TMI Blog2013 (4) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... to survey proceedings. There can be no justification for imposition of penalty on the income offered in the return of income by the Assessee for both the A.Ys., because 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 - difference between assessed income and returned income - held that:- Assessee was that it was due to inadvertence that the income declared in the return of income was less than what was offered at the time of survey. - the estimation of income is not on any incriminating material but based on agreement between the revenue and the Assessee at the time of survey. In respect of such addition, for which a bona fide explanation has been given by the Assessee, no penalty can be imposed. The law is well settled that an Explanation inserted in a penal provision cannot be regarded as a substantive provision by itself and such an Explanation can only be regarded as a rule of procedure and a rule of evidence leaving it to the assessee and the Revenue to adopt the same as the basis to substantiate their rival claims having regard to the facts of the case and the law applicable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that but for the survey u/s. 133A of the Act, the Assessee would not have filed the return of income for both the assessment years. He therefore held the return of income filed by the assessee was not voluntary and was only consequent to the discovery made at the time of search regarding existence of taxable income of the assessee. The AO imposed penalty on the same reasoning u/s.271(1)(c) of the Act in both the A.Ys. 4. The CIT(A) confirmed the order of the AO observing as follows:- "3. I have carefully considered the facts of the case and perused the penalty as well as assessment orders in the appellant's case for the two assessment years in question. It is an undisputed fact that the appellant failed to disclose income from sale of sites valuing Rs. 3,25,14,790/- and Rs. 2,69,06,710/- for asst. years 2007-08 and 2008-09 respectively, which was brought to the notice of the AO during survey proceedings. The AO worked out 11.5% as the profit from these transactions and determined income at Rs. 37,39,200/- and Rs. 7,94,271 /-respectively. As against this, the appellant had instantanty (sic) filed returns of income at 11% profit at Rs. 35,76,630/- and Rs. 7,59,740/- fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey held that penalty has to be imposed in respect of additions made in the assessment proceedings. We may, at this stage, clarify that the aforesaid decision relied upon by the ld. DR was a case where the assessee had filed the original returns of income prior to the date of survey and in those returns the income offered at the time of survey had not been declared. In the present case, however, we are concerned with a case where the assessee had not filed any return of income in the ordinary course, but had filed return of income only after the survey and in pursuance of a notice u/s. 148 of the Act. Therefore, the case of the assessee will stand on a different footing, as will be explained in the latter part of this order. 8. In all other respects, the ld. DR relied on the orders of the revenue authorities. 9. We have considered the rival submissions. We have to deal with the justification of imposition of penalty by bifurcating the income on which tax sought to be evaded was computed by the AO into two parts. The first part would be the income offered in the return of income by the Assessee for both the A.Ys. The second part would be the difference between the income decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed. Explanation 3 : Where any person, fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and, until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 5A : Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of (i) 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 for any previous year; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and, (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22.2.2010 within two years from the end of AYs 07-08 08-09. Therefore Explanation 3 will not apply to the present case 13. There can be no 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 and therefore no penalty under s. 271(1)(c) could be levied. The words 'in the course of any proceedings under this Act' in Sec. 271(1)(c ) of the Act are prefaced by the satisfaction of the AO or the CIT(A). When a survey is conducted by a survey team, the question of satisfaction of AO or the CIT(A) or the CIT does not arise. One has to keep in mind that it is the AO who initiates penalty proceedings and directs the payment of penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is 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. 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. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he letter dated 18.12.2009 was misplaced and the Assessee therefore offered only 11% of the sale value as income in the return of income filed. In the assessment proceedings, the Assessee when confronted by the AO about the discrepancy agreed to the AO taxing income at 11.5% of the sale value. In our view, the estimation of income is not on any incriminating material but based on agreement between the revenue and the Assessee at the time of survey. In respect of such addition, for which a bona fide explanation has been given by the Assessee, no penalty can be imposed. The burden that lay on the Assessee under Explanation 1 to Sec.271(1)(c) of the Act, in our view, is also satisfied in the present case. The law is well settled that an Explanation inserted in a penal provision cannot be regarded as a substantive provision by itself and such an Explanation can only be regarded as a rule of procedure and a rule of evidence leaving it to the assessee and the Revenue to adopt the same as the basis to substantiate their rival claims having regard to the facts of the case and the law applicable. On the facts and circumstances of the present case, we are of the view that imposition of penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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