical issue has been decided in favour of the

assessee. We therefore proceed to extract the finding given by the

Tribunal herein below for the sake of completeness :

“6. We heard both the sides, perused the orders of the Revenue authorities and the paper book filed before us. We have also perused the decisions relied on by the assessee. On going through the facts of the case, we find this is a case where assessee filed the return of income incorporating the additional income subsequent to the survey action and the said return has been accepted without making any addition. Assessee offered the additional income and subjected the same to tax. Survey action took place before end of the financial year. In the above background of the facts, we find this issue is squarely covered by the judgment of Hon’ble Delhi High Court in the case of CIT Vs. SAS Pharmaceuticals (supra). For the sake of completeness, we proceed to extract the conclusion given by the High Court and the same reads as under :

4 ITA No.1228/PUN/2016 M/s. Mittal Enterprises

“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 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.

5 ITA No.1228/PUN/2016 M/s. Mittal Enterprises

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.

17.

We, thus, answer the questions as formulated above, in favour of the assessee and against the Revenue finding no fault with the decisions of the CIT (A) as well as the Tribunal. As a result, this appeal is dismissed.

6.1 Further, we find the Pune Bench of the Tribunal in the case of Ashok S. Agarwal Vs. DCIT in ITA No.1227/PUN/2016, dated 05-06-2018 relied on the decision of Pune Bench of the Tribunal in the case of Nandkishor Tulsidas Katore Vs. ACIT in ITA Nos.2174 to 2180/PN/2014, dated 14-12-2016 for the A.Yrs. 2002-03 to 2008-09; wherein the judgment of Hon’ble Delhi High Court in the case of CIT Vs. SAS Pharmaceuticals (supra) was followed and eventually allowed the appeal filed by the assessee. The decisions relied on by the Ld. Counsel for the assessee also support the case of the assessee. In the instant case also, the survey action gave rise to the disclosure of Rs.25 lakhs before the end of the financial year and due date for filing of return of income is still not expired. On these facts, in the case of Shri Ashok S. Agarwal (supra) and others, the penalty u/s.271(1)(c) of the Act is not found sustainable in law. The logic is very obvious that the return of income filed by the assessee based on the complete books of account including the transactions relating to the said Rs.25 lakhs, is not alleged to contain any concealed income or furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act.

Therefore, considering the settled nature of the issue, we find the solitary issue raised by the assessee has to be decided in favour of the assessee. Accordingly, the order of CIT(A) is set aside. Thus, the ground raised by the assessee is allowed.

7.

From the above, we find the facts of the present case on hand are

identical to the one decided by the Tribunal. Therefore, following the

same reasoning, we hold that the penalty levied by the AO and confirmed

6 ITA No.1228/PUN/2016 M/s. Mittal Enterprises

by the CIT(A) is unsustainable. Accordingly, we direct the AO to delete the penalty. The grounds of appeal raised by the assessee are thus allowed.

8.

In the result, appeal of the assessee is allowed.

Order pronounced on 08th day of October, 2018. Sd/- Sd/-

(िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER पुणे / Pune; िदनांक / Dated : 08th October, 2018. Satish

आदेश की 'ितिलिप अ)ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��थ� / The Respondent. 2. 3. The CIT(Appeals)-9, Pune 4. The Pr.CIT-5, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब"च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड% फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.

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