TMI Blog2015 (5) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax (Appeals)-III, Bangalore dt.24.6.2014 for Assessment Year 2007-08 confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (herein after referred to as 'the Act') imposed by the Assessing Officer. 2. The facts of the case, briefly, are as under :- 2.1 The assessee, Propx. of Maruti Ceramics and engaged in the business as a dealer in ceramic tiles, filed the return of income for Assessment Year 2007-08 on 26.10.2007 admitting income of ₹ 14,21,220. A survey under Section 133A of the Act was conducted at the assessee's business premises on 14.9.2006. The return was processed under Section 143(1) of the Act and the case was taken up for scrutiny. The assessment was completed under Section 143(3) of the Act vide order dt.18.12.2009 wherein the assessee s income was assessed at ₹ 14,69,892 as against the returned income of ₹ 14,21,220 in view of the Assessing Officer resorting to a disallowance of ₹ 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 Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, the learned CIT (Appeals) ought to have appreciated the fact that the appellant has agreed to declare the difference in stock for the Assessment Year 2007-08 (which was found during survey) in addition to the normal income based on books of account declared in the return voluntarily and the appellant has also co-operated with the Revenue and accordingly the learned CIT (Appeals) ought to have refrained form affirming the levy of penalty under Section 271(1)(c) of the Act. 5. The learned CIT (Appeals) ought to have appreciated the various judgments cited by the appellant as they were applicable to the facts of the appellant s case and thus ought to have deleted the penalty under Section 271(1)(c) of the Act. 6. Without prejudice, the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partmental Representative relied on the orders of the authorities below. 4.3.1 We have heard the rival submissions and perused and carefully considered the material on record, including the judicial pronouncements cited and placed reliance on by the assessee. On perusal, we find that, inter alia, a similar issue was before the co-ordinate bench of this Tribunal in the case of Vasavi Shelters (supra); viz. the justification of the imposition of penalty under Section 271(1)(c) of the Act on income disclosed / offered for taxation in the return of income filed for the concerned year. In this regard, the co-ordinate bench held that there is no justification for levy of penalty under Section 271(1)(c) of the Act on income admitted and offered for taxation in the concerned assessment year. 4.3.2 The relevant portion 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 person shall, for 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 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 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 bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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