Penalty under s.271(1)(c) cannot be imposed when income is declared and taxed; survey u/s133A alone insufficient

ITAT held that penalty under s.271(1)(c) cannot be imposed where the income was declared and taxed in the return; survey u/s133A cannot by itself justify penalty. The tribunal found the starting point for concealment is the return, survey proceedings are not "in the course of any proceedings" for initiating penalty, and mere surmise cannot sustain penalty. Since the assessee made full disclosure and offered the surrendered amount to tax, penalty could not be levied. Decision in favour of the assessee.

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Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Determination of concealment of income or furnishing inaccurate particulars of income.
3. Applicability of Explanation 3, 5, and 5A to Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:
The assessee challenged the order of the CIT(Appeals) which confirmed the penalty imposed by the AO under Section 271(1)(c) of the Income Tax Act. The penalty was imposed on the grounds that the assessee had concealed income amounting to Rs. 81,36,400 from a joint venture known as 'Singapore Layout'. The AO's decision was based on the fact that this income was declared only after a survey conducted under Section 133A of the Act.

2. Determination of Concealment of Income or Furnishing Inaccurate Particulars of Income:
The Tribunal analyzed whether the assessee had concealed particulars of income or furnished inaccurate particulars of income. It was noted that the assessee had filed a return of income declaring the total income, including the income from the joint venture, which was accepted by the AO. The Tribunal emphasized that penalty under Section 271(1)(c) is imposed for "concealing particulars of income or furnishing inaccurate particulars of income." Since the income declared in the return was accepted and brought to tax, there was no concealment or furnishing of inaccurate particulars. The Tribunal referred to the legal position that the starting point for determining concealment is the return of income.

3. Applicability of Explanation 3, 5, and 5A to Section 271(1)(c) of the Income Tax Act:
The Tribunal examined the applicability of Explanation 3, 5, and 5A to Section 271(1)(c). Explanation 3 applies to cases where a person fails to furnish a return of income within the specified period and is deemed to have concealed particulars of income. However, in this case, the assessee filed the return within the stipulated period, and the notice under Section 148 was issued within two years from the end of the assessment year. Therefore, Explanation 3 did not apply. Explanations 5 and 5A pertain to cases of search under Section 132, which were not applicable in this case as it involved a survey under Section 133A.

The Tribunal concluded that there was no justification for imposing a penalty on the income declared in the return, as there was no concealment or non-disclosure. The Tribunal cited the Delhi High Court's decision in the case of SAS Pharmaceuticals and its own decision in Vasavi Shelters, which supported the view that penalty cannot be imposed if the income declared in the return is accepted and brought to tax.

Conclusion:
The Tribunal allowed the appeal by the assessee, holding that there was no justification for imposing a penalty under Section 271(1)(c) on the income declared in the return. The decision emphasized that penalty provisions must be construed strictly, and unless there is actual concealment or non-disclosure of income, penalty cannot be imposed. The Tribunal's decision was pronounced on August 14, 2013.

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