Revenue's appeal dismissed against deletion of penalty under section 271(1)(c) for surrendered income without incriminating material

ITAT Guwahati dismissed Revenue's appeal against deletion of penalty u/s 271(1)(c). Assessee surrendered Rs. 5 crore income calculated on estimated basis for unrecorded sales without specific incriminating material. The surrendered amount was offered in return and accepted by AO. Despite surrender, assessee showed loss of Rs. 44.99 crore after originally declaring Rs. 54.99 crore loss. CIT(A) correctly deleted penalty following established precedent in Hitech Construction case, finding no infirmity in assessment.

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Issues Involved:

1. Whether the CIT(A) was correct in law and in fact in deleting the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):

The primary issue in this case was whether the CIT(A) correctly deleted the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. The Revenue's contention was that the penalty was justified as the assessee admitted to undisclosed income from unrecorded sales, which the assessee set off against declared losses, thereby avoiding tax. The Revenue argued that this constituted concealment of particulars of income.

The Tribunal, however, upheld the CIT(A)'s decision to delete the penalty. It was noted that the penalty was levied on income admitted during a search and disclosed in compliance with a notice under Section 153A of the Act. The assessee's return, including the additional income, was accepted by the Assessing Officer without any additions. The Tribunal emphasized that the income declared in response to a notice under Section 153A should be treated as a return filed under Section 139, and if the assessed income matches the declared income, no penalty under Section 271(1)(c) is applicable.

The Tribunal referenced several judicial precedents to support its decision. In the case of DCIT vs. Purti Sakhar Karkhana, it was held that if there is no variation between the income shown in the return filed under Section 153A and the assessed income, no penalty is leviable. Similarly, in Kirit Dahyabhai Patel vs. ACIT, the Gujarat High Court held that the return filed under Section 153A is considered as filed under Section 139 for penalty purposes, and penalty is only applicable on income assessed over and above the returned income.

Additionally, the Tribunal noted that the penalty under Section 271(1)(c) is not automatic and requires specific conditions to be fulfilled. The Delhi High Court in Pr. CIT vs. Neeraj Jindal emphasized that the Assessing Officer must prove that the assessee consciously intended to conceal income. In this case, the revised return filed under Section 153A was accepted by the Assessing Officer, indicating no concealment.

The Tribunal also referred to its previous decision in the case of Hitech Construction, where it was held that no penalty is justified if the income disclosed in response to a notice under Section 153A is accepted without any incriminating material found during the search. The Tribunal observed that the assessee's disclosure was voluntary, taxes were paid, and there was no incriminating material indicating concealment.

In conclusion, the Tribunal found no infirmity in the CIT(A)'s decision to delete the penalty, as the assessee's income was accepted as declared without any evidence of concealment. The appeal by the Revenue was dismissed, affirming the CIT(A)'s order.

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