CHANDRAKANT S. AGARWAL (HUF),PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

PER D. KARUNAKARA RAO, AM:

This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals)-6, Pune dated 10.02.2016 for the Assessment Year 2007-08 in connection with levy of penalty u/s.271(1)(c) of the Act.

2 ITA No.1103/PUN/2016 Chandrakant S. Agarwal (HUF)

discovery of excess stock. Assessee offered Rs.25 lakhs as additional to

cover up the said discrepancies in the stock and paid the dues taxes on

the said additional income. At the end of assessment u/s.143(3) of the

Act, no other addition was made by the AO. However, the penalty

proceedings were initiated for concealment of income and eventually the

AO levied the penalty of Rs.7,75,827/-. In the First Appellate

proceedings, the CIT(A) considered the submissions on the aspect of

recording of satisfaction by the AO and held the notice u/s.274 r.w.s.

271(1)(c) of the Act as valid one. Further, the CIT(A) considered the

submissions of the assessee that is (1) no penalty is leviable in cases

where there is no difference between the assessed income and returned

income; and (2) penalty is not leviable as there is no tax sought to be

evaded. At the end of the First Appellate proceedings, the CIT(A) rejected

the said submissions made by the assessee and eventually, upheld the

penalty levied by the AO.

appeal before the Tribunal with the following solitary ground :

“ On facts and circumstances prevailing in the case and as per provisions of the law it be held that penalty u/s.271(1)(c) levied by the AO and confirmed by the Ist Appellate Authority is contrary to the provisions of law, unjustified and 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.” in law,

order of Tribunal in the case of Ashok S. Agarwal in ITA

no.1227/PUN/2016, dated 05-06-2018 for the A.Y. 2007-08 and

submitted that, in the said also, there was survey action us.133A of the

3 ITA No.1103/PUN/2016 Chandrakant S. Agarwal (HUF)

Act on the same date of 13-03-2007. During the said survey action, the

assessee disclosed the excess stock by the assessee in the return of

income filed subsequently before the due date and the penalty is held

unsustainable in law. Contents of Para No.12 and 13 of the order of

Tribunal are relevant. Therefore, the solitary issue raised in this appeal

now stands decided in favour of the assessee. Further, Ld. Counsel for

the assessee relied on the following decisions/judgments :

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.1103/PUN/2016 Chandrakant S. Agarwal (HUF)

“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.

5 ITA No.1103/PUN/2016 Chandrakant S. Agarwal (HUF)

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.

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

6 ITA No.1103/PUN/2016 Chandrakant S. Agarwal (HUF)

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.

Order pronounced on this 20th day of June, 2018.

Sd/- Sd/-

(VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे / Pune; िदनांक Dated : 20th June, 2018. Satish आदेश की (ितिलिप अ*ेिषत/Copy of the Order is forwarded to : अपीलाथ� / The Appellant; 1. ��थ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-6, Pune 3. आयकर आयु� / The Pr.CIT-5, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / 5. DR ‘A’, ITAT, Pune; गाड# फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER,स स�ािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune