TaxTMI 
TaxTMI 
2016 (1) TMI 980
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....gabad has erred in facts and on law in treating the Income declared in revised return as concealed income inspite of the fact that the Learned Assessing Officer has accepted the revised return filed after survey. The penalty initiated and levied amounting to Rs. 39,23,895/- may be deleted. 3. Such other orders be passed as may be deemed fit and proper. 4. The Appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of appeal." 3. The issue arising in the present appeal is against the initiation and levy of fresh penalty under section 271(1)(c) of the Act by the CIT(A). 4. Briefly, in the facts of the present case, the assessee had furnished the return of income on 18.12.2003 declaring total income of Rs. 82,842/-. The said return of income was processed under section 143(1) of the Act. Survey action under section 133A of the Act was carried out at the premises of the assessee and declaration of additional income of Rs. 1.75 crores was made by the assessee. Pursuant to the issue of notice under section 148 of the Act, the assessee filed revised return on 05.11.2009 declaring total income of Rs. 1,25,39,650/- and agricultur....
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....ontention of the assessee and the nature of additions held the assessee to have furnished inaccurate particulars of income to the extent of Rs. 24,53,207/- i.e. on account of addition of Rs. 23,01,567/- plus Rs. 1,51,640/-. The Assessing Officer thus levied penalty under section 271(1)(c) of the Act at Rs. 7,72,759/-. The assessee filed an appeal before the CIT(A) with regard to the said levy of penalty under section 271(1)(c) of the Act. 5. The CIT(A) vide order dated 21.11.2013 held that the assessee was not liable for any levy of penalty under section 271(1)(c) of the Act on additions of Rs. 23,01,567/- on account of alleged unexplained investment in Hotel Varsha. The Revenue is not in appeal against the said deletion of penalty by the CIT(A). The CIT(A) further held that the penalty on addition of Rs. 1,51,640/- on account of excessive agricultural income claimed by the assessee was justified. The assessee is not in appeal against the said confirmation of penalty on the additions of Rs. 1,51,640/-. 6. The CIT(A) thereafter vide para 11 noted that the Assessing Officer had not initiated or levied penalty on additional income declared by the assessee during the survey actio....
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....n, the business profit has been shown at Rs. 1,22,029/- and the same has been shown as per profit & loss account filed after survey action at Rs. 1,25,79,646/- by crediting Declaration Account to profit & loss account to the extent of Rs. 1,42,00,000/-. As the return filed by the appellant was beyond the time limit prescribed u/s 139(5), the A.O. has issued notice u/s 148 on 26/02/2009 for assessing the undisclosed income, revealed during survey action and other income, if any. The appellant has, therefore, filed revised return on 05/11/2009 declaring total income of Rs. 1,25,39,650/- including additional income of Rs. 1,24,56,810/- in response to notice issued by the A.O. u/s 148 of the Act. In this return, agricultural income has also been shown at Rs. 3,26,988/- as against Rs. 1,75,348/- shown in the original return. From the above facts, it is evident that the income disclosed in the return filed by the appellant after survey action, in response to notice u/s 148, is not voluntary but on account of facts revealed due to survey action. The appellant has undisputedly concealed the income of Rs. 1,24,56,810/- which has been offered to tax by him in return of income filed ....
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.... original return filed on 18/12/2003 and the same has been disclosed in the return filed on 05/11/2009 after survey action, filed in response to notice u/s 148 of the Act. It has also been noticed that the appellant has not filed any bonafide explanation in respect of the concealed income of Rs. 1,24,56,810/-. The penalty u/s 271(1)(c) is leviable in view of Explanation-1 to section 271(1)(c) of the Act of Rs. 1,24,56,810/-. Therefore, I am satisfied that the appellant has concealed the income of Rs. 1,24,56,810/- and hence the penalty u/s 271(1)(c) is leviable in the case of the appellant in respect of the concealed income of Rs. 1,24,56,810/-. Further, the time limit prescribed in section 271(1)(c), reproduced above, is to be counted with reference to the initiation of the penalty. In the case under appeal, the penalty u/s 271(1)(c) in respect of concealment of income has been initiated by the undersigned on 31/10/2013 and hence the prescribed time limit is up to 30th April, 2014 i.e. 6 months from the end of the month in which the penalty has been initiated. The contention of the Ld.AR of the appellant is that section 251 refers to enhancement of penalty levied....
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....alty under section 271(1)(c) of the Act should not be levied on the additional income declared by the assessee pursuant to Survey upon the assessee. Our attention was drawn to the provisions of section 251(1) of the Act to point out that it talks of the powers of CIT(A) to vary the quantum of penalty levied, which has already been levied. Our attention was also drawn to the provisions of section 271(1)(c) of the Act to point out that the section requires that in the course of any proceedings, where the Assessing Officer / CIT(A) is satisfied, they have the power to initiate and impose the penalty under section 271(1)(c) of the Act. As per the learned Authorized Representative for the assessee, the word used in proceedings in section means assessment or re-assessment passed by the Assessing Officer, 263 order passed by the Commissioner and / or enhancement order in quantum proceedings passed by the CIT(A). The learned Authorized Representative for the assessee pointed out that where the Assessing Officer did not initiate or did not levy any penalty for concealment, then even where the powers of the CIT(A) are co-terminus with the powers of the Assessing Officer, he has no power to l....
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....f Vivek Chowdhary had relied upon the decision of Hon'ble Karnataka High Court in CIT & Anr. Vs. Manjunath Cotton and Ginning Factory (supra). In view thereof, a prayer was made before us to consider the said decision of the Hon'ble Karnataka High Court. 13. We have heard the rival contentions and perused the record. The issue in the present appeal is in relation to the levy of penalty for concealment under section 271(1)(c) of the Act. In the facts of the present case before us, the assessee had originally filed return of income declaring total income of Rs. 82,842/-. Thereafter, Survey under section 133A of the Act was carried out against the assessee, in which, he made a declaration of additional income of Rs. 1.75 crores. Pursuant to the notice issued under section 148 of the Act, the assessee furnished revised return of income declaring total income of Rs. 1.24 crores and agricultural income of Rs. 3,26,988/-. The assessee in the said revised return of income had declared different amount of Rs. 1.24 crores as against the original declaration of Rs. 1.75 crores. During the course of assessment, the Assessing Officer accepted the said additional income declared by the assess....
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....d and levied penalty under section 271(1)(c) of the Act on the additional income furnished by the assessee at Rs. 1.24 crores, is the CIT(A) authorized to initiate and levy the penalty on the said undisclosed income of Rs. 1.24 crores. Admittedly, in the facts of the present case, during the course of Survey under section 133 of the Act, the assessee had made a declaration of Rs. 1.75 crores. However, in the revised return of income filed by the assessee, the total income was declared at Rs. 1.24 crores along with agricultural income of Rs. 3,26,988/-. The Assessing Officer noted that in the said revised return of income, the assessee had declared the additional income at Rs. 1.42 crores as against the original declaration of Rs. 1.75 crores. However, the declaration made by the assessee at Rs. 1.42 crores was accepted by the Assessing Officer. The perusal of the assessment order reflects that no penalty proceedings were initiated by the Assessing Officer in respect of the additional income offered by the assessee. However, the Assessing Officer initiated the penalty proce edings under section 271(1)(c) of the Act in respect of the other two additions made by it. As referred to by ....
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....rt thereafter, deliberated upon the conditions which must exist before initiating the proceedings under section 271 of the Act. The Hon'ble High Court was of the view that levy of penalty is not a matter of course, it has been found that the assessee concealed any income. Where there is no concealment, or no material for concealment, no penalty can be imposed ...., the mere addition to the taxable income would not automatically lead to an order of penalty. Further, the levy of penalty is not an automatic concomitant of the assessment. Therefore, safeguards have been provided for in the Act itself to see that the penalties are levied only in appropriate cases. Reference was made to the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC), wherein it was held that the higher income offered after search would not lead to levy of penalty automatically. Thereafter, the Hon'ble High Court considered the various facets of the terms used in the section 271(1)(c) of the Act and also the Explanation thereunder and reference was made to the words of Explanation (1), which makes it clear that where in respect of any facts material to the computati....
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....on by the Delhi High Court in the case of Ms. Madhushree Gupta reported in [2009] 317 ITR 1 07 (Delhi), wherein the Delhi High Court held that the satisfaction should be discernible in the assessment order. Position post amendment is not in much variance with pre amendment. They held that provisions will fall foul of article 14 of the Constitution if the same is not read in the manner it has read and in fact has read down the provisions to hold it constitutional. Therefore, according to the Delhi High Court, in post amendment and pre amendment there is not much difference and the satisfaction is required to be arrived in the course of assessment proceedings and should be discernible in the assessment order. Therefore, this provision makes it abundantly clear that satisfaction of the Assessing Officer before initiation of penalty proceedings is a must. The satisfaction should be that he has concealed the particulars of his income or furnished inaccurate particulars of such income and even in the absence of those expressed words or findings recorded in the assessment proceedings, if a direction as aforesaid is mentioned, it constitutes satisfaction of the Assessing Officer." 19. T....
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....ion (1) applies to all these three officers, whereas the deeming provision of sub-section 1(B) refers only to the Assessing Officer. Where the order of assessment is passed by the CIT(A) or the Commissioner, then in the course of the said proceedings, if they are satisfied that there is any concealment of particulars of income, then the said satisfaction must be stated in the said order. It is also in this facts the deeming provisions and Explanation (1) would apply and thereafter, the authority was entitled to initiate penalty proceedings under section 271(1)(c) of the Act. The Hon'ble High Court also held that deeming provision provided in subsection (1B) was confined only to the Assessing Officer. The Hon'ble High Court observed as under:- "When deeming provision not applicable 52. Sub-section (1B) only deals with satisfaction of the Assessing Officer. However, under the scheme of section 271, the persons who are authorised to compute income as well as initiate the proceedings or the Assessing Officer or the Commissioner of Income-tax (Appeals) or the Commissioner in the course of revisional jurisdiction, Explanation 1 applies to all these three officers wherea....
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....assed by the Commissioner of Income-tax (Appeals) or the Commissioner." 21. It was categorically laid down by the Hon'ble High Court that the person initiating penalty proceedings should be satisfied about the existence of the said conditions in the assessment order passed by them. The onus was on the officer passing the order to categorically state that he was satisfied that the assessee has concealed income and once such a finding is recorded, then it is sufficient to initiate penalty proceedings. In other words, if the officer passing the assessment order does not direct initiation of penalty proceedings under section 271(1)(c) of the Act, then no such proceedings can be initiated in respect of additional income, if any assessed in the hands of assessee. In view of the ratio laid down by the Hon'ble High Court of Karnataka (supra) and applying the said ratio to the facts of the present case, we find that the assessment in the present case was completed by the Assessing Officer, who consciously did not initiate any penalty proceedings in respect of the additional income offered by the assessee. However, penalty proceedings were initiated and levied by the CIT(A) during the cou....
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....djudicated on the issue and held as under:- "Who initiates penalty proceedings 54. As is clear from the words in section 271, if the Assessing Officer or the Commissioner of Income-tax (Appeals) or the Commissioner in the course of any proceedings under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of his income, he may direct that such person shall pay by way of penalty the amount mentioned therein. Therefore, the penalty proceedings have to be initiated by the person who is satisfied about the concealment of income or furnishing of inaccurate particulars of income in the course of any proceedings under this Act. In a given case if the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal or in revision, the authority is satisfied regarding concealment and furnishing of inaccurate particulars, then it is that authority which is satisfied about the said concealment or furnishing of inaccurate particulars has to initiate penalty proceedings and then pass orders in respect of the penalty to be imposed. The imposition of pen....
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....ue is examined and not any other authority. Further, levy of penalty has also to be done by the same authority, but by different proceedings. The Hon'ble High Court very clearly held the authority in whose proceedings, there is satisfaction of concealment or furnishing inaccurate particulars of income alone, can levy the penalty and not any other authority. Applying the above said principles laid down by the Hon'ble High Court of Karnataka (supra), it is clear that there are two stages i.e. first stage of initiation of penalty proceedings during the course of assessment proceedings and / or appeal or revision proceedings, as the case may be and thereafter, levy of penalty for concealment by a separate order passed under section 271(1)(c) of the Act. The person who is making the assessment in the hands of a person, is the person authorized to give the satisfaction as to whether the addition made in the hands of the said assessee justifies initiation of penalty proceedings. The exercise of initiation of penalty proceedings is at the stage of assessment by the Assessing Officer or at the stage of an appeal against the quantum appeal, by the CIT(A) or in the revision proceedings. There....
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....sed that the Hon'ble High Court in CIT & Anr. Vs. Manjunath Cotton and Ginning Factory (supra) had laid down the proposition that where the CIT(A) during the course of appellate proceedings, had initiated the penalty proceedings, then he had to complete the same by levying the penalty. We find an error in the said proposition proposed by the learned Departmental Representative for the Revenue. Admittedly, where the CIT(A) has completed the assessment during the course of appellate proceedings and he is satisfied that there is a case of concealment and furnishing of inaccurate particulars of income, then he can initiate the penalty proceedings. Thereafter, the CIT(A) is only competent to issue show cause notice to the assessee before levying the penalty under section 271(1)(c) of the Act and thereafter, levy the penalty for concealment, if the facts of the case so desire. In the facts of the present case before us, this is not the position. The assessment was completed by the Assessing Officer, who had not recorded any satisfaction for initiating the penalty for concealment under section 271(1)(c) of the Act, with regard to the additional income offered. Thereafter, in the order lev....