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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER PER SUSHMA CHOWLA, JM:
The appeal filed by the assessee is against order of CIT(A)-6, Pune, dated 22.02.2016 relating to assessment year 2007-08 against penalty levied under section 271(1)(c) of the Income Tax Act 1961 (in short the ‘Act’).
The assessee has raised the following ground of appeal:-
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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 & confirmed by the 1st 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.
The issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act at Rs.2,20,617/-.
Briefly, in the facts of the case, the assessee was engaged in the business of trading in building / construction material of tiles. The assessee had furnished the return of income declaring total income of ₹ 8,70,514/-. Survey action under section 133A of the Act was carried out in the case of assessee. During the course of survey action, the Assessing Officer had duly inventoried the physical stock found and the business premises of assessee and discrepancies found were confronted to assessee. Thereafter, assessment was completed under section 143(3) of the Act accepting the income returned by the assessee. The income declared by assessee includes declaration of ₹ 8 lakhs covering up all discrepancies, omissions, etc. for the various activities done by the assessee. Penalty proceedings were initiated under section 274 r.w.s. 271(1)(c) of the Act in respect of declaration made by the assessee and show caused the assessee in this regard. In reply, the assessee submitted that as per provisions of the Act, there was no income which could be considered as concealed in the case. He further stated that survey operation took place on 13.03.2007 and the income quantified and offered as additional income relate to the previous year relevant to assessment year 2007-08. The return of income for assessment year 2007-08 was due to be filed on or before 30.07.2007 and it was accordingly, filed on 30.07.2007 declaring such income. After considering the reply of assessee, the
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Assessing Officer held that I have considered the reply of the assessee and find no merit in the same. The assessee has disclosed the additional income only after the action u/s 133A of the I.T. Act, 1961. Had there been no survey action the assessee would have never disclosed the same. In view of the above I find it to be a fit case for imposition of penalty u/s 271(1)(c) for concealment of income. I therefore levy a penalty of Rs.2,20,617/-.
The CIT(A) after deliberating upon the issue and various judicial pronouncements had dismissed the plea of assessee.
The assessee is in appeal against the order of CIT(A).
The learned Authorized Representative for the assessee first referred to the additional ground of appeal raised in the present appeal and pointed out that no satisfaction was recorded by the Assessing Officer while initiating penalty proceedings as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee. He further pointed out that Explanation 1 is attracted only in cases where there is addition or disallowance made in the hands of assessee. He further pointed out that penal provisions are to be interpreted strictly and penalty for concealment could be levied only if it fits into four corners of law. He further placed reliance on the ratio laid down by the Hon’ble High Court of Delhi in CIT Vs. SAS Pharmaceuticals (2011) 335 ITR 259 (Del). The learned Authorized Representative for the assessee further referred to the decisions of the Pune Bench of Tribunal in Nandkishor Tulsidas Katore Vs. ACIT in ITA Nos.2174 to 2180/PN/2014, relating to assessment years 2002-03 to 2008-09, order dated 14.12.2016, Shri Anand Suresh Jain Vs. DCIT in ITA
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No.353/PUN/2015 and Shri Suresh N. Jain Vs. DCIT in ITA No.354/PUN/2015, relating to assessment year 2006-07, order dated 13.01.2017 and the Hon’ble High Court of Calcutta in CIT Vs. Arun Kumar Khetwat (2015) 94 CCH 154 (Cal) for the proposition that if after the survey, revised return of income was filed and the same has been accepted, there is no basis for levy of penalty under section 271(1)(c) of the Act. He further stressed that whether the return of income filed after survey was valid return under section 139(5) of the Act and whether the Assessing Officer made any addition thereafter are the issues to be decided.
The learned Departmental Representative for the Revenue placed reliance on the ratio laid down by the Hon'ble Supreme Court in MAK Data (P) Ltd. Vs. CIT (2013) 358 ITR 593 (SC) and the Hon’ble High Court of Karnataka in B. Damodar Vaman Baliga Jewellers Vs. JCIT (2013) 353 ITR 206 (Kar). He further referred to the provisions of section 271(1B) of the Act and pointed out that once the penalty proceedings have been initiated, then there is deemed satisfaction in the case.
The learned Authorized Representative for the assessee in rejoinder pointed out that even in the case of deemed satisfaction, it is the requirement of law that specific charge should be raised in the penalty proceedings itself. In respect of reliance on the ratio laid down by the Hon’ble High Court of Karnataka in B. Damodar Vaman Baliga Jewellers Vs. JCIT (supra), the learned Authorized Representative for the assessee pointed out that the facts of said case were at variance with the facts of the assessee, wherein the original return of income which was filed by the said assessee was not within time, hence, the revised return of income was not accepted as filed under section 139(5) of the Act.
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Hence, the addition was made in the hands of assessee, on which the penalty under section 271(1)(c) of the Act was levied which was confirmed by the Hon‟ble High Court. However, in the facts of present case, original return of income was filed in time and therefore, pursuant to survey, the assessee had filed the revised return of income under section 139(5) of the Act, which was also within time and hence, no merit in rejecting the plea of assessee that no addition was made in the hands of assessee after it had filed the revised return of income and the penalty was levied on the returned income filed after the survey but before the start of assessment proceedings. He further placed reliance on the ratio laid down by the Hon’ble High Court of Delhi in SAS Pharmaceuticals (supra), which was relied upon by the Pune Bench of Tribunal in the cases of Nandkishor Tulsidas Katore Vs. ACIT (supra) and Shri Anand Suresh Jain Vs. DCIT (supra).
We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against levy of penalty under section 271(1)(c) of the Act. In the facts of the case, the assessee had originally filed the return of income declaring total income of Rs.8,70,514/-. Survey action under section 133A of the Act was carried out in the case of assessee. During the course of survey action, the Assessing Officer had duly inventoried the physical stock found and the business premises of assessee and discrepancies found were confronted to assessee. Thereafter, assessment was completed under section 143(3) of the Act accepting the income returned by the assessee. The income declared by assessee includes declaration of ₹ 8 lakhs covering up all discrepancies, omissions, etc. for the various activities done by the assessee. However, penalty proceedings were initiated under section 274 r.w.s. 271(1)(c) of
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the Act in respect of declaration made by the assessee and consequently levied penalty. The question which arises in the present appeal is once the income has been declared by the assessee and has been accepted by the Assessing Officer as such, can the assessee be held liable for levy of penalty for concealment under section 271(1)(c) of the Act?.
Before going into jurisdictional issue of recording of satisfaction or not by the Assessing Officer while initiating penalty proceedings, the first part of the issue is levy of penalty under section 271(1)(c) of the Act on the returned income, which includes additional income offered during the course of Survey. The case of assessee before us is once the income returned has been assessed in the hands of assessee as such without making any addition, there is no merit in levying penalty under section 271(1)(c) of the Act. The case of the Revenue on the other hand, is that the additional income has been offered in the hands of assessee pursuant to Survey and in case no Survey was conducted, such additional income would not be offered, hence, it is a fit case for levy of penalty.
We find that similar case of levy of penalty on the additional income, which was offered in the return of income and whether the same was liable for levy of penalty under section 271(1)(c) of the Act, arose before the Tribunal in the case of Nandkishor Tulsidas Katore Vs. ACIT (supra). The Tribunal in turn, relying on the ratio laid down by the Hon’ble Delhi High Court in CIT Vs. SAS Pharmaceuticals (supra), held as under:- “13. The perusal of above details reflects that the returned income has been accepted with minor variations in the final assessed incomes. The issue which arises for adjudication before us is that where the additional income has been declared in his hands whether the same is liable for levy of penalty under section 271(1)(c) of the Act. The first issue raised by the learned Authorized Representative for the assessee is that in case any income is declared pursuant to Survey, then the same is not covered under Explanation 5A to section
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271(1)(c) of the Act. We find merit in the stand of assessee in this regard, wherein Explanation 5A to section 271(1)(c) of the Act categorically provides that the same is applicable in case of searches. However, the Statute is silent about the additional income offered by the persons in the revised return of income filed pursuant to Survey proceedings. The additional income was declared during the Survey and if offered by the person in the revised return of income filed thereafter, then the same does not partake the nature of additional income taken note in Explanation 5A to section 271(1)(c) of the Act. In this regard, we find support from the ratio laid down by the Hon‟ble Delhi High Court in CIT Vs. SAS Pharmaceuticals reported in 335 ITR 259 (Del), wherein it has been held as under:- “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 s. 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-s. (1) of s. 271 stipulates certain contingencies on the happening whereof the AO or the CIT(A) may direct payment of penalty by the assessee. We are concerned herewith the fundamentality provided in cl. (c) of s. 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 particulars of income, as in the IT return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the IT 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 IT return filed by the assessee, viz., whether concealment is to be found in the IT 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-s. (1) of s. 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 to 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 CIT(A). When the survey is conducted by a survey team, the question of satisfaction of AO or the CIT(A) or the CIT 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 IT return filed by it. There is sufficient indication of this in the judgment of this Court in the cases of CIT vs. Mohan Das Hassa Nand (1983) 34 CTR (Del) 361 : (1983) 141 ITR 203 (Del) and in Reliance Petroproducts (P) Ltd. (supra), the Supreme Court has clinched this aspect, viz., the
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assessee can furnish the particulars of income in his return and everything would depend upon the IT return filed by the assessee. This view gets supported by Explns. 4 as well as 5 and 5A of s. 271 of the Act as contended by the learned counsel for the respondent. 16. No doubt, the discrepancies were found during the survey. 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 as to whether this would attract penalty upon the assessee under the provisions of s. 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. Sec. 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 IT 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.” 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 facts of the present case are similar to the facts before the Pune Bench of Tribunal in Nandkishor Tulsidas Katore Vs. ACIT (supra). The assessee herein had also offered additional income during the course of Survey in the return of income filed pursuant to Survey, which admittedly, was a valid return of income under section 139(1) of the Act. Applying the ratio laid down by the Hon’ble High Court of Delhi in CIT Vs. SAS Pharmaceuticals (supra), we find
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no merit in levy of penalty on the additional income which was offered to tax in the revised return of income filed after Survey. Accordingly, penalty levied under section 271(1)(c) of the Act is hereby cancelled. The ground of appeal raised by the assessee is thus, allowed.
In the result, appeal of assessee is allowed.
Order pronounced on this 5th day of June, 2018.
Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 5th June, 2018. GCVSR आदेश की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to : अऩीऱाथी / The Appellant; 1. प्रत्यथी / The Respondent; 2. आयकर आयुक्त(अऩीऱ) / The CIT(A)-6, Pune; 3. The Pr. CIT-5, Pune; 4. ववबागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “फी” / DR 5. ‘B’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune