2018 (6) TMI 1678 - AT - Income Tax

Appeal granted, penalty canceled under Income Tax Act; no concealment found.

Ashok S. Agarwal Versus The Dy. Commissioner of Income Tax, Circle – 8, Pune

Ashok S. Agarwal Versus The Dy. Commissioner of Income Tax, Circle – 8, Pune - TMI Issues Involved:1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.2. Recording of satisfaction by the Assessing Officer while initiating penalty proceedings.3. Validity of penalty on additional income disclosed during survey.Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The primary issue in the appeal is the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961, amounting to Rs. 2,20,617/-. The assessee, engaged in trading building/construction materials, declared a total income of Rs. 8,70,514/- in the return. During a survey under section 133A, discrepancies in physical stock were found and confronted to the assessee. The assessee declared an additional income of Rs. 8 lakhs to cover discrepancies and omissions, which was accepted by the Assessing Officer in the assessment under section 143(3). However, penalty proceedings were initiated under section 274 r.w.s. 271(1)(c) for concealment of income, leading to the imposition of the penalty.2. Recording of Satisfaction by the Assessing Officer:The assessee argued that no specific satisfaction was recorded by the Assessing Officer regarding which limb of section 271(1)(c) was violated. The assessee's representative emphasized that penal provisions must be interpreted strictly and that penalty for concealment can only be levied if it fits within the legal framework. The representative cited various judicial precedents, including CIT Vs. SAS Pharmaceuticals (2011) 335 ITR 259 (Del), to support the argument that if the revised return filed after the survey is accepted, there is no basis for penalty under section 271(1)(c).3. Validity of Penalty on Additional Income Disclosed During Survey:The Revenue argued, citing MAK Data (P) Ltd. Vs. CIT (2013) 358 ITR 593 (SC) and B. Damodar Vaman Baliga Jewellers Vs. JCIT (2013) 353 ITR 206 (Kar), that the additional income was disclosed only due to the survey and would not have been disclosed otherwise, justifying the penalty. The assessee, in rejoinder, contended that the original return was filed within time, and the revised return filed post-survey was also within the permissible period under section 139(5). Thus, no addition was made after the revised return, and the penalty was unjustified.Tribunal's Findings:The Tribunal examined whether penalty under section 271(1)(c) could be levied when the income declared in the return, including additional income disclosed during the survey, was accepted without any additions. It referred to the Pune Bench decision in Nandkishor Tulsidas Katore Vs. ACIT and the Delhi High Court ruling in CIT Vs. SAS Pharmaceuticals, which held that penalty cannot be imposed if the additional income declared during the survey is included in the valid return filed subsequently.The Tribunal noted that the Assessing Officer did not record satisfaction during the survey but decided to initiate penalty proceedings during the assessment, which was not in line with the requirement of law. The Tribunal concluded that since the additional income was declared in a valid return filed post-survey, there was no concealment or non-disclosure warranting penalty under section 271(1)(c).Conclusion:The Tribunal allowed the appeal, canceling the penalty of Rs. 2,20,617/- levied under section 271(1)(c) of the Act, upholding the assessee's argument that the penalty was unjustified as the additional income was disclosed in a valid return filed after the survey.Order Pronounced:The appeal was allowed on June 5, 2018.