SANTOSH HASTIMAL GUGALE,,AHMEDNAGAR vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

The assessee has raised the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the order of the Assessing Officer levying penalty of Rs.9,26,999/- under section 271(1)(c) of the Income Tax Act.

The issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act.

Briefly, in the facts of the case, Survey under section 133A of the Act was carried out at the premises of assessee on 01.11.2012. During the course of Survey, assessee declared additional income of ₹ 30 lakhs. The assessee included the said additional income in the return of income filed under section 139(4) of the Act, which was filed on 23.01.2013. The Assessing Officer passed assessment order under section 143(3) of the Act on the income declared by the assessee. However, penalty proceedings were initiated for concealment under section 271(1)(c) of the Act. The assessee during the course of penalty proceedings pointed out that no penalty was leviable since the additional income offered in Survey was included in the return of income filed by the assessee and taxes were paid thereon. The Assessing Officer however, was of the view that additional income was offered during the course of Survey when the assessee

The CIT(A) upheld the order of Assessing Officer rejecting the plea of assessee that the additional income was offered subject to the condition that penalty should not be initiated. The CIT(A) observed that the assessee had failed to furnish the return of income since assessment year 2008-09 onwards and return was filed only after Survey conducted under section 133A of the Act. Even the additional income was detected during the course of Survey and the same was admitted by the assessee. The CIT(A) vide para 4.3.4 placed reliance on the ratio laid down by the Hon'ble Supreme Court in Mak Data Pvt. Ltd. Vs. CIT (2013) 358 ITR 593 (SC) and observed that even in cases where voluntary disclosure was made to buy peace and to avoid litigation, etc. but the law does not provide that he has to be absolved from penalty. The CIT(A) upheld the levy of penalty under section 271(1)(c) of the Act.

The assessee is in appeal against the order of CIT(A).

The learned Authorized Representative for the assessee pointed out that due date for filing the return of income was 31.07.2012, however, no return of income was filed within the period prescribed under section 139(1) of the Act. But after Survey on 01.11.2012, wherein the additional income of ₹ 30 lakhs was furnished, the assessee filed return of income within time allowed under section 139(4) of the Act. The said return which was filed for the first time was filed on

He further pointed out that the Tribunal in earlier decision in the case of Nandkishor Tulsidas Katore Vs. ACIT in ITA Nos.2174 to 2180/PN/2014, relating to assessment years 2002-03 to 2008-09, vide order dated 14.12.2016 had relied on the ratio laid down by the Hon’ble High Court of Delhi in CIT Vs. SAS Pharmaceuticals reported in 335 ITR 259 (Del).

The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A) with special emphasis on the finding in para 4.3.4 of the appellate order and the ratio laid down by the Apex Court in Mak Data Pvt. Ltd. Vs. CIT (supra).

We have heard the rival contentions and perused the record. In the facts of the present case before us, Survey at the premises of assessee had taken place on 01.11.2012. During the course of Survey, when confronted the assessee offered additional income of ₹ 30 lakhs. The assessee had not furnished any return of income within due date of filing the return of income under section 139(1) of the Act. However, he furnished the return of income on

The issue which is arising in the present appeal is that in the circumstances where the assessee had already offered additional income in the return of income filed for the first time though within time frame prescribed under section 139(4) of the Act and the said income offered by the assessee having been accepted, can the assessee be held to be liable for levy of penalty under section 271(1)(c) of the Act.

We find that the Tribunal on similar facts had decided the issue in Nandkishor Tulsidas Katore Vs. ACIT (supra) and had applied the ratio laid down by the Hon’ble High Court of Delhi in CIT Vs. SAS Pharmaceuticals (supra) and had held as under:- “14. Another facet which has to be considered is that the additional income was offered during the course of Survey, which was conducted at the premises of assessee. However, it was the Assessing Officer who initiated penalty proceedings against the assessee and levied the same. The Hon‟ble Delhi High Court has categorically laid down that where the Assessing Officer had not recorded any satisfaction during the course of Survey, the decision to initiate penalty proceedings being taken while making the assessment order, then it was held Thus, the expression “in the course of any proceedings under this Act could not have the reference to survey proceedings, in this case”. Since the assessee had made complete disclosure in the return and surrendered the amount for the purpose of tax, the Hon‟ble High Court held that there was no such concealment of non-disclosure and the assessee was held to be not liable for levy of penalty. Applying the said proposition to the facts of the present case, we hold that the assessee is not liable to levy of penalty on the additional income which was declared by the assessee during the course of Survey and was offered to tax in the revised return of income filed after the Survey.”

The said decision has been applied by the Tribunal in Shri Anand Suresh Jain Vs. DCIT (supra), wherein it has been held as under:- “11. We have heard the rival contentions and perused the record. The issue arising in the present appeal is against levy of penalty under section 271(1)(c) of the Act. The assessee is engaged in the business of jewellery. Survey action under section 133A of the Act was carried out at the business premises of assessee on 27.04.2005. Simultaneously, search action was also carried out at the residential premises of assessee. The instant assessment year in appeal is the year of search. During the course of Survey, the assessee declared certain additional income on account of excess stock found from his premises of gold and silver amounting to Rs.2,30,498/-. The assessee included the said additional income in the return of income filed. Undoubtedly, no proceedings under section 153A of the Act are to be carried out in the year of search. The assessee filed the return of income for the captioned assessment year after due date prescribed under section 139(1) of the Act but within the period allowed under section 139(4) of the Act. The said return of income was filed pursuant to notice issued under section 142(1) of the Act. The assessee had included the additional income in his hands in the said return of income and the Assessing Officer had accepted the said income offered by the assessee along with certain additions i.e. on account of errors and omissions of Rs.9,502/-. The explanation of assessee is that since he did not find any errors and omissions in its return of income, it had not included the said income as part of its additional income by filing the return of income, though the same was offered as additional income during the course of Survey. The issue which needs to be adjudicated in the present appeal is that where the additional income was offered which was detected during the course of Survey at the premises of assessee, whether Explanation 5 to section 271(1)(c) of the Act is attracted. The answer to the said question is „No‟, since it is not the case of search under which the assessee had offered the additional income. Explanation 5 to section 271(1)(c) of the Act is applicable only in the case of search. In the facts of the present case, additional income was offered by the assessee when Survey action had taken place at its business premises and certain excess stock was found from its premises. In such cases, where the assessee had offered the additional income during the course of Survey, then the same does not part take the nature of additional income referred to in Explanation 5 to section 271(1)(c) of the Act, hence Explanation 5 to section 271(1)(c) of the Act is not attracted in the present case. Since the assessee had offered the additional income in the return of income which has been accepted by the Assessing Officer perse with minor variations, then in such circumstances, no penalty under section 271(1)(c) of the Act is leviable upon the assessee. The additional income of Rs.9,502/- added in the hands of assessee on account of errors and omissions does not attract any penalty since no malafides have been attributed to the assessee in not offering the same as its income. 12. We find that Pune Bench of Tribunal in Nandkishor Tulsidas Katore Vs. ACIT (supra) while deciding the similar issue of additional income offered during the course of Survey and whether Explanation 5 to section 271(1)(c) of the Act is attracted had observed as under:- “11. We have heard the rival contentions and perused the record. In the facts of the present case before us dual action was taken against the assessee i.e. search under section 132 of the Act was carried out at the residence of assessee on 16.01.2009. Simultaneously, Survey was carried out at the hospital of assessee on 16.01.2009. During the course of Survey, evidence of certain unaccounted receipts, rough pages, note

Similar proposition has been laid down in Dr. Bapusaheb Eknath Kandekar Vs. DCIT (supra) and M/s. D.P. Jagtap Vs. ACIT (supra).

The learned Departmental Representative for the Revenue has placed strong reliance on the ratio laid down by the Hon'ble Supreme Court in Mak Data (P.) Ltd. Vs. CIT (supra). However, the facts of the said case are at variance, wherein during the course of assessment proceedings certain discrepancies in documents were noted by the Assessing Officer, which were impounded during the course of Survey proceedings. No disclosure was made on account of documents so impounded; however, when the Assessing Officer sought specific information, the assessee made an offer to surrender sum of ₹ 40.74 lakhs with a view to avoid litigation and to buy peace. The Assessing Officer made addition and levied penalty under section 271(1)(c) of the Act. The Apex Court in such circumstances held that surrender of income was not voluntary, since it was made by assessee when confronted during the course of assessment proceedings. The major fact which is at variance is that during the course of Survey in the case of Mak Data (P.) Ltd. Vs. CIT (supra), no disclosure was made by the assessee and when confronted by the Assessing Officer, the assessee made an offer to surrender sum of ₹ 40.74 lakhs. However, in the facts of the present case before us, the surrender was made during the course of Survey and the additional income was offered to tax in the return of income filed

In the result, appeal of assessee is allowed.