DCIT Vs NBM Iron & Steel Trading Pvt Ltd (ITAT Ahmedabad)
In the case of DCIT vs. NBM Iron & Steel Trading Pvt. Ltd. [ITA No. 205/Ahd/2022, dated May 17, 2023], the ITAT, Ahmedabad held that if an assessee voluntarily declares income during a survey and later includes it in their regular income tax return, no penalty under Section 271(1)(c) can be imposed. ITAT held that taxpayer had accurately disclosed the surrendered income, making the penalty unjustifiable.
Facts:
M/s. NBM Iron & Steel, Trading Pvt. Ltd. (“the Respondent”) is engaged in the business of ship breaking. The Revenue department conducted a survey under Section 133A of the Income Tax Act, 1961 (“the IT Act”) at the business premises of the Respondent and a search action under Section 132 of the IT Act at the residential premises of the Respondent both dated January 12, 2010.
During a search the director of the Respondent declared income of INR 1,80,00,000/- of the Respondent and INR 20,00,000/- in his individual capacity.
The Respondent reported INR 3,27,20,120/- (inclusive of INR 1,80,00,000/-) in its income tax return dated October 07, 2010.
However, as per regular assessment as per Section 143(3) of the IT Act dated December 29, 2011, the income was assessed at INR 4,17,26,360/-.
Aggrieved by the additions made by the Assessing officer (“AO”), the Respondent filed an appeal before the Commissioner of Income Tax (Appeal) (“the CIT (A)”) who gave partial relief to the Respondent. The Revenue department filed an appeal before the ITAT, wherein the matter was restored and remanded back to the CIT(A) for fresh hearing. In the fresh hearing, the CIT(A) confirmed the addition of INR 1,84,08,097/- on merits of the case.
Consequently, the AO issued a notice under Section 271(1)(c) r.w. Section 274 of the IT Act for levying penalty INR 62,56,911/- on the income ascertained by the CIT(A) of INR 1,84,08,097/-. In response to the notice the Respondent filed reply which was not accepted by the AO and the penalty of INR 62,56,911/- was levied vide the penalty order (“the Penalty Order”).
Aggrieved by the Penalty order, the Respondent filed an appeal before the CIT(A).
The CIT(A) vide the Order (“Impugned Order”) held that the Respondent has correctly paid taxes on income of INR 1,80,00,000/- and deleted such addition. However, for the remaining income of Rs. 4,08,097/-, the CIT(A) confirmed the addition.
Aggrieved by the Impugned Order the Revenue field an appeal before the ITAT on the grounds that the Respondent had not recorded any amount in books and made ad hoc additions in return of income which is ‘filing inaccurate particulars’ as per Section 271(1)(c) of the IT Act.
Issues:
Whether penalty could be imposed under section 271(1)(c) of the IT Act, on the income surrendered during survey which was shown by the Respondent it in income-tax return?
Held:
The ITAT, Ahmedabad in [ITA No. 205/Ahd/2022] held as under:
