Shri. Muninaga Reddy, Bangalore V. ACIT, Bangalore

ITA 1488/BANG/2012

• Counselvise Citation: 148821114 RSA 2012
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 15-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRISCILLA SINGSIT CITIIIDR
• Assessee Lawyers: P DINESH
• Section: 142(1); 133A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.1488/BANG/2012 ASSESSMENT YEAR : 2008-09 SHRI MUNINAGA REDDY, NO.45, 3 RD B MAIN ROAD, 4 TH CROSS, 3 RD BLOCK, KALYAN NAGAR, BANGALORE 560 043. PAN : AFLPR 5736E VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI P. DINESH, ADVOCATE RESPONDENT BY : SMT. PRISCILLA SINGSIT, CIT-III(DR) DATE OF HEARING : 12.08.2013 DATE OF PRONOUNCEMENT : 14.08.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 31.08.2012 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSE SSMENT YEAR 2008-09. ITA NO.1488/BANG/2012 PAGE 2 OF 12 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(APPEALS) WHEREIN THE CIT(APPEALS) CONFIRMED THE ORDER OF THE AO IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE ASSESSING OFFICER ARE AS FOLLOW S. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE ALONG WITH ONE SHRI E. KR ISHNAPPA DEVELOPED A LAYOUT OF HOUSE SITES KNOWN AS SINGAPORE LAYOUT. THERE WAS A SURVEY CONDUCTED U/S. 133A OF THE ACT IN THE CASE OF THE A SSESSEE ON 01.02.2008. IN THE COURSE OF THE SAID SURVEY, THE ASSESSEE DECL ARED AN AMOUNT OF RS.5.26 CRORES AND RS.70 LAKHS FOR THE A.Y. 2006-07 & 2007-08 RESPECTIVELY. THERE WAS ALSO A SURVEY U/S. 133A OF THE ACT CONDUCTED IN THE CASE OF E. KRISHNAPPA ON 11.11.2009. CONSEQUEN T TO SURVEY IN THE CASE OF E. KRISHNAPPA, THE ASSESSEE AND E. KRISHNAP PA DECLARED INCOME FROM JOINT VENTURE OF DEVELOPING A LAYOUT KNOWN AS SINGAPORE LAYOUT. THE ASSESSEE DECLARED HIS SHARE OF INCOME FROM THE JOIN T VENTURE OF RS.81,36,400. THE ASSESSEE HAD ALSO DECLARED INCOM E OF RS.88,00,098 FROM BUSINESS. THE ASSESSEE IN ALL DECLARED INCOME FOR THE A.Y. 2008-09 OF A SUM OF RS.1,76,94,888, WHICH APART FROM BUSINE SS INCOME STATED ABOVE ALSO INCLUDED AN AMOUNT OF RS.7,57,401 AS INC OME FROM PROPERTY AND RS.979 AS INCOME FROM OTHER SOURCES. RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 09.06.2010. SINCE IT WAS A BELATED RETURN, THE SAME WAS LODGED. TO REGULARIZE THE RETURN FILED BY THE ASSE SSEE, A NOTICE U/S. 148 WAS ISSUED. THE ASSESSEE THROUGH HIS AR BY LETTER DATED 16.09.2010, ITA NO.1488/BANG/2012 PAGE 3 OF 12 PLEADED THAT THE RETURN FILED ON 09.06.2010 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. THEREAFTER , THE AO REFERRED TO THE SURVEY AND THE OUTCOME OF THE SURVEY, ACCEPTED THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. THE FOLLOWIN G ARE THE RELEVANT OBSERVATIONS OF THE AO:- 5.2 THE ASSESSEE HAD NOT MAINTAINED PROPER BOOKS O F ACCOUNTS AND DID NOT FILE ANY AUDIT REPORT IN RESPECT OF BUS INESS INCOME. AFTER VERIFYING ALL THE SUPPORTING MATERIALS, THE I NCOME RETURNED AT RS.1,76,94,888/- IN RESPONSE TO NOTICE U/S. 148, IS FOUND TO BE IN ORDER AND THE SAME IS ACCEPTED. 4. IN THE ASSESSMENT ORDER, THE AO INITIATED PENALT Y PROCEEDINGS U/S. 271(1)(C) OF THE ACT. IN RESPONSE TO THE NOTICE IS SUED BY THE AO BEFORE IMPOSING PENALTY, THE ASSESSEE SUBMITTED THAT THE I NCOME DECLARED IN THE RETURN OF INCOME HAS BEEN ACCEPTED BY THE AO AND TH EREFORE THERE WAS NO QUESTION OF ANY CONCEALMENT OF PARTICULARS OF INCOM E AND THEREFORE THERE CANNOT BE ANY IMPOSITION OF PENALTY ON THE ASSESSEE . THE AO, HOWEVER, TOOK THE VIEW THAT BUT FOR THE SURVEY OPERATIONS U/ S. 133A OF THE ACT, THE ASSESSEE WOULD NOT HAVE DECLARED INCOME OF RS.81,36 ,400 FROM THE JOINT VENTURE CARRIED OUT WITH E. KRISHNAPPA FOR FORMING A LAYOUT KNOWN AS SINGAPORE LAYOUT. THE AO ACCORDINGLY HELD THAT T HE ASSESSEE HAS CONCEALED HIS PARTICULARS OF INCOME TO THE EXTENT O F RS.81,36,400 AND IMPOSED PENALTY ON THE ASSESSEE, WHICH WAS 100% OF THE TAX SOUGHT TO BE EVADED. THE AO ALSO MADE A REFERENCE TO THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF UOI V. DHARMENDRA TEXTILES PROCESSORS, 295 ITA NO.1488/BANG/2012 PAGE 4 OF 12 ITR 244 (SC) , WHEREIN THE HONBLE SUPREME COURT TOOK A VIEW THA T PENALTY U/S. 271(1)(C) IS A CIVIL LIABILITY AND IS COMPENSA TORY IN NATURE, HENCE THE ELEMENT OF MENS REA IS NOT REQUIRED. 5. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ORDER OF THE AO. THE CIT(APPEALS) ALSO REJECTED THE ARGUMENT OF THE ASSESSEE THAT MERE ACCEPTANCE OF ADDITIONAL INCOME DECLARED BY TH E ASSESSEE AT THE TIME OF ASSESSMENT WOULD NOT TANTAMOUNT TO CONCEALMENT. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS PREFERR ED AN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNE D DR RELIED ON THE ORDER OF THE CIT(A). THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED BEFORE US THAT SINCE THE RETURN OF INCOME FILED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE AO AND SINCE THE INCOME DECLARED IN THE RETURN OF INCOME WAS DUE TO FINDINGS IN A SURVEY U/S.133A OF THE ACT , THERE CAN NO IMPOSITION OF PENALTY FOR CONCEALMENT AND IN THIS R EGARD RELIED ON THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF VASAVI SHELTERS VS. ITO IN ITA NO.S 499 & 450/BANG/2012 DATED 22.2.201 3. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. SAS PHARMACEUTICALS 335 ITR 259 (DEL) WHERE IN ON IDENTICAL FACTS OF THE CASE, THE HONBLE DELHI HIGH COURT TOOK THE VIEW THAT PENALTY U/S.271(1)(C) OF THE ACT, CANNOT BE IMPOSED. ITA NO.1488/BANG/2012 PAGE 5 OF 12 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS FAR AS IMPOSITION OF PENALTY ON THE INCOME OFFERED IN THE RETURN OF INCO ME BY THE ASSESSEE IS CONCERNED, WE ARE OF THE VIEW THAT THERE CANNOT BE ANY PENALTY ON INCOME WHICH IS DECLARED IN A RETURN OF INCOME, ON THE FAC TS AND CIRCUMSTANCES OF THE PRESENT CASE. PENALTY U/S.271(1)( C) OF THE AC T IS IMPOSED FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INA CCURATE PARTICULARS OF INCOME. WHEN AN INCOME WHICH IS ULTIMATELY BROUGH T TO TAX IS DECLARED IN A RETURN OF INCOME, THERE CAN BE NO QUESTION OF TRE ATING THE ASSESSEE AS HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME. THE STARTING POINT OF DETERMINING CONC EALMENT FOR IMPOSING PENALTY IS THE RETURN OF INCOME. IF THE RETURN OF INCOME DECLARES INCOME WHICH IS ULTIMATELY BROUGHT TO TAX THERE CAN BE NO COMPLAINT BY THE REVENUE THAT THE ASSESSEE IS GUILTY OF CONCEALING PARTICUL ARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THIS LEGAL POSI TION WOULD BE IMPLICIT IF ONE READS SEC.271(1)( C) OF THE ACT TOGETHER WITH E XPLN.3, 5 AND 5A OF THE ACT, WHICH CARVES OUT EXCEPTION FOR THE LEGAL POSIT ION AS STATED ABOVE. SEC.271 (1) (C ): FAILURE TO FURNISH RETURNS, COMP LY WITH NOTICES, CONCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) . (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, ITA NO.1488/BANG/2012 PAGE 6 OF 12 HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, (D) ... (I) (II) .. (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHIC H SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES TH E AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1 : WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS)OR THE COMMISSIONER TO BE FAL SE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FO R THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPR ESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. EXPLANATION 3 : WHERE ANY PERSON, FAILS, WITHOUT RE ASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPECIFIED IN SU B-SECTION (1) OF SECTION 153 A RETURN OF HIS INCOME WHICH HE IS REQU IRED 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 14 8 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 O F CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO HAVE CONCEALED THE P ARTICULARS OF HIS INCOME IN RESPECT OF SUCH ASSESSMENT YEAR, NOTW ITHSTANDING ITA NO.1488/BANG/2012 PAGE 7 OF 12 THAT SUCH PERSON FURNISHES A RETURN OF HIS INCOME A T 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 INI TIATED UNDER SECTION 132 BEFORE THE 1ST DAY OF JUNE, 2007, THE A SSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELL ERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLAN ATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PART) HI S INCOME, (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE TH E DATE OF THE SEARCH, BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE, OR, WHERE SUCH RETU RN HAS BEEN FURNISHED BEFORE THE SAID DATE, SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFT ER THE DATE OF THE SEARCH; THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION, BE DEEMED TO HA VE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME, UNLESS, (1) SUCH INCOME IS, OR THE TRANSACTIONS RESULTING I N SUCH INCOME ARE, RECORDED, (I) IN A CASE FALLING UNDER CLAUSE (A), BEFORE THE DATE OF THE SEARCH; AND (II) IN A CASE FALLING UNDER CLAUSE (B), ON OR BEFO RE SUCH DATE, IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE SAID DATE; OR (2) HE, IN THE COURSE OF THE SEARCH, MAKES A STATEM ENT UNDER SUB- SECTION (4) OF SECTION 132 THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSES SION OR UNDER HIS CONTROL, HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURN ISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SEC TION 139, AND ITA NO.1488/BANG/2012 PAGE 8 OF 12 ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INT EREST, IF ANY, IN RESPECT OF SUCH INCOME. EXPLANATION 5A : WHERE, IN THE COURSE OF A SEARCH I NITIATED 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 ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PART) HIS INCOME FOR ANY PR EVIOUS 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 TRANSACT IONS REPRESENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY P REVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND, (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR 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 FO R 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 C LAUSE (C) OF SUB-SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. 8. EXPLANATION-3 IS AN EXCEPTION TO THE RULE THAT W HEN AN INCOME WHICH IS ULTIMATELY BROUGHT TO TAX IS DECLARED IN A RETUR N OF INCOME, THERE CAN BE NO QUESTION OF TREATING THE ASSESSEE AS HAVING CON CEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. EXPLAN.-4(B) TO SEC.271(1) OF THE ACT MAKES THIS CLEAR. EXPLN.-4 TO SEC.271 (1) OF THE ACT ITA NO.1488/BANG/2012 PAGE 9 OF 12 LAYS DOWN WHAT IS 'THE AMOUNT OF TAX SOUGHT TO BE EVADED' ON WHICH PENALTY CAN BE IMPOSED AND CLAUSE (B) LAYS DOWN IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEANS THE TAX ON THE TOTAL I NCOME ASSESSED AS REDUCED BY THE AMOUNT OF ADVANCE TAX, TAX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SELF ASSESSMENT TAX PAID BE FORE THE ISSUE OF NOTICE UNDER SECTION 148. THIS MEANS THAT THE INCOME DECL ARED IN THE RETURN OF INCOME CAN BE IGNORED AND PENALTY CAN BE IMPOSED EV EN IN RESPECT OF SUCH INCOME. EXPLANATION 3 OF SECTION 271(1)(C)(II I) APPLIES ALSO IN THE CASE OF ASSESSEES, WHO HAVE NOT BEEN ASSESSED AS YET. AC CORDING TO THIS SECTION, IF A PERSON FAILS, WITHOUT REASONABLE CAUS E, TO FURNISH A RETURN OF HIS INCOME VOLUNTARILY UNDER SECTION 139 WITHIN THE PER IOD SPECIFIED UNDER SECTION 153(1), I.E., WITHIN TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME IN RESPECT OF SUCH ASSESSMENT YEAR IF HE HAS TAXABLE INCOME FOR THAT YEAR. BUT THIS I S SUBJECT TO TWO LIMITATIONS FIRSTLY, IT APPLIES TO ASSESSMENT YEAR 1989-90 AN D SUBSEQUENT YEARS AND SECONDLY, NO NOTICE UNDER SECTION 142(1) OR 148 WAS ISSUED WITHIN THE SAID PERIOD OF TWO YEARS. IN OTHER WORDS, EXPLANATION 3 SHALL HAVE NO APPLICATION IF A NOTICE UNDER SECTION 142(1) OR 148 WAS ISSUED WITHIN TWO YEARS. BUT IF AN ASSESSEE FILES A RETURN OF HIS INCOME AFTER THE PERIOD OF TWO YEARS IN RESPONSE TO A NOTICE UNDER SECTION 148, HE WOULD BE CAUGHT WITHIN THE MISCHIEF OF THIS EXPLANATION. ITA NO.1488/BANG/2012 PAGE 10 OF 12 9. IN THE PRESENT CASE, EXPLN.-3 TO SEC.271(1) OF T HE ACT WILL NOT APPLY BECAUSE, AS WE HAVE SEEN THE ASSESSEE FILED THE ORI GINAL RETURN OF INCOME ON 09.06.2010 AND IN RESPONSE TO NOTICE U/S.148 OF THE ACT BY LETTER DATED 16.9.2010, REQUESTED THE AO TO TREAT THE RETURN FIL ED EARLIER AS A RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT. THUS THE RETURN OF INCOME WAS FILED WITHIN A PERIOD OF 2 YEARS FROM THE END OF AY 08-09. MOREOVER THE NOTICE U/S.148 HAD BEEN ISSUED IN THE PRESENT PRIO R TO 16.9.2010 WHICH IS WITHIN TWO YEARS FROM THE END OF AY 07-08. THEREFO RE EXPLANATION 3 WILL NOT APPLY TO THE PRESENT CASE. 10. 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 THER EFORE NO PENALTY UNDER S. 271(1)(C) COULD BE LEVIED. THE WORDS IN THE COU RSE OF ANY PROCEEDINGS UNDER THIS ACT IN SEC. 271 (1)(C) OF THE ACT ARE P REFACED 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 AN Y 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 HA VE THE REFERENCE TO SURVEY PROCEEDINGS. IT NECESSARILY FOLLOWS THAT CON CEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF IN COME BY THE ASSESSEE HAS ITA NO.1488/BANG/2012 PAGE 11 OF 12 TO BE IN THE IT RETURN FILED BY IT. THE ASSESSEE CA N FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UP ON THE IT RETURN FILED BY THE ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLAN ATIONS 4 AS WELL AS 5 AND 5A OF S. 271. OBVIOUSLY, NO PENALTY CAN BE IMPO SED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DU LY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING SU RVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURV EY. HOWEVER, THERE CANNOT BE ANY PENALTY ONLY ON SURMISES, CONJECTURES AND POSSIBILITIES. SEC. 271(1)(C) HAS TO BE CONSTRUED STRICTLY. UNLESS IT I S FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON-DISCLOSURE OF THE PAR TICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. THERE IS NO SUCH CONCEAL MENT OR NON- DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISC LOSURE IN THE IT RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE P URPOSES OF TAX. 11. EXPLN.5 AND 5A ARE ALSO AN EXCEPTION TO THE RUL E THAT WHEN AN INCOME WHICH IS ULTIMATELY BROUGHT TO TAX IS DECLAR ED IN A RETURN OF INCOME, THERE CAN BE NO QUESTION OF TREATING THE ASSESSEE A S HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. THOSE EXPLANATIONS WILL ALSO NOT APPLY IN THE PRESENT CAS E BECAUSE THOSE EXPLANATIONS ARE APPLICABLE ONLY WHEN THERE IS A SE ARCH U/S.132 OF THE ACT AND TO A CASE OF SURVEY U/S.133A OF THE ACT. 12. FOR THE REASONS GIVEN ABOVE WE HOLD THAT THERE CAN BE NO JUSTIFICATION FOR IMPOSITION OF PENALTY ON THE INCO ME OFFERED IN THE RETURN OF ITA NO.1488/BANG/2012 PAGE 12 OF 12 INCOME BY THE ASSESSEE, BECAUSE THERE CANNOT BE ANY PENALTY ON INCOME WHICH IS DECLARED IN A RETURN OF INCOME, ON THE FAC TS AND CIRCUMSTANCES OF THE PRESENT CASE. 13. THE HONBLE DELHI HIGH COURT IN THE CASE OF SAS PHARMACEUTICALS (SUPRA) AND THIS TRIBUNAL IN THE CASE OF VASAVI SHE LTERS (SUPRA) HAVE ALSO TAKEN THE VIEW AS STATED ABOVE. 14. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF AUGUST, 2013. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 14 TH AUGUST, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.