TaxTMI 
TaxTMI 
2017 (12) TMI 1521
X X X X Extracts X X X X
X X X X Extracts X X X X
....return filed by the assessee after the survey action was not voluntary and hence, the penalty levied u/s 271(1)(c) was valid in law. 4] The learned CIT(A) failed to appreciate that the assessee had offered additional income of Rs. 85,00,000/- to tax in the revised return which was accepted by the A.O. and hence, there was no question of levying penalty on the amount of Rs. 85,00,000/- which was offered by the assessee in the revised return. 5] The learned CIT(A) erred in not appreciating that the penalty u/s 271(1)(c) was not leviable on the facts of the case and also because of the fact that the tax sought to be evaded was NIL and hence, the question of levy of penalty simply did not arise. 3. The issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act at Rs. 25,50,000/-. 4. The assessee during the course of hearing raised the additional ground of appeal against initiation of penalty proceedings under section 271(1)(c) of the Act, without specifying exact charge for levy of penalty under section 271(1)(c) of the Act. The additional ground of appeal reads as under:- "1] The assessee submits that the exa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds of assessee. Further, vide para 8, the Assessing Officer notes that the assessee during the course of Survey conducted on 03.10.2011 had admitted income of Rs. 2.07 crores for assessment years 2009-10, 2011-12 and 2012-13. Consequent thereto, the assessee had revised the return of income for assessment year 2011-12 and shown undisclosed investment in stock of Rs. 85 lakhs under the head "Income from other sources". Further, declaration of Rs. 15 lakhs on the issue of MOU flats was to be considered in the return of income for assessment year 2012-13. The Assessing Officer while concluding the assessment notes that the assessee had declared and included Rs. 85 lakhs in the return of income, hence, no separate addition was to be made but penalty proceedings under section 271(1)(c) of the Act were initiated. The Assessing Officer while levying penalty under section 271(1)(c) of the Act noted the above said facts and the declaration of additional income of Rs. 85 lakhs on account of undisclosed investments in the hands of assessee. The Assessing Officer observed that the act of concealment was complete, when the assessee filed the revised return of income declaring higher income as c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee on 03.10.2011 i.e. on 31.03.2012. Thus, the CIT(A) held that the declaration of income in the revised return of income could not be said to be a voluntary act and the penalty levied of Rs. 25,50,000/- was upheld. 8. The assessee is in appeal against the order of CIT(A). 9. The learned Authorized Representative for the assessee first referred to the additional ground of appeal raised in the present appeal and pointed out that no satisfaction was recorded by the Assessing Officer while initiating penalty proceedings as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee. He further pointed out that Explanation 1 is attracted only in cases where there is addition or disallowance made in the hands of assessee. For this, he placed reliance on the ratio laid down by the Vizag Bench of Tribunal in Godavari Townships Pvt. Ltd. Vs. DCIT (2014) 148 ITD 463 (Visakhapatnam). He further pointed out that penal provisions are to be interpreted strictly and penalty for concealment could be levied only if it fits into four corners of law. He further placed reliance on the ratio laid down by the Hon'ble High Court of Delhi in CIT Vs. SAS Pharmaceuti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome was filed in time and therefore, pursuant to survey, the assessee had filed the revised return of income under section 139(5) of the Act, which was also within time and hence, no merit in rejecting the plea of assessee that no addition was made in the hands of assessee after it had filed the revised return of income and the penalty was levied on the returned income filed after the survey but before the start of assessment proceedings. He further placed reliance on the ratio laid down by the Hon'ble High Court of Delhi in SAS Pharmaceuticals (supra), which was relied upon by the Pune Bench of Tribunal in the cases of Nandkishor Tulsidas Katore Vs. ACIT (supra) and Shri Anand Suresh Jain Vs. DCIT (supra). 12. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against levy of penalty under section 271(1)(c) of the Act. In the facts of the case, the assessee had originally filed the return of income declaring total income of Rs. 1,31,14,038/-. Further, consequent to survey operation carried on at the premises of assessee, the assessee made certain declaration of additional income for three different assessment years on acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Vs. SAS Pharmaceuticals (supra), held as under:- "13. The perusal of above details reflects that the returned income has been accepted with minor variations in the final assessed incomes. The issue which arises for adjudication before us is that where the additional income has been declared in his hands whether the same is liable for levy of penalty under section 271(1)(c) of the Act. The first issue raised by the learned Authorized Representative for the assessee is that in case any income is declared pursuant to Survey, then the same is not covered under Explanation 5A to section 271(1)(c) of the Act. We find merit in the stand of assessee in this regard, wherein Explanation 5A to section 271(1)(c) of the Act categorically provides that the same is applicable in case of searches. However, the Statute is silent about the additional income offered by the persons in the revised return of income filed pursuant to Survey proceedings. The additional income was declared during the Survey and if offered by the person in the revised return of income filed thereafter, then the same does not partake the nature of additional income taken note in Explanation 5A to section 271(1)(c) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of survey. Decision to initiate penalty proceedings was taken while making assessment order. It is, thus, obvious that the expression "in the course of any proceedings under this Act" cannot have the reference to survey proceedings in this case. 15. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in the IT return filed by it. There is sufficient indication of this in the judgment of this Court in the cases of CIT vs. Mohan Das Hassa Nand (1983) 34 CTR (Del) 361 : (1983) 141 ITR 203 (Del) and in Reliance Petroproducts (P) Ltd. (supra), the Supreme Court has clinched this aspect, viz., the assessee can furnish the particulars of income in his return and everything would depend upon the IT return filed by the assessee. This view gets supported by Explns. 4 as well as 5 and 5A of s. 271 of the Act as contended by the learned counsel for the respondent. 16. No doubt, the discrepancies were found during the survey. This has yielded income from the assessee in the form of amount surrendered by the assessee. Presently, we are not concerned with the assessment of income, but the mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Katore Vs. ACIT (supra). The assessee herein had also offered additional income declared during the course of Survey in the return of income filed pursuant to Survey, which admittedly, was a valid return of income under section 139(5) of the Act. Applying the ratio laid down by the Hon'ble High Court of Delhi in CIT Vs. SAS Pharmaceuticals (supra), we find no merit in levy of penalty on the additional income which was offered to tax in the revised return of income filed after Survey. 16. Now, we take up the first aspect of satisfaction which was recorded by the Assessing Officer while framing the assessment in the hands of assessee i.e. recording of satisfaction for initiation of penalty proceedings. The perusal of assessment order reflects that vide para 8 of the assessment order, the Assessing Officer acknowledges the revised return of income filed by the assessee, wherein the undisclosed amount of investment in shops at Rs. 85 lakhs has been offered to tax under the head "Income from other sources". The Assessing Officer further acknowledges that no separate addition is to be made but penalty proceedings under section 271(1)(c) of the Act is initiated. Thereafter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ald Meadows (2016) 73 taxmann.com 241 (Kar) i.e. the amendment to section 271(1B) of the Act with retrospective effect and it was observed as under:- "16. Another aspect raised by the learned Authorized Representative for the assessee before us was in respect of decision of Hon'ble High Court of Karnataka in CIT Vs. SSA"S Emerald Meadows (supra). The substantial questions which were raised before the Hon'ble High Court are as under:- "(1) Whether, omission if Assessing Officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under section 274 r.w.s. 271(1)(c) is bad in law and invalid despite the amendment of Section 271(1B) with retrospective effect and by virtue of the amendment, the Assessing Officer has initiated the penalty by properly recording th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....following pre-requisites should be there. "Under section 271(1)(c) to initiate penalty proceedings the following pre- requisites should obtain: (i) The Assessing Officer should be "satisfied" that : (a) the assessee has either concealed particulars of his income; or (b) furnished inaccurate particulars of his income; or (c) infracted both (a) and (b) above. (ii) This "satisfaction" should be arrived at during the course of "any" proceedings. These could be assessment, reassessment or rectification proceedings, but not penalty proceedings. (iii) If ingredients contained in (i) and (ii) are present a notice to show cause under s. 274 of the Act shall issue setting out therein the infraction the assessee is said to have committed. The notice under s. 274 of the Act can be issued both during or after the completion of assessment proceedings, however, the satisfaction of the AO that there has been an infraction of cl. (c) of sub-s. (1) of s. 271 should precede conclusion of the proceedings pending before the Assessing Officer. (iv) The order imposing penalty can be passed only after assessment proceedings are completed. The time frame for pas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... income or furnished inaccurate particulars of income. It cannot be a case of satisfaction of both of limbs, one by the Assessing Officer and the second by the CIT(A). Hence, there is no merit in levy of penalty under section 271(1)(c) of the Act where the initiation of penalty proceedings is without recording satisfaction. Further, levy of penalty under section 271(1)(c) of the Act, which has been levied by the Assessing Officer for concealment of income but has been confirmed by the CIT(A) for furnishing inaccurate particulars of income again suffers from infirmities and cannot be upheld. 21. Before parting, we must also refer to the stand of the learned Departmental Representative for the Revenue in placing heavy reliance on the ratio laid down by the Hon'ble High Court of Karnataka in B. Damodar Vaman Baliga Jewellers Vs. JCIT (supra). The learned Departmental Representative for the Revenue referred to the head note and pointed out that in the first instance where penalty proceedings were initiated in re-assessment proceedings that itself would be deemed to constitute satisfaction of the Assessing Officer in terms of section 271(1B) of the Act i.e. where the assessment....