TMI Blog2017 (1) TMI 1508X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings in the case of assessee. The satisfaction by the Assessing Officer is missing except for direction to issue notice under section 274 of the Act initiating penalty under section 271(1)(c) of the Act. In the absence of the same, the Assessing Officer is not empowered to initiate and complete penalty proceedings against the assessee. Accordingly, we hold so. The penalty proceedings for concealment are thus, not leviable even on this jurisdictional issue. - Decided in favour of assessee. - ITA No.353/PUN/2015/, ITA No.354/PUN/2015/Assessment Year: 2006-07 - - - Dated:- 13-1-2017 - MS. SUSHMA CHOWLA, AND SHRI ANIL CHATURVEDI For the Appellant by: Shri Suhas Bora For the Respondent by: Shri P.L. Kureel Date of Pronouncement: 13.01.2017 ORDER PER SUSHMA CHOWLA, JM: Both the appeals filed by related assessee are against separate orders of CIT(A)-12, Pune, both dated 12.01.2015 relating to assessment year 2006-07 against penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. Both the appeals filed by related assessee on identical issue were heard together and are being disposed of by this consolidated order for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haman Jewellers. For the year under consideration, the assessee had furnished the return of income on 25.09.2006 declaring total income of ₹ 5,34,270/-. Survey action under section 133A of the Act was conducted at the business premises of assessee on 27.04.2005 and search action was carried out at the residential premises of the assessee. During the course of Survey, the assessee in order to buy peace of mind and to avoid litigation had offered additional income as under: - a) Value of Excess stock of gold Rs. 44,500/- b) Value of Excess stock of silver Rs.1,85,998/- c) on account of errors and omissions Rs. 9,502/- Total amount of income agreed Rs.2,40,000/- 6. The assessee had included the aforesaid additional income in its return of income on account of excess stock of gold and silver but had not included the income of ₹ 9,502/- on account of errors and omissions. The Assessing Officer had accepted the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was applicable as the assets were found during the course of search, wherein he was found to be the owner of unaccounted gold and silver. The CIT(A) confirmed the penalty levied by the Assessing Officer under section 271(1)(c) of the Act. 8. The assessee is in appeal against the order of CIT(A). 9. The learned Authorized Representative for the assessee pointed out that the additional income was offered consequent to Survey action under section 133A of the Act on the business premises of assessee on 27.04.2005. He admitted that though search was carried out at the residential premises of assessee but the declaration was in respect of excess stock in gold and silver, which was found from the business premises of assessee. The assessee was engaged in the business of jewellery. In respect of addition on account of errors and omissions of ₹ 9,502/-, the learned Authorized Representative for the assessee pointed out that the assessee had not offered the said income, since no such errors were noticed by him. He admitted that the assessee has accepted the addition made by the Assessing Officer of ₹ 9,502/-. The learned Authorized Representative for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by filing the return of income, though the same was offered as additional income during the course of Survey. The issue which needs to be adjudicated in the present appeal is that where the additional income was offered which was detected during the course of Survey at the premises of assessee, whether Explanation 5 to section 271(1)(c) of the Act is attracted. The answer to the said question is No , since it is not the case of search under which the assessee had offered the additional income. Explanation 5 to section 271(1)(c) of the Act is applicable only in the case of search. In the facts of the present case, additional income was offered by the assessee when Survey action had taken place at its business premises and certain excess stock was found from its premises. In such cases, where the assessee had offered the additional income during the course of Survey, then the same does not part take the nature of additional income referred to in Explanation 5 to section 271(1)(c) of the Act, hence Explanation 5 to section 271(1)(c) of the Act is not attracted in the present case. Since the assessee had offered the additional income in the return of income which has been acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment in construction of hospital. The assessee is a sole proprietor of hospital and had disclosed additional income in the return of income pursuant to notice issued under section 153A of the Act. The learned Authorized Representative for the assessee has vehemently stated before us that the basis of additional income was Survey and not Search and once the additional income was based on Survey proceedings, then Explanation 5A to section 271(1)(c) of the Act is not applicable. The details of original return of income filed and the returns of income filed under section 148 of the Act for assessment year 2002-03 and under section 153A of the Act for assessment years 2003-04 to 2008-09 and also the income assessed thereafter and the penalties imposed from year to year is tabulated hereunder:- A.Y. Income as per Original return of income (`) Date of original return of income Income as per return u/s 148/153A (`) Income assessed u/s 148/153A (`) Income concealed (`) Penalty imposed u/s 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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) of the Act. In this regard, we find support from the ratio laid down by the Hon ble Delhi High Court in CIT Vs. SAS Pharmaceuticals reported in 335 ITR 259 (Del), wherein it has been held as under:- 12. After considering the respective submissions of the learned counsel for the parties, we are of the view that the argument of the learned counsel for the assessee has to prevail as it carried substantial weight. It is to be kept in mind that s. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the assessee in the form of amount surrendered by the assessee. Presently, we are not concerned with the assessment of income, but the moot question is as to whether this would attract penalty upon the assessee under the provisions of s. 271(1)(c) of the Act. 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 but for the said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. Sec. 271(1)(c) of the Act 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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