TMI Blog2011 (12) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... e including the amount so surrendered. - However, while framing the assessment order, the learned AO initiated penal proceedings on the premise that the assessee had furnished inaccurate particulars by suppressing and under-reporting the investment in bank accounts and on account of income deemed to have accrued to it. - penal proceedings initiated and subsequent imposing of penalty under s. 271(l)(c) of the Act in the present appellant's case are not in accordance with the provisions of s. 271(l)(c) as envisaged in the Act. - Decided in favor of assessee. - ITA No. 1555/Ahd/2009; - - - Dated:- 16-12-2011 - Bhavnesh Saini, A. Mohan Alankamony, JJ. Samir Tekriwal, for the Appellant K. Gopal, for the Respondent ORDER A. Mohan Alankamony, Accountant Member 1. This appeal is filed by the assessee (sic-Revenue) aggrieved by the order of the CIT(A)-II, Ahmedabad in Appeal No. CIT(A)-II/CC.4/1/2008-09 dt. 3rd Feb., 2009 for the asst. yr. 2005-06 passed under s. 250 r/w s. 271(l)(c) of the IT Act, 1961. 2. Though the Revenue has raised five grounds, the prime grievance of it being- "That the learned CIT(A) had erred in deleting the penalty of Rs.49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment year. Thus, according to the Revenue, the basis for addition and the penal proceedings has been detection of out of books production and unrecorded sales as per impounded digital document and consequent concealment of income determined during the assessment proceedings. 3.2 On the basis of unearthing of the concealment of income, the assessee was issued a notice under s. 274 r/w s. 271(l)(c) of the Act requiring to show-cause as to why it should not be penalized for having concealed the particulars of its income and/or furnished inaccurate particulars of such income. After duly analyzing the lengthy submission of the assessee and also extensively quoting the findings of the Hon'ble earlier Bench in the case of Dy. CIT vs. Smt Jayshree M. Pethani [IT (SS)A No. 169/Ahd/2002] [reportated at (2006) 99 TTJ (Ahd) 644-Ed] which had laid down tests for determining the culpability and levy of penalty and also relying on various judicial pronouncements on a similar issue as recorded in the impugned order under challenge, the AO had observed thus:- "(On p. 14). Thus, the following points emerge as regards to the penalty proceedings: 1. The assessee has failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the learned CIT(A) for relief. During the course of appellate proceedings (penalty), it was valiantly argued that:- "3....that penalty cannot be levied on addition of Rs.89,40,079 under s. 40A(3) made by disallowing 20 per cent of cash expenditure. All the expenditure are genuine and incurred for earning the income. Since the ' sales and purchase was outside books, it was incurred in cash but the fact is that the expenditure is incurred and disallowance does not call for imposition of penalty for concealment. For addition of Rs.89,98,810 being profit out of book it was submitted that the assessee has already surrendered amount of Rs.1,60,00,000 at the time of survey and in statement recorded and also officered (sic) offered it in return of income. When he has offered it as income, the levy of penalty under s. 271(1)(c) on this amount is not justified. Further, it was submitted that the AO while making the assessment has taken sale of country liquor from regular book and sale of Indian Made Foreign Liquor from unaccounted book which is not proper. Both the figures should be taken from the unaccounted books and if this is taken, there will be no difference in returned and asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing case laws, namely: (i) IMP Precision Engg. Co. Ltd vs. Dy. CIT (2009) 223 CTR (Guj) 301: (2009) 20 DTR (Guj) 294: (2011) 330 ITR 93 (Guj); (ii) Asstt. CIT vs. Kirit Dhyabhai Patel (2009) 125 TTJ (Ahd)(TM) 145: (2009) 28 DTR (Ahd)(TM)(Trib) 380: (2009) 121 ITD 159 (Ahd)(TM)- Tribunal, Ahd 'B' Third Member Bench; and (iii) Shyam Behari vs. Asstt. CIT (2011) 43 SOT 129 (Del). 5.2 On the other hand, the learned Authorised Representative came up with emphatic reiteration of more or less what was portrayed before the first appellate authority. In furtherance, it was contended that the levy of concealment penalty under s. 271(1)(c) of the Act was not at all justifiable as the income disclosed during the course of survey proceedings was included in the return of income furnished on 31st Oct., 2005 and, hence, it was urged, no concealment in the return filed by the appellant. It was, further, submitted that the penalty proceedings for the asst. yrs. 2004-05 and 2006-07 were dropped on identical facts, and, thus, the stand of the AO to levy of penalty for the impugned assessment year under dispute was not at all justified. Further, the learned Authorised Representative s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed during the course of survey proceedings was included in the return of income furnished and, hence, no concealment in the return filed by the assessee. The, learned Authorised Representative further submitted. that the penalty proceedings for the, asst: yrs. 2004-05 and 2006-07 were dropped on identical facts, and, thus, the stand of the AO to levy of penalty for the assessment year under dispute was not justified and that the appellant sought refuge under cl. 2 of Expln. 5 to s. 271(1)(c) of the Act since the disclosure was made during the course of search proceedings under s. 132(4) of the Act. 6.3 Let us now analyse the legal position on the issue: Case laws relied on by the Revenue: (i) LMP Precision Engg. Co. Ltd. vs. Dy. CIT (supra): The issue before the Hon'ble Court was, briefly, that the statement of the Chairman and MD of the assessee company was recorded, as certain purchases made by it did not appear to be genuine. It was, only thereafter, the assessee filed a declaration under s. 273A disclosing additional income of Rs.54.71 lakhs' as being relatable to the asst. yr. 1985-86 which was followed by revised returns for all the three relevant assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome on 31st Oct., 2005, on the basis of materials available wherein it had added additional income of Rs.1.60 crores in its computation of income. It is pertinent to mention here that the learned AO in his assessment order had unwittingly mentioned that a notice under s. 153C of the Act was served on the assessee on 27th April, 2006, whereas a return of income declaring a total income of nil was filed on 23rd March, 2006. (iii) Shyam Behari vs. Asstt. CIT (supra): 6.6 In this case, during the course of search, it was found that the assessee was keeping two sets of books and documentary evidence was found exhibiting the involvement of assessee in selling the goods out of books and recording expenditure. The AO made the addition by estimating the profit at 10 per cent on unrecorded sales which was reduced to 4 percent by the CIT(A) and 3 per cent by the Tribunal. The penalty levied on addition was confirmed by the CIT(A). It was held by the Hon'ble Tribunal that the assessee was maintaining two sets of books and addition had been made on the basis of the documentary evidence which had been confirmed upto the Tribunal. It is not the case of simpliciter estimation of the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year under consideration on 29th Nov., 2002 where this income was duly disclosed therein. Under s. 271(l)(c) the concealment of income is to be inferred from the return of income and not merely an attempt to make concealment. If the assessee rectifies itself and declares the correct income in the valid return of income and does not file any return by concealing the income then such act is not punishable under s. 271(l)(c) of the Act. Therefore, in our considered opinion, no penalty can be levied in respect of income of Rs.8 lacs which was duly disclosed by the assessee in its valid return of income. 6. Further, we find that the remaining amount of assessed income was determined on the basis of estimation of the income because of rejection of books of account. No positive material was brought on record by the Revenue to show that any bogus or non-genuine expenditure was claimed by the assessee in the return of income...........................We do not find any force in the contention of the learned Departmental Representative that as ultimately assessed income is almost 16 times of the returned income, therefore, penalty under s. 271(1)(c) should be levied. In our considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been returned or furnished copies thereof by the Revenue to facilitate the appellant to finalize its accounts and to sketch its computation of income.,It may not also be out of place to mention here that the learned AO in his assessment order had mentioned that a notice under s. 153C of the Act. was issued on 27th April, 2006 which was served upon the assessee on 27th April, 2006. However, on the same breath, he had stated that in response to notice issued under s. 153C of the Act, return of income declaring total income of Rs.Nil was filed on 23rd March, 2006. If the learned AO's assertion were to be taken on its face value, then the assessee on its own, rather voluntarily, furnished its return of income before the issuance of the notice under s. 153C of the Act wherein it had volunteered to admit an additional income of Rs.1.60 crores. (ii) CIT vs. SAS Pharmaceuticals (supra): Briefly, the assessee's business premises were subjected to survey operation and during the survey discrepancies in cash, stock and difference in the cost of renovation were unearthed. When confronted, the assessee had surrendered the amount of Rs.88.14 lakhs during the survey and while furnishin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the four corners of the said provision, penalty cannot be imposed. Sub-s. (1) of s. 271 stipulates certain contingencies on the happening whereof the AO or the CIT(A) may direct payment of penalty by the assessee. We are concerned herewith the fundamentality provided in cl. (c) of s. 271(1) of the Act which authorizes imposition of penalty when the AO is satisfied that the assessee has either: (a) concealed the particulars of his income; or (b) furnished inaccurate particulars of such income. 13. it is not the case of furnishing inaccurate particulars of income, as in the IT return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the IT return. The question is whether the particulars of income were concealed by the assessee or not. It would depend upon the issue as to whether this concealment has reference to the IT return filed by the assessee, viz., whether concealment is to be found in the IT return. 14. We may, first of all, reject the contention of the learned counsel for the Revenue relying upon the expression 'in the course of any proceedings under this Act' occurring in sub-s. (1) of s. 271 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the IT return and offered the surrendered amount for the purposes of tax." 6.9 We fully endorse the ruling of the Hon'ble Court. In the present case also, the assessee had surrendered a whopping sum of Rs.1.6 crores during the course of survey/search and seizure operation. While furnishing its return of income, the appellant had declared its income including the amount so surrendered. However, while framing the assessment order, the learned AO initiated penal proceedings on the premise that the assessee had furnished inaccurate particulars by suppressing and under-reporting the investment in bank accounts and on account of income deemed to have accrued to it. 6.10 Taking into account the submissions of the learned Authorised Representative, the learned Departmental Representative and also the judicial pronouncements on a similar issue and in conformity with the findings of the Hon'ble Bench in the case of Sadhbhav Builders vs. ITO (supra) and the ruling of the Hon'ble Delhi High Court cited supra, we are of the unanimous view that penal proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
