TMI Blog2017 (12) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... evying penalty is for concealment of income and the order of CIT(A) confirming the levy of penalty is on furnishing of inaccurate particulars of income. Such contrary orders by the Assessing Officer and the CIT(A) cannot survive as they have failed to come to conclusion as to whether the assessee has concealed its 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. - Decided in favour of assessee. - ITA No. 1296/PUN/2015 - - - Dated:- 31-10-2017 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM Appellant by : Shri Sanket Joshi Respondent by : Shri Achal Sharma, Addl.CIT ORDER Per Sushma Chowla, JM The appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an individual and had earned income from business, house property and other sources. The assessee was engaged in the proprietary business of trading in all types of MS scrap and machines scrap, etc. The assessment of assessee was taken up for scrutiny and the first addition which was made in the hands of assessee was on account of ESCI not paid within due date as stipulated under section 36(1)(va) of the Act i.e. contribution from the employees towards the welfare fund. The addition was made in the hands of assessee of ₹ 16,815/-. Another addition which was made was on account of personal use of vehicle and sum of ₹ 50,000/- was disallowed on adhoc basis. Further, the assessee had shown sum of ₹ 12,76,435/- as his agricultural income. The assessee was asked to produce certain details with regard to agricultural income. However, sum of ₹ 1,50,000/- was disallowed from agricultural income and was considered as Income from other sources in his hands. Further, the Assessing Officer had received information from the Sales Tax Department of Maharashtra in respect of hawala transactions. The assessee in reply, pointed out that he had neither purchased any materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee does not fall within clause (a) or clause (b) of Explanation 4 to section 271(1)(c) of the Act and there cannot be any tax sought to be evaded . The Assessing Officer rejecting the explanation of assessee was of the view that the assessee had concealed income within meaning of section 271(1)(c) of the Act read with Explanation 1 and penalty under section 271(1)(c) of the Act was levied on the concealed income of ₹ 85 lakhs at ₹ 25,50,000/-. 6. The CIT(A) after deliberating upon the issue and various judicial pronouncements observed that the assessee had made undisclosed investments in shops which was admitted during the course of survey and the return of income was revised incorporating the disclosure made during the course of survey of ₹ 85 lakhs. The revision of return of income incorporating the said declaration was the testimony of the fact that the assessee was admitting its concealment, was held by the CIT(A) and penalty levied by the Assessing Officer was upheld observing as under:- 6.25 Adverting to the fact in the instant case it is evident that the assessee had undisclosed the investments in shops which was admitted during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2006-07, order dated 13.01.2017 and the Hon ble High Court of Calcutta in CIT Vs. Arun Kumar Khetwat (2015) 94 CCH 154 (Cal) for the proposition that if after the survey, revised return of income was filed and the same has been accepted, there is no basis for levy of penalty under section 271(1)(c) of the Act. He further stressed that whether the return of income filed after survey was valid return under section 139(5) of the Act and whether the Assessing Officer made any addition thereafter are the issues to be decided. 10. The learned Departmental Representative for the Revenue placed reliance on the ratio laid down by the Hon'ble Supreme Court in MAK Data (P) Ltd. Vs. CIT (2013) 358 ITR 593 (SC) and the Hon ble High Court of Karnataka in B. Damodar Vaman Baliga Jewellers Vs. JCIT (2013) 353 ITR 206 (Kar). He further referred to the provisions of section 271(1B) of the Act and pointed out that once the penalty proceedings have been initiated, then there is deemed satisfaction in the case. 11. The learned Authorized Representative for the assessee in rejoinder pointed out that even in the case of deemed satisfaction, it is the requirement of law that specific charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income filed in response to section 139(5) of the Act, can the assessee be held liable for not having voluntarily declared the said income?. Admittedly, the assessee had not declared the said income in the original return of income and had declared the same while filing the revised return of income, after Survey on the premises of assessee. The said return filed under the provisions of section 139(5) of the Act is admittedly, a valid return and the additional income offered in such return of income has been accepted as such, by the Assessing Officer. Once the income has been declared by the assessee and has been accepted by the Assessing Officer as such, can the assessee be held liable for levy of penalty for concealment under section 271(1)(c) of the Act?. 13. Before going into jurisdictional issue of recording of satisfaction or not by the Assessing Officer while initiating penalty proceedings, the first part of the issue is levy of penalty under section 271(1)(c) of the Act on the returned income, which includes additional income offered during the course of Survey. The case of assessee before us is once the income returned has been assessed in the hands of assessee as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the Act is a penal provision and such a provision has to be strictly construed. Unless the case falls within 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct has to be construed strictly. Unless it is found that there is actually a concealment or non-disclosure of the particulars of income, 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. 17. We, thus, answer the questions as formulated above, in favour of the assessee and against the Revenue finding no fault with the decisions of the CIT(A) as well as the Tribunal. As a result, this appeal is dismissed. 14. Another facet which has to be considered is that the additional income was offered during the course of Survey, which was conducted at the premises of assessee. However, it was the Assessing Officer who initiated penalty proceedings against the assessee and levied the same. The Hon ble Delhi High Court has categorically laid down that where the Assessing Officer had not recorded any satisfaction during the course of Survey, the decision to initiate penalty proceedings being taken while making the assessment order, then it was held Thus, the expression in the course of any proceedings under this Act could not have the refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the Assessing Officer in initiating penalty proceedings is invalid. In this regard, we find support from the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Shri Samson Perinchery in Income Tax Appeal No.1154 of 2014 with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017, wherein it was held that where initiation of penalty is on one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty 17. Applying the said principle as laid down by the Hon ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra), the requirement of the Act is to initiate penalty proceedings on account of non satisfaction of one limb especially in a case where one addition is sought to be made, for levy of penalty under section 271(1)(c) of the Act. As referred to by us in the earlier paras and also in this para, we find that there is total non recording of any satisfaction as to which limb of section 271(1)(c) of the Act has not been complied with by the assessee and in the absence of such show cause notice, where the Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple, we hold that even if it is established that the additional income is on account of concealment of income but while recording satisfaction for initiating penalty proceedings, the Assessing Officer should explicitly mentions as to whether penalty is being initiated for concealment or income or for furnishing of inaccurate particulars of income. In the absence of the same, notice issued in such circumstances, which also is not clear as to which limb of section 271(1)(c) of the Act is attracted, stands vitiated and the penalty order passed consequent to such notice is invalid in law. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act in the case of assessee. The ground of appeal No.8 raised by the assessee is thus, allowed. Other grounds of appeal raised on merits of issue become academic and also additional ground of appeal. 18. Before parting, we may also refer to the decision of the Hon ble High Court of Delhi in (1) Ms. Madhushree Gupta (2) British Airways Profit and Loss Account Vs. Union of India and Another (2009) 317 ITR 107 (Del), wherein the retrospective operation of section 271(1B) of the Act was challenged being violative of Article 14 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law. 20. The next aspect which has to be considered is that the Assessing Officer while levying penalty under section 271(1)(c) of the Act, in para 5 had held the assessee to have defaulted under section 271(1)(c) of the Act read with Explanation 1 i.e. the act of concealment of additional income in the hands of assessee. The Assessing Officer vide para 7 of penalty order thus, specified that the assessee had concealed the income within meaning of section 271(1)(c) of the Act read with Explanation 1 on the additional income of ₹ 85 lakhs, hence, penalty of ₹ 25,50,000/- was levied. The CIT(A) vide para 6.25 upholds the action of Assessing Officer in levying penalty under section 271(1)(c) of the Act as the assessee had furnished inaccurate particulars of income by concealing the investments in shops. Hence, penalty has been confirmed by the CIT(A) on account of furnishing of inaccurate particulars of income which is at variance to the Explanation 1 to section 271(1)(c) of the Act applied by the Assessing Officer. Thus, there was a contrast between the order levying penalty under section 271(1)(c) of the Act and the appellate order, wherein the penalty has been lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, we rely on the proposition of the Hon ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra) wherein it has been categorically held by the Tribunal and upheld by the Hon ble High Court that while recording satisfaction for initiating penalty proceedings under section 271(1)(c) of the Act, one of the limbs i.e. either concealment of income or furnishing inaccurate particulars of income should be clearly mentioned. So, merely initiating penalty proceedings under section 271(1)(c) of the Act is not sufficient. Accordingly, applying the ratio laid down by the jurisdictional High Court in the case, we hold that in the absence of specifying the limb for which penalty proceedings have been initiated, such recording of satisfaction is invalid in law. 22. Now, coming to the issue which was decided by the Hon ble High Court of Karnataka in B. Damodar Vaman Baliga Jewellers Vs. JCIT (supra), wherein it was held that where the revised return of income was filed as a result of Survey unearthing undisclosed income that the same could not be considered as voluntary return and penalty under section 271(1)(c) of the Act was leviable in such cases. The learned Departmental Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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