Concealment of particulars of income or furnishing of inaccurate particular of income by assessee has to be in income tax return filed by it. However, assessee had included the surrendered amount in its revised return. There was no such concealment or non disclosure as assessee had made a complete disclosure in income-tax return and offered the surrendered amount for purposes of tax. Therefore, no penalty under section 271(1)(c) could be levied.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal filed by the Revenue against the order of CIT(A)-II, Lucknow dated 21/03/2017. The only issue involved in this appeal is the action of the learned CIT(A) by which he has deleted the penalty which the Assessing Officer had imposed u/s 271(1)(c) of the Act.
2. At the outset, Learned D. R. submitted that the Assessing Officer had rightly imposed the penalty which learned CIT(A) has wrongly deleted as the revised return was filed only after incriminating documents were found during the course of survey and therefore, there was concealment of income in the original return and had there been no survey, the income of the assessee would have been short assessed to that extent and therefore, the Assessing Officer had rightly imposed the penalty.
3. Learned A. R., on the other hand, submitted that after the filing of return of income a survey took place u/s 133A of the Act and certain incriminating documents showing payments of Rs.77,42,720/- were found and thereafter the assessee surrendered such payment and offered the same in the form of revised return and the assessment was completed u/s 143(3) of the Act wherein the Assessing Officer had noted this fact and had accepted the surrender. It was argued that the Assessing Officer thereafter imposed penalty for concealment of income on this amount of surrender by holding that the assessee had concealed the income in its original return of income. Learned A. R. submitted that the revised return was filed well within the prescribed period of time wherein such surrender was offered as income and Assessing Officer did not make any addition to the returned income on this account and therefore, it cannot be said that assessee had concealed any income or had furnished wrong particulars of income and therefore, learned CIT(A) after relying on a number of case laws had rightly deleted the addition.
4. We have heard the rival parties and have gone through the material placed on record. We find that it is an undisputed fact that revised return of income was filed within the prescribed period of time. The learned CIT(A) had noted this fact in his order in para 7(1). The Learned D. R. was also not able to demonstrate that the revised return was a belated one. It is also a fact that in the revised return the assessee had surrendered the same amount of Rs.77,42,720/- as income and the assessment of the assessee was completed u/s 143(3) vide order dated 28/03/2016 and the Assessing Officer in the assessment order had accepted the surrender and no further addition was made on this account therefore, it cannot be said that the assessee had concealed the income as he had already declared the surrendered amount in the revised return of income and no particulars of income was found to be wrong or concealed in the revised return of income. The learned CIT(A) has passed a detailed and exhaustive order wherein he has relied on a number of case laws which hold that once the income as declared in the revised return of income is accepted and no addition with respect to that surrender are made, the penalty u/s 271(1)(c) will not be imposable. The findings of learned CIT(A), as contained from para 7.1 onwards are reproduced below:
“7(1) I have examined the facts and circumstances of the case. I have considered the order passed by the Assessing officer and the documents placed before me in the appellate proceedings as well as in the quantum proceedings. I find that the appellant filed a return o f income showing total income of Rs.98,89,870/- on 11.09.2013 within the time allowed as per provisions contained in Section 139(1) of the Act. Thereafter a survey under section 133A of the Act was carried out on 10.03.2015. During the course of the said survey certain incriminating documents were found, on the basis of which the appellant made an offer for surrender of Rs.77,42,720/-. The appellant filed a revised return of income on 31.03.2015 in which the amount of Rs. 77,42,720/- was offered as additional income and tota l income of Rs. 1,66,89,870/- was shown. The surrendered amount was accepted in the assessment order passed under section 143(3) of the Act. The revised return of income filed on 31.03.2015 is within the time allowed under section 139(5) of the Act. The issue therefore is whether the penalty under section 271(l)(c) of the Act is leviable on the amount surrendered on survey was shown in the return o f income.
7(2)(i) Hon’ble ITAT, Banglore in the case of Muninaga Reddy Vs ACIT (2013) 37 Taxmann.com 440 (Banglore – Trib) has examined the issue. The head note read as under-
Section 271(1)(c) of the Income-tax Act, 1961 – Penalty – For concealment of income [Survey, declaration of income after, effect of] – Assessment year 2008-09 – Assessee along with one ‘E’ developed a layout of house site -Competent Authority conducted a survey under section 133A upon ‘E’ on 11-11-2009 – Consequent to survey, assessee declared his share o f income from joint venture at Rs. 81 lakhs – In return o f income filed for assessment year 2008-09 on 9-6-2010, assessee apart from other income also declared aforesaid income of Rs. 81 lakhs as income from business – Assessing Officer accepted said income and passed assessment order – He also levied penalty under section 271(1)(c) on plea that but for survey operations under section 133A assessee had declared income of Rs. 81 lakhs and, therefore, he had concealed particulars of income to extent ofRs. 81 lakhs – Whether since assessee had made a complete disclosure in return of income and offered surrendered amount for purposes of tax, which was accepted and brought to tax, there could be no question of treating assessee as having concealed particulars of income or furnished inaccurate particulars of income – Held, yes – Whether, therefore, there was no justification for imposition of penalty under section 271(1)(c) on income of Rs. 81 lakhs- Held, yes [Paras 7,10 & 12] [In favour of assessee]
7(2)(ii) Similar issue was examined by Hon’ble ITAT, Ahemdabad in the case of R. Umedbhai Jewellers Pvt.Ltd Vs DCIT in ITA No. 221/Ahd/2015 dated 09.10.2015 after considering the Apex Court Judgement in the case of MAK Data (P) Ltd Vs CIT observed as under-
4.2. In the present case, it is not the case where the assessee has surrendered the amount during the course of the assessment proceedings. In the case of MAK Data (P.) Ltd. [supra] before the Hon’ble Apex Court, the assessee had already filed its return of income for AY 2004-05 on 27/10/2004, wherein assessee declared a total income o f Rs.16,17,040/-, however, before the AO, assessee surrendered another amount of Rs.40.74 lacs to avoid litigation, buy peace and amicable settlement of the dispute. In the present case, the assessee had filed its return o f income before the due date of filing and including the amount on which penalty has been levied, admittedly, prior to initiation of assessment proceedings. Further, the Ld.CIT(A) failed to take note of the observation of the Hon’ble Apex Court that the survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. In the present case, the assessee has included the amount into the return of income, therefore, in our considered view, the assessee cannot be held guilty of concealing the particulars of income. The Coordinate Bench of the Tribuna l
(ITAT “A” Bench Ahmedabad) in ITA No.1960/Ahd/2011 for AY 2006-07 in the case of ITO vs. Shri Valibhai Khanbha i Mankad, vide its order dated 27/02/2015 has confirmed the view of the Id.CIT(A) by observing as under:-
“6 The ld. CIT(A) has followed the decision of this Bench of the Tribunal rendered in the case of DOT Vs. Dr. Satish B Gupta (42 SOT 48)(Ahd). Ld. CIT-DR has contended that the CIT(A) failed to appreciate the fact that the additional income amounting to Rs.41,73,000/- was declared in consequence to the survey action by the Revenue. However, it is not disputed by the Id. CIT-DR that the assessee has declared this income in his original Return of Income, although it was belated return. As per provisions of Section 271(1)(c) of the Income-tax Act, penalty can be imposed if the assessee has concealed the particulars of income or furnishing the inaccurate particulars of such income. There is no dispute with regard to the fact that the particulars of income are reflected in the Return of Income. It is not the case of the Revenue that the returns of income filed were invalid. In fact, the Assessing Officer has proceeded on the basis of the returns filed by the assessee and particulars furnished therein. Therefore, we do not see any good reason to interfere with the order of the Id. CIT(A) which is hereby confirmed. Thus, this ground of appea l of the Revenue is rejected. “
4.3. In the light of the above, we are of the considered view that the Ld.CIT(A) has wrongly applied and misconstrued the judgement o f Hon’ble Apex Court rendered in the case of MAK Data (P.)Ltd. vs. CIT[supra] as the facts of the present case are entirely different from the facts of the case of MAK Data (P.)Ltd. vs. CIT[supra], therefore we direct the AO to delete the penalty.
7(2)(iii) Banglore Bench of Hon’ble ITAT also examined the same issue in the case of Vasavi Shelters Vs ITO in ITA No. 499 & 500 o f 2012 dated 22.02.2013 observing as under –
13. There can be no concealment or nondisclosure, as the assessee had made a complete disclosure in the IT return and offered the surrendered amount for the purposes of tax and therefore, no penalty under s. 271(1)(c) could be levied. The words ‘in the course of any proceedings under this Act’ in Sec. 271(1)(c ) of the Act are prefaced by the satisfaction of the AO or the CIT(A). When a survey is conducted by a survey team, the question of satisfaction of AO or the CIT(A) or the CIT does not arise. One has to keep in mind that it is the AO who initiates penalty proceedings and directs the payment o f penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is 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. 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. The 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 Explanations 4 as wel l as 5 and 5A of s. 271. 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) has to be construed strictly. Unless it is found that there is actually a concealment or nondisclosure of the particulars o f income penalty cannot be imposed. There is no such concealment or nondisclosure as the assessee had made a complete disclosure in the IT return and offered the surrendered amount for the purposes of tax.
15. For the reasons given above we hold that there can be no justification for imposition of penalty on the income offered in the return of income by the Assessee for both the A.Ys., because there cannot be any penalty on income which is declared in a return of income, on the facts and circumstances of the present case.
7(2)(iv) The issue was also decided by Hon’ble Delhi High Court in the case of CIT Vs SAS Pharmaceuticals in ITA No. 1058 of 2009 dated 08.01.2011:
13. It is not the case of furnishing inaccurate particular o f income, as in the income tax return, particulars of income have been duly furnished and the surrendered amount o f income was duly reflected in the income tax 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 income tax return filed by the assessee, viz., whether concealment is to be found in the income tax return.
16. No doubt, the discrepancies were found during the survey. This has yielded income from the assessee in the form o f 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) o f 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.
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.
7(3) In view of the decisions discussed supra I find that concealment of particulars of income or furnishing of inaccurate particular o f income by the assessee has to be in the income tax return filed by it. The assessee can furnish the particulars of income in his return and everything would depend upon the income tax return filed by the assessee. This view gets supported by Explanation 4 as well as 5 and 5A of Section 271 of the Act. In the instant case the appellant has included the surrendered amount of Rs.77,42,720/- in the revised return of income filed by it. 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.
8(4) Respectfully following the cases (supra), I find that the surrendered amount having been included in the revised return o f income, it does not attract penalty under section 271(1)(c) of the Act. In accordance with the discussion above, the penalty o f Rs.23,95,000/- levied by the AO under section 271(1)(c) of the Act is cancelled. The appellant gets the consequential relief. ”
4.1 Finding no infirmity in the order of learned CIT(A), the appeal of the Revenue stands dismissed.
5. In the result, the appeal of the Revenue is dismissed.
(Order pronounced in the open court on 07/09/2018)