TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 537
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....nder Section 143(3) of the Act vide order dt.18.12.2009 wherein the assessee's income was assessed at Rs. 14,69,892 as against the returned income of Rs. 14,21,220 in view of the Assessing Officer resorting to a disallowance of Rs. 48,672 under Section 40A(3) of the Act. While passing the order of assessment, the Assessing Officer simultaneously initiated penalty proceedings under Section 271(1)(c) of the Act by issue of notice under Section 274 rws 271 of the Act dt.18.12.2009. 2.2 From the details on record, it transpires that in the course of survey proceedings, conducted at the assessee's business premises on 14.9.2006, certain discrepancies were noticed in the stock maintained by the assessee. The assessee admitted the excess stock amounting to Rs. 10,35,000 and admittedly offered the same for tax in the return of income for Assessment Year 2007-08 filed on 26.10.2007. The Assessing Officer who initiated penalty proceedings under Section 271(1)(c) of the Act by issue of notice under Section 274 rws 271 of the Act dt.18.12.2009, proceeded to levy penalty of Rs. 4,34,738 under Section 271(1)(c) of the Act @ 100% of the tax sought to be evaded on the excess stock of Rs. 10,3....
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....he levy of penalty under Section 271(1)(c) as affirmed by the learned CIT (Appeals) is arbitrary, excessive and ought to be deleted in toto. 7. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed." 4.1 Before us, the learned Authorised Representative submitted that in respect of the income admitted and offered by the assessee in the return of income for Assessment Year 2007-08 filed on 26.10.2007, there cannot be any penalty leviable under Section 271(1)(c) of the Act as the assessee cannot be said to have concealed particulars of income or furnished inaccurate particulars of income therein. According to the learned Authorised Representative, the starting point for imposition of penalty is the return of income and when income is declared in the return of income, that cannot be ignored. It was submitted by the learned Authorised Representative that the facts of the case on hand were that pursuant to the survey under Section 133A of the Act on 14.9.2006, the excess stock of Rs. 10,35,000 admitted therein was declared and offered to tax as part of the income of Rs. 14,21,220 in the return of income for....
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....n of this order in the case of Vasavi Shelters (supra) at paras 10 to 15 thereof is extracted hereunder : " 10. As far as the first part is concerned, viz., the justification of imposition of penalty on the income offered in the return of income by the Assessee for both the A.Ys., we are of the view that there cannot be any penalty on income which is declared in a return of income, on the facts and circumstances of the present case. Penalty u/s.271(1)( c) of the Act is imposed for "concealing particulars of income or furnishing inaccurate particulars of income". When an income which is ultimately brought to tax is declared in a return of income, there can be no question of treating the Assessee as having "concealed particulars of income or furnished inaccurate particulars of income". The starting point of determining concealment for imposing penalty is the return of income. If the return of income declares income which is ultimately brought to tax there can be no complaint by the revenue that the Assessee is guilty of "concealing particulars of income or furnishing inaccurate particulars of income". This legal position would be implicit if one reads Sec.271(1)( c) of the Act toge....
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.... the purposes of clause (c) of this subsection, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148. Explanation 5 : Where in the course of a search initiated under section 132 before the 1st day of June, 2007, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date, or, where such return has been furnished before the said date, such income has not been declared therein; or (b) for any previous year which is to end on or after the date of the search; then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of impositio....
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....rticulars of his income or furnished inaccurate particulars of such income." 11. Explanation-3 is an exception to the rule that when an income which is ultimately brought to tax is declared in a return of income, there can be no question of treating the Assessee as having "concealed particulars of income or furnished inaccurate particulars of income". Explan.-4(b) to Sec.271(1) of the Act makes this clear Expln.-4 to Sec.271 (1) of the Act lays down what is "the amount of tax sought to be evaded" on which penalty can be imposed and clause (b) lays down in any case to which Explanation 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self assessment tax paid before the issue of notice under section 148. This means that the income declared in the return of income can be ignored and penalty can be imposed even in respect of such income. Explanation 3 of section 271(1)(c)(iii) applies also in the case of assessees, who have not been assessed as yet. According to this section, if a person fails, without reasonable cause, to furnish a return of his income voluntarily under section 139 withi....
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....depend upon the IT return filed by the assessee. This view gets supported by Explanations 4 as well 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 non-disclosure of the particulars of 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. 14. Expln.5 and 5A are also an exception to the rule that when an income which is ultimately brought to tax is declared in a return of income, there can be no question of treating the Assessee as having "concealed particulars of income or furnished inaccurate particulars of income". Those Explanations will also not apply in the present case because those Explanations are applicable only when ....