2019 (1) TMI 1602 - AT - Income Tax

Tribunal upholds deletion of penalty under Income Tax Act section 271(1)(c)

The Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) of the Income Tax Act. It concluded that the assessee had ... Penalty u/s 271(1)(c) - change of heads of income is made by the AO during the course of assessment proceedings - HELD THAT:- It is not a case of furnishing inaccurate particulars of income, as in the Income Tax Return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the Income Tax Return nor there is a tax sought to be evaded on the basis of return of income as the assessee has not evaded any tax on the return income. The Hon'ble Delhi High Court in the case of SAS Pharmaceuticals [2011 (4) TMI 888 - DELHI HIGH COURT] has considered the expression in the course of any proceedings under this Act appearing in section 271 of the Act and held that the said expression cannot have reference to the survey proceedings. It has also held that penalty proceedings would depend upon the return of income filed by the assessee. - Decided in favour of assessee. Issues Involved:1. Deletion of penalty u/s 271(1)(c) of the Income Tax Act.2. Whether the penalty was imposed against the principles of natural justice.3. Applicability of the Supreme Court decision in Mak Data Pvt. Ltd. vs. CIT.4. Justification for penalty when there is no difference between returned income and assessed income.Detailed Analysis:1. Deletion of Penalty u/s 271(1)(c):The Revenue challenged the deletion of a penalty of Rs. 3,10,02,580/- imposed under section 271(1)(c) of the Income Tax Act. The penalty was initially levied by the Assessing Officer (AO) on the grounds that the assessee had failed to disclose an income of Rs. 10,03,31,960/- detected during a survey. The AO contended that the income was not recorded in the books and was only disclosed after the survey, implying an intention to evade taxes. However, the CIT(A) deleted the penalty, reasoning that the income was disclosed in the return and taxed under the head of 'business income,' not 'income from other sources,' as the AO had classified it.2. Principles of Natural Justice:The assessee argued that the penalty was imposed without affording a reasonable opportunity to be heard, violating the principles of natural justice. The CIT(A) noted that while the assessee did not appear for the second notice due to the illness of their Authorized Representative (AR), no adjournment was sought, and the AO had provided ample opportunity to the assessee. Thus, this ground of appeal was dismissed by the CIT(A).3. Applicability of Mak Data Pvt. Ltd. vs. CIT:The Revenue cited the Supreme Court decision in Mak Data Pvt. Ltd. vs. CIT to support the penalty. However, the Tribunal distinguished this case, noting that in Mak Data, the disclosure was made much later during assessment proceedings, whereas in the present case, the income was disclosed in the original return filed after the survey. Therefore, the facts were not comparable, and the Tribunal held that the penalty provisions were not attracted.4. Justification for Penalty:The Tribunal emphasized that the penalty u/s 271(1)(c) starts from the furnishing of details in the return of income. Since the assessee disclosed the income in the return and paid taxes accordingly, there was no concealment or furnishing of inaccurate particulars. The Tribunal referenced several judicial precedents, including decisions from the High Courts of Rajasthan, Gujarat, and Delhi, supporting the view that no penalty is leviable when the income disclosed during a survey is duly reflected in the return of income.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the penalty, concluding that:- The assessee had disclosed the income in the return and paid the due taxes.- The AO's reclassification of the income from 'business income' to 'income from other sources' did not justify the penalty.- There was no concealment of income or furnishing of inaccurate particulars in the return.- The principles of natural justice were not violated as the AO had provided ample opportunity to the assessee.Final Judgment:The Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty imposed under section 271(1)(c) of the Income Tax Act.