ALPHA LITE, MUMBAI vs. ITO 14(2)(2), MUMBAI

This appeal by assessee under section 253 of the Income-tax Act (the Act) is directed against the order of ld. Commissioner of Income-Tax (Appeals)-25 [ld. CIT(A)], Mumbai dated 13.05.2014 in confirming the penalty levied under section 271(1)(c) of the Act for Assessment Year 2010-11. The assessee has raised the following grounds of appeal:

We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits that the Assessing Officer has wrongly held that assessee furnished inaccurate particular or concealed income. A survey was conducted on 17.03.2010. The return of income for Assessment Year 2010-11 was filed on 12.10.2010. The assessee while filing return of income increased the closing stock by Rs. 40.00 lacks - to Rs. 1,30,28,931/- raising Gross Profit to 14% against the normal Gross Profit on 5%. The return of income was accepted by Assessing Officer qua the closing stock. The assessee has paid additional tax during survey itself and the income was incorporated in the return of income. Therefore, there is no occasion for any concealment during the process of assessment. No inaccurate particular was furnished. The Assessing Officer has not recorded his satisfaction while passing the assessment order that any particular furnished by assessee was inaccurate or assessee concealed any particular of income. The assessee has made voluntary disclosure during the survey proceeding. Therefore, there is no occasion for evading any tax or concealing any income assessed. The Assessing Officer has not disputed the Gross Profit declared at 14%.

On the other hand, the ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue submits that admission of assessee was in consequence of the act of survey team. The assessee has 3 M/s Alpha Lite suppressed the stock and the circumstances of the result of survey leads to admission by the assessee in disclosing stock. The assessee declared stock when he was cornered by survey team. 5. We have considered the rival submission of the parties and have gone through the orders of authorities below. There is no dispute about the survey carried at the premises of assessee on 17.03.2010. Further, there is no dispute that during the course of survey, the assessee declared stock of Rs. 40,01,181/- after the survey, the assessee filed his return of income on 17.10.2010. The Assessing Officer accepted the income while the assessment, no addition qua the stock declared by assessee was made while passing the assessment order. The Assessing Officer has not recorded his satisfaction whether the additional stock declared by assessee for Rs. 40,01,181/- was disclosed in the return of income or not. There is no satisfaction recorded by the Assessing Officer , at the time of passing assessment order that assessee furnished any inaccurate particular or concealed any income. The Assessing Officer simply noted while passing the assessment order “penalty proceeding under section 271(1)(c) are being initiated separately for concealing of income”. 6. During the penalty proceeding, the assessee filed reply to the show cause vide its reply dated 21.06.2013. In the reply, the assessee contended that they have neither concealed their income nor furnished inaccurate particulars of income. The Assessing Officer levied the penalty @ 100% 4 M/s Alpha Lite of the tax sought to be evaded. Before the ld. CIT(A), the assessee urged that the said stock has been offered to tax in the return filed by the assessee and the fact has been accepted by Assessing Officer as no further addition has been made. The ld. CIT(A) relied upon the decision of Hon’ble Supreme Court in case of MAK Data Pvt. Ltd. vs CIT 355 ITR 593 (SC) held that the decision squarely applicable in the present case and confirmed the penalty. We have noted that the Assessing Officer levied the penalty on addition of Rs. 1,27,628/- and the additional income of Rs. 40,01,181/- declared in the form of stock. Thus, the Assessing Officer levied the penalty total concealed income of Rs. 41,28,809/-, the Assessing Officer worked out the minimum penalty @ 100% at Rs. 12,75,802/-. We have further noted that the ld. CIT(A) deleted the penalty qua the addition of Rs. 1,27,628/-. We are surprise that one the penalty qua the addition of Rs. 1,27,628/ was deleted, the ld. CIT(A) still confirmed the penalty of Rs. 12,75,802/-. As we have already noted that there is no satisfaction of Assessing Officer at the time of passing the assessment order, the Assessing Officer has not recorded the satisfaction that the return of income was found to be incorrect, erroneous or false, thus, in absence of such satisfaction no penalty is leviable. The Hon’ble Supreme Court in case of CIT Vs Reliance Petroproducts (P.) Ltd. 322 ITR 158 held that if there is no finding of the Assessing Officer to recall that return were found to be incorrect or erroneous there would be no question of 5 ITA No.4778/M/14- M/s Alpha Lite inviting the penalty under section 271(1)(c). As argued by ld. AR of the assessee that the assessee neither concealed any income nor any inaccurate particular was furnished as there is no addition qua the income offered during the survey action. Further, the Revenue has not disputed the Gross Profit declared by assessee.

The Hon’ble Delhi High Court in CIT Vs SAS Pharmaceuticals (2011) 11 taxmann.com 207 (Del.) held that section 271(1)(c) is a penal provision and as such a provision has to be strictly construed. Unless the case false within the four-corners of the said provision of law, the penalty cannot be imposed. Sub-section (1) of section 271 stipulates certain contingencies on the happening whereof the Assessing Officer or the Commissioner (Appeals) may direct payment of penalty by the assessee. Clause (c) of section 271(1) authorizes imposition of penalty when the Assessing Officer is satisfied that the assessee has either (a) concealed the particulars of his income; or (b) furnished inaccurate particulars of such income. It was not the case of furnishing inaccurate particulars of income, as in the income-tax return, particular of income had been duly furnished and the surrendered amount of income was duly reflected in the income-tax return.

In view of the above discussion, we found that in absence of any satisfaction recorded by Assessing Officer while passing the assessment order that there was non-disclosure of income offered during the survey proceeding, no penalty for concealed income is leviable. The ration of decision in case of MAK Data (supra) relied by ld CIT(A) is not applicable on the facts of the present case. The said case is related with the search carried under section 132; moreover, the assessee surrendered the 7 M/s Alpha Lite income while it was detected by assessing officer while making quarries.

In the result, appeal filed by assessee is allowed.