Asst. Commissioner of Income Tax, Circle-5(1), Hyderabad V. Shri G.S.Arora , Hyderabad

ITA 1789/HYD/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1817 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 26-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2013
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Tax effect; Revised return
• Section: 143(3); 133A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1789/HYD/2013 ASSESSMENT YEAR: 2009-10 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5(1), HYDERABAD VS SHRI G.S. ARORA, HYDERABAD [PAN: ABQPA4437J] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAMA KRISHNA BANDI, DR FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR DATE OF HEARING : 17-07-2015 DATE OF PRONOUNCEMENT : 21-08-2015 O R D E R THIS IS A REVENUE'S APPEAL AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-V, HYDERABAD DT. 30-09-2013 CANCELLING THE PENALTY OF RS. 10 LAKHS LEVIED U/S. 271(1)(C) OF TH E INCOME TAX ACT [ACT]. 2. BRIEFLY STATED FACTS ARE THAT THERE WAS A SURVEY AT THE BUSINESS PREMISES OF ASSESSEE ON 23-03-2009 AND DURING THE C OURSE OF SURVEY, AS PER THE FACTS STATED IN THE ASSESSMENT ORDER AND CI T(A)'S ORDER, NO INCRIMINATING MATERIAL WAS FOUND. CASH OF RS. 2,83 ,460/- WAS FOUND WHICH WAS EXPLAINED AS AN AMOUNT OF RS. 2,50,000/- WAS ADVANCE RECEIVED TOWARDS SALE OF PROPERTY OWNED BY ASSESSEE 'S DAUGHTER. THERE WERE CERTAIN COMMISSION PAYMENTS MADE IN ASSESSEE'S BUSINESS OF RUNNING NAVJIVAN CHIT FUNDS, AS ITS PROPRIETOR. ASS ESSEE ALSO HAD RENTAL INCOMES AND INCOME FROM INTEREST. ASSESSEE IN THE STATEMENT RECORDED U/S. 133A HAS AGREED TO PAY AN ADDITIONAL TAX OF RS . 10 LAKHS FOR THE I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 2 -: CURRENT YEAR. IT WAS STATED- TO QUOTE- ' TO COVER THE DEFICIENCIES OF EARLIER YEARS A WELL AS CURRENT YEAR AND TO PURCHASE PEACE WITH THE DEPARTMENT, I OFFER AN ADDITIONAL TAX OF RS. 10 LAKHS FOR THE CUR RENT YEAR. ' ACCORDINGLY, ASSESSEE PAID ADVANCE TAX AND CORRESPONDING AMOUNT OF RS. 29,42,000/- COVERING THE TAX EFFECT OF RS. 10 LAKHS WAS INCLUDE D AS 'OTHER INCOME' AND FILED RETURN OF INCOME WHEN IT WAS DUE. ASSESS ING OFFICER (AO) IN THE SCRUTINY ASSESSMENT ACCEPTED THE INCOME RETURNED. H OWEVER, HE INITIATED PROCEEDINGS U/S. 271(1)(C) ON THE REASON THAT THE ADDITIONAL INCOME WAS OFFERED IN THE COURSE OF SURVEY TO COVER UP THE DISCREPANCIES WHICH ATTRACTS PENALTY PROCEEDINGS. HE LEVIED PENA LTY OF RS. 10 LAKHS CONCLUDING THAT ASSESSEE HAS CONCEALED PARTICULARS OF INCOME. 3. IT WAS CONTENDED BEFORE THE LD.CIT(A) THAT PROVI SIONS OF SECTION 271(1)(C) WERE NOT ATTRACTED AS THE CONDITIONS STIP ULATED IN THE PROVISIONS WERE NOT SATISFIED. IT WAS SUBMITTED THAT EVEN THO UGH THERE WERE NO INCRIMINATING MATERIAL OR CONCEALED INCOME IDENTIFI ED IN THE COURSE OF SURVEY, ASSESSEE VOLUNTARILY OFFERED TO PAY ADDITIO NAL TAX AND FILED RETURN OF INCOME ACCORDINGLY. SINCE THE RETURN OF INCOME WAS ACCEPTED AS SUCH, PENALTY PROVISIONS ARE NOT ATTRACTED. ASSESSEE REL IED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAS PHARMACEUTICALS [335 ITR 259] AND ALSO PRINCIPLES LAID DOWN BY HON' BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD., [ 322 ITR 158 (SC)] AND ALSO THE CASE OF CIT VS. MOHAN DAS HASSA NAND [141 ITR 203 (DELHI). HE ALSO RELIED ON THE EXPLANATIONS TO SECTION 271(1 )(C) TO SUBMIT THAT THERE IS NO CASE FOR PENALTY AS CONTEMPLATED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. LD.CIT(A) CONSIDERED THE SUBMISSIONS AND DELETED THE PENALTY VIDE IMPUGNED ORDER WHICH IS AS UNDER: 6.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R, SUBMISSIONS OF THE APPELLANT AND I FIND FORCE IN TH E ARGUMENT OF THE APPELLANT. REGARDING THE DISCREPANCY FOUND IN CASH OF RS.2.5 LAKHS, THE EXPLANATION OF THE APPELLANT IS ACCEPTABLE, PAR TICULARLY IN VIEW OF I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 3 -: THE FACT THAT THE APPELLANT OFFERED THE SAME TO TAX . THE QUESTION OF CONCEALING THE PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WILL ARISE ONLY WITH REFERENC E TO THE RETURN OF INCOME. IN THIS REGARD, THE HON'BLE SUPREME COURT I N THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LIMITED (SUPRA) HELD TH AT THERE COULD BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RE TURN FILED BECAUSE THAT WAS THE ONLY DOCUMENT WHERE THE ASSESS EE COULD FURNISH THE PARTICULARS OF HIS INCOME AND WHEN SUCH PARTICULARS WERE FOUND TO BE INACCURATE, THE LIABILITY WOULD AR ISE. 6.3 IN THE CASE OF CIT VS SAS PHARMACEUTICALS (SUPR A), INCOME WAS OFFERED FOR TAXATION IN THE RETURN OF INCOME AF TER SURVEY, WHICH WAS ACCEPTED BY THE DEPARTMENT. PENALTY U/S 271 (1) (C) WAS LEVIED. CANCELLING THE PENALTY SO LEVIED, THE HON'BLE HIGH COURT OBSERVED AS FOLLOWS (PARA 2 AT PAGE 264): 'IT IS TO BE KEPT IN MIND THAT SECTION 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-SECTION (1) OF SECTION 271 STIPULATED CERTAIN CONTINGENCIES ON THE HAPPENING WHEREOF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) MAY DIRECT PAYMENT OF PENALTY BY THE ASSESSEE. WE ARE CONCERNED HEREWITH THE FUNDAMENTALITY PROVIDED IN CLAUSE (C) OF SECTION 271(1) OF THE ACT, WHICH AUTH ORIZES IMPOSITION OF PENALTY WHEN THE ASSESSING OFFICER IS SATISFIED THAT THE ASSESSEE HAS EITHER A. CONCEALED THE PARTICULARS OF HIS INCOME; OR B. FURNISHED INACCURATE PARTICULARS OF HIS INCOME. 6.3 IT IS NOT A CASE OF FURNISHING INACCURATE PARTI CULARS OF INCOME, AS IN THE INCOME TAX RETURN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT WAS DULY REFLECTED IN THE INCOME TAX RETURN. THE QUESTION IS WHETHER THE PARTICULARS OF INCOME WERE CONCEALED BY THE ASSESSE E OR NOT. IT WOULD DEPEND UPON THE ISSUE AS TO WHETHER THIS CONC EALMENT HAS REFERENCE TO THE INCOME TAX RETURN FILED BY THE ASS ESSEE VIZ WHETHER CONCEALMENT IS TO BE FOUND IN THE INCOME TAX RETURN . 6.4 IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PART ICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME BY THE ASSESSEE HAS TO BE IN THE INCOME TAX RETURN FILED B Y IT. THERE IS SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF TH IS COURT IN THE CASE I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 4 -: OF CIT VS MOHAN DAS HASSA NAND (1983) 141 ITR 203 ( DELHI) AND IN RELIANCE PETRO PRODUCTS PVT. LTD. [2010] 322 ITR 15 8 (SC), THE SUPREME COURT HAS CLINCHED THIS ASPECT VIZ THE ASSE SSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE INCOME TAX RETURN FILED BY THE ASSE SSEE. THIS VIEW GETS SUPPORTED 'BY EXPLANATION 4 AS WELL AS EX PLANATION 5 AND EXPLANATION 5A TO SECTION 271 OF THE ACT. THE COURT HELD THAT: 'NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISION ARE DULY AND UNAMB IGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING SU RVEY, MAY BE/ IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY O NLY ON SURMISES/ CONJECTURES AND POSSIBILITIES. SECTION 27 1 (1)(C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON DISCLOSURE O F THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. T HERE IS NO SUCH CONCEALMENT OR NON DISCLOSURE AS THE ASSESSEE HAS MADE A COMPLETE DISCLOSURE IN THE INCOME TAX RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSE OF T AX' 6.4 IT IS ALSO PERTINENT TO MENTION MY FOLLOWING OB SERVATIONS: (I) THE PENALTY ORDER WHICH IMPOSED PENALTY HAS NO MENTION OF WHAT KIND OF CONCEALMENT THE APPELLANT HAS CONCEALED. IT JUST STATES THAT DISCREPANCY FOUND IN CASH OF RS. 2.5 LAKHS WAS A ST ARK REALITY WHICH GOES TO SAY THAT THE ASSESSEE HAD NOT RECORDE D ALL HIS TRANSACTIONS IN HIS REGULAR BOOKS OF ACCOUNTS AND I T WAS NOT CERTAINLY A CASE GIVING ROOM FOR SURMISES, CONJECTU RES AND INFERENCES (POSSIBILITIES) AND HENCE, PENALTY WAS L EVIED. HERE, THE AO LOSES JURISDICTION SINCE IT IS A WELL SETTLED PR INCIPLE THAT WHAT IS GOOD FOR ADDITION IS NOT GOOD EVIDENCE FOR PENALTY. SOMETHING MORE TO INDICATE WHAT THE ASSESSEE HAS CONCEALED PARTICU LARS OF INCOME HAS TO BE INDICATED IN THE PENALTY ORDER AS TWO ORD ERS I.E. ASSESSMENT ORDER AND PENALTY ORDER ARE DISTINCT AND SEPARATE; (II) IT IS SEEN THAT EXCEPT RELYING ON THE VOLUNTAR Y ADMISSION, NO COGENT MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A O TO PROVE THAT THE INCOME ADMITTED VOLUNTARILY, REPRESENTS CONCEAL ED INCOME; (III) IT WAS ARGUED BEFORE ME THAT THE OFFER OF INC OME WAS MADE TO BUY PEACE. IN SUCH A CASE AND IN THE ABSENCE OF COG ENT EVIDENCE, NO PENALTY CAN BE IMPOSED. IN THIS REGARD, THE DECISIO N IN THE CASE OF SIR SHADILAL SUGAR GENERAL MILLS LTD (1987) 168 ITR 705(SC) IS RELEVANT. IT WAS OBSERVED THAT 'FROM AGREEING TO AD DITIONS, IT DID NOT I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 5 -: FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCE ALED. THERE MAY BE HUNDRED AND ONE REASONS FOR SUCH ADMISSIONS I.E. WHEN THE ASSESSEE REALIZED THE TRUE POSITION IT DID NOT DISP UTE CERTAIN DISALLOWANCE BUT THAT DID NOT ABSOLVE THE REVENUE F ROM PROVING THE MENS REA. IT IS FOR THE INCOME TAX AUTHORITY TO PRO VE THAT A PARTICULAR RECEIPT IS TAXABLE. IF, HOWEVER, THE REC EIPT IS ACCEPTED AND CERTAIN AMOUNT IS ACCEPTED AS TAXABLE, IT CANNOT BE ADDED BUT FROM THAT IT DOES NOT FOLLOW THAT IT IS ACCEPTED BY THE ASSESSEE AS INCOME.' THIS DECISION CANNOT SUPPORT THE PLEA THAT IN ALL CASES WHERE THE ASSESSEE AGREES FOR ADDITION, PENALTY IS NOT IMPOSABLE. EVERY CASE IS REQUIRED TO BE DECIDED ON ITS OWN FAC TS. THE RATIO OF THE ABOVE DECISION HAS BEEN AFFIRMED BY THE APEX CO URT IN THE CASE OF CIT VS SURESH CHANDRA MITTAL (2001) 251 ITR 9(SC ); (IV) THE APPELLANT, IN HIS SWORN STATEMENT DATED 23 -6-2009 DURING THE COURSE OF SURVEY OPERATIONS, OFFERED ADDITIONAL INCOME VOLUNTARILY TO PURCHASE PEACE WITH THE DEPARTMENT A ND ON THE UNDERSTANDING THAT THAT NO PENALTY WOULD BE LEVIED. 6.5 ON THE FACTS OF THE CASE, IT IS A FACT NOT DISP UTED THAT THERE WAS NO SPECIFIC INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SURVEY IN THE BUSINESS PREMISES OF THE APPELLANT, F OR THE AY UNDER CONSIDERATION. THE APPELLANT HAS BEEN CONSISTENTLY CONTENDING DURING THE COURSE OF ASSESSMENT PROCEEDINGS/PENALTY PROCEEDINGS, INCLUDING APPELLATE PROCEEDINGS, BEFORE ME THAT THE ADDITIONAL INCOME WAS OFFERED VOLUNTARILY TO BUY PEACE WITH TH E DEPARTMENT, AND AS SUCH NO PENALTY IS TO BE LEVIED. HOWEVER, TH E AO HAS NOT ACCEPTED THE CONTENTION OF THE APPELLANT AND HAS GO NE FORWARD IN LEVYING THE PENALTY ON THE PRETEXT THAT THE APPELLA NT HAD CONCEALED THE INCOME. HOWEVER, WHILE DOING SO, THE AO HAS NOT BROUGHT OUT ANY CORROBORATIVE EVIDENCE/CIRCUMSTANCES IN HIS PEN ALTY ORDER TO PROVE THAT THE APPELLANT HAD IN FACT CONCEALED THE PARTICULARS OF INCOME. NO DOUBT, MERELY OFFERING ADDITIONAL INCOME WILL NOT AUTOMATICALLY PROTECT THE ASSESSEE FROM LEVY OF PEN ALTY BUT IN THE INSTANT CASE, IT IS SEEN THAT AT NO STAGE THE APPEL LANT ADMITTED THE SURRENDERED AMOUNT/VOLUNTARY INCOME, AS ITS CONCEAL ED INCOME. EXCEPT THE OFFER MADE BY THE APPELLANT, NOTHING WAS AVAILABLE WITH THE AO ON THE BASIS OF WHICH IT CAN BE INFERRED THA T THE APPELLANT HAD CONCEALED THE INCOME, THEREFORE, JUSTIFYING THE PENALTY. THE AD WAS HAVING NO EVIDENCE AVAILABLE WITH HIM, WHICH CO ULD HAVE OTHERWISE JUSTIFIED THE LEVY OF PENALTY AND EVEN TH E OFFER OF AMOUNT MADE BY THE APPELLANT WAS MORE THAN THE AD COULD HA VE VISUALIZED ON THE BASIS OF APPRECIATION OF ANY MATERIAL FOUND DURING THE COURSE OF SURVEY. THE APPELLANT CAME FORWARD WITH ADDITION AL INCOME VOLUNTARILY. IN A CASE OF ADMITTED/VOLUNTARY INCOME , CONCEALMENT I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 6 -: PENALTY IS NOT AUTOMATIC. THE DISCRETION VESTED IN THE AO SHOULD BE USED NOT TO LEVY PENALTY BECAUSE THERE WAS NO CONCL USIVE PROOF THAT THE APPELLANT CONCEALED INCOME OR FURNISHED INACCUR ATE PARTICULARS OF INCOME. THE APPELLANT'S OFFER WAS TO AVOID LITIG ATION. IF THE AO HAD CLINCHING EVIDENCE OF CONCEALMENT, HE SHOULD NOT HA VE ACCEPTED VOLUNTARY DISCLOSURE OF ADDITIONAL INCOME, IN THE F IRST INSTANCE AT ALL. 6.6 WHILE ACCEPTING THE VOLUNTARILY DECLARED INCOME , THE AO CANNOT LEVY PENALTY ON THE ASSUMPTION THAT THE ASSE SSEE HAS CONCEALED INCOME, IN ABSENCE OF ANY INCRIMINATING M ATERIAL. FIRST, THE AO HAS TO BRING OUT THE FACTS OF WHAT KIND OF I NCOME THE ASSESSEE HAS CONCEALED, IN ORDER TO IMPOSE PENALTY. LEVYING PENALTY IS AN ACT OF BRINGING ADDITIONAL TAX UNDER THE NET, BUT WHILE DOING SO, THE AD HAS TO JUSTIFY HIS ACTION OF SHOWING THE INTENTION OF THE APPELLANT IN CONCEALING THE PARTICULARS OF INCOME, WITH A CLEAR SPEAKING ORDER, WHICH ULTIMATELY IS NOT SO IN THE C ASE OF THE APPELLANT FOR THE AY UNDER CONSIDERATION. 6.7 HENCE, IN VIEW OF THE ABOVE FACTUAL POSITION AN D IN THE ABSENCE OF ANY COGENT EVIDENCE, I AM OF THE CONSIDE RED VIEW THAT THE PENALTY IMPOSED BY THE AO U/S 271(1)(C), IS NOT SUSTAINABLE, ESPECIALLY, IN ABSENCE OF ANY ADVERSE MATERIAL, EXC EPT BASING ON A VOLUNTARY DISCLOSURE/SURRENDERED INCOME. THUS, THE VIEW TAKEN BY ASSESSING OFFICER CANNOT BE SAID TO BE PERMISSIBLE IN LAW PARTICULARLY WHEN THE APPELLANT HAD VOLUNTARILY CAM E FORWARD AND OFFERED ADDITIONAL INCOME IN ORDER TO BUY PEACE WIT H THE DEPARTMENT. MORE SO, I CANNOT IGNORE THE FACT THAT THE MOST IMPORTANT FACTOR IS THE INTENTION OF THE ASSESSEE I N OFFERING THE VOLUNTARY DISCLOSURE, IN THE ABSENCE OF ANY INCRIMI NATING MATERIAL BY THE DEPARTMENT IN APPELLANT'S BUSINESS PREMISES. 7. THUS, AFTER CAREFUL CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED O PINION THAT THE PENALTY PROVISIONS U/S 271(1)(C) ARE NOT AUTOMATIC PROVISIONS AND THE WORDS 'CONCEALMENT' AND 'INACCURATE' MUST BE TA KEN IN GOOD SPIRIT. CONSIDERING THE ACT OF THE APPELLANT WITH H IS INTENTION AND IN THE CASE IN HAND, ON MICRO READING OF THE PENALTY O RDER, WHICH IS NOT A SPEAKING ONE, AND ALSO IN THE ABSENCE OF ANY FIND ING/SATISFACTION THAT THE AMOUNT OF VOLUNTARY SURRENDERED INCOME WAS CONCEALED INCOME, I AM UNABLE TO SEE EXACT REASON FOR LEVY OF PENALTY U/S 271(1)(C). IN VIEW OF MY ABOVE OBSERVATIONS AND REL YING ON THE CASE- LAWS CITED ABOVE, THE ACTION OF THE AO IN LEVYING T HE PENALTY OF RS. 10,00,000/- IS NOT JUSTIFIED AND THE SAME IS ORDERE D TO BE DELETED. I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 7 -: 4. LD. DR VEHEMENTLY ARGUED THAT THE FACTS OF THE C ASE CALLS FOR LEVY OF PENALTY AND CIT(A) ERRED IN CANCELLING THE PENAL TY. HE FILED THE FOLLOWING WRITTEN SUBMISSIONS IN SUPPORT OF HIS CON TENTIONS: 3. IT IS, IN THIS REGARD, SUBMITTED THAT PENALTY U/S. 271(1)(C) IS LEVIABLE ON TWO COUNTS VIZ., (1) FOR FURNISHING INACCURATE PARTICULARS OF INCOME; (2) FOR CONCEALING PARTICULA RS OF INCOME. ON CLOSE ANALYSIS OF THE ABOVE TWO REASONS FOR INITIAT ION OF PENALTY U/S. 271(1)(C), IT IS EVIDENT THAT FURNISHING INACCURAT E PARTICULARS OF INCOME IS WITH REFERENCE TO RETURN OF INCOME, WHER EAS CONCEALING PARTICULARS OF INCOME CAN BE WITH REFERENCE TO EITH ER FILING OF RETURN OF INCOME OR BOOKS OF ACCOUNTS OR BOTH. SINCE SURV EY TOOK PLACE IN THIS SPECIFIC CASE ON 23.03.2009, SURVEY DECLARATIO N WAS ALSO FOR THE FINANCIAL YEAR 2008-09 (RELEVANT TO AY 2009-10) AND ALSO SINCE THE ASSESSEE HAD SHOWN THE DECLARED AMOUNT IN THE R ETURN OF INCOME, THOUGH PENALTY U/S. 271(1)(C) CANNOT BE LEV IED ON GROUNDS OF FURNISHING INACCURATE PARTICULARS OF INCOME, BUT PENALTY U/S. 271(1)(C) CAN BE LEVIED ON GROUNDS OF CONCEALMENT O F HIS PARTICULARS OF INCOME BECAUSE CONCEALMENT OF INCOME IN THIS SPECIFIC CASE WAS WITH REFERENCE TO BOOKS OF ACCOUNTS. THE MEMBER ALSO SPECIFICALLY ASKED AS TO WHAT THE NATURE OF ADDITIONAL INCOME OF FERED WAS AND WHY IT WAS OFFERED. ON PERUSAL OF THE FINAL SURVEY REPORT, IT IS FOUND THAT THE ASSESSEE HAD OFFERED ADDITIONAL INCOME ON GROUNDS OF (I) UNVERIFIABLE EXPENDITURE FOR REPAIRS OF THE FLAT, ( II) UNVERIFIABLE PAYMENTS CLAIMED TO BE MADE TOWARDS AGENT COMMISSIO N AND (III) AVAILABILITY OF UNACCOUNTED CASH OF RS. 2,50,000/- ON THE DAY OF SURVEY. THE ASSESSING OFFICER HAD ALSO MENTIONED I N THE FINAL SURVEY REPORT THAT THE ASSESSEE OFFERED ADDITIONAL INCOME OF RS. 29,42,000/- DUE TO THE ABOVE MENTIONED DISCREPANCIE S. WHEREAS, I AM NOT COMPETENT TO ANSWER WHY THE ASSESSEE HAD OFF ERED ADDITIONAL INCOME IN THE ASSESSMENT YEAR 2009-10, R ATHER IT IS FOR THE ASSESSEE, WHO THOUGH FIT TO OFFER THE ADDITIONA L IN AY 2009-10, TO EXPLAIN AS TO WHY ADDITIONAL INCOME WAS OFFERED ONLY IN AY 2009- 10 FOR THE DISCREPANCIES OF ALL THE YEARS UPTO AY 2 009-10. 5. LD. COUNSEL HOWEVER, REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A). 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE WRITTEN SUBMISSIONS AND FACTS ON RECORD. FIRST OF ALL, IT IS TO BE NOTED THAT EVEN I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 8 -: THOUGH A SURVEY WAS CONDUCTED 22-03-2009 I.E., DURI NG THE FINANCIAL YEAR RELEVANT TO THE AY. 2009-10, EVEN THOUGH THERE WAS NO INCRIMINATING MATERIAL AND ONLY CERTAIN DISCREPANCI ES HAVE BEEN FOUND, ASSESSEE VOLUNTEERED TO PAY ADDITIONAL TAXES OF RS. 10 LAKHS. THE STATEMENT ITSELF, AS EXTRACTED BY THE LD.CIT(A) IN THE ORDER, DO INDICATE THAT THERE WAS NO QUANTIFICATION OF CONCEALED INCOM E IN THE COURSE OF SURVEY. IN FACT, WHAT ASSESSEE HAS ADMITTED WAS PA YMENT OF RS. 10 LAKHS AS ADDITIONAL TAX, ACCORDINGLY, HE WORKED OUT THE INCOME TO BE OFFERED WHICH HE DID IN THE RETURN FILED SUBSEQUENT LY. AS PER THE PROVISIONS OF THE ACT IN ORDER TO ATTRACT PENALTY U /S. 271(1)(C) EITHER THERE SHOULD BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. IN THIS CASE, THERE IS NO CONCEALMENT OF INCOME AS ASSESSEE HAS RETURNED THE CORRECT INCOME WHICH WAS ACCEPTED BY THE AO IN THE SCRUTINY ASSESSMENT. QUESTION OF FURNISHING INACCU RATE PARTICULARS DOES NOT ARISE ON THE FACTS OF THE CASE, WHICH WAS ACCEP TED BY DR ASWELL. LOOKING AT EITHER WAY, THE CONDITIONS SPECIFIED U/S . 271(1)(C) ARE NOT SATISFIED. MOREOVER, THE RETURNED INCOME AND ASSES SED INCOME BEING THE SAME, THE COMPUTATION OF PENALTY ALSO FAILS. EXPLA NATION-I WITH REFERENCE TO EXPRESSION CONCEALED INCOME HAS DEEMED THE AMOUNT CONCEALED INCOME INDICATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON SHALL FOR THE PURPOSE OF CLAUSE- C OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE IN COME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED'. AS ALREADY STATED, THERE IS NO AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME OF ASSESSEE AS THE RETURNED INCOME WAS ACCEPTED AS SUCH. THERE FORE, UNDER EXPLANATION-I, THE AMOUNT OF CONCEALMENT IS NIL. T HEREFORE, NO AMOUNT CAN BE CONSIDERED AS CONCEALED INCOME UNDER THE FAC TS OF THE CASE. 7. THERE IS ALSO NO PROVISION IN THE ACT TO LEVY PE NALTY ON AN INCOME IDENTIFIED/UN-EARTHED IN THE COURSE OF SURVEY PROCE EDINGS. THIS ISSUE I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 9 -: WAS CONSIDERED BY THE CO-ORDINATE BENCH IN ITA.NO.5 4/VIZAG/2012 DT. 29-01-2014 IN THE CASE OF GODAVARI TOWNSHIPS PVT. L TD., VS. DCIT [148 ITD 463] AS UNDER: 16.2 MORE IMPORTANTLY ON SIMILAR ISSUE, THE HON BLE HIGH COURT OF A.P. IN THE CASE OF V.V. PROJECTS AND INVE STMENTS PVT. LTD. VS. DCIT 300 ITR 40 (A.P.) CONSIDERED SIMILAR SITUA TION AND HELD THAT PENALTY IS NOT IMPOSABLE. THE HONBLE HIGH COU RT CONSIDERING THE FACTS HELD AS UNDER : THE LANGUAGE OF SUB-S. (1) OF S. 271 ITSELF MAKES I T CLEAR THAT RECORDING OF SATISFACTION OF CONCEALMENT OF INCOME BY A PERSON OR FURNISHING INACCURATE PARTICU LARS OF SUCH INCOME IS A CONDITION PRECEDENT FOR LEVYING PENALTY INVOKING THE POWER UNDER S. 271(1). THE AO HAS TO FORM HIS OWN OPINION AND RECORD HIS SATISFACTION OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME BEFORE INITIATING PENALTY PROCEEDINGS UNDER S. 271(1)(C). IT IS ALSO CLEAR TH AT SUCH SATISFACTION OF THE AO MUST BE SPELT OUT IN THE ORD ER OF ASSESSMENT ITSELF BUT CANNOT BE ASSUMED FROM THE IS SUE OF A NOTICE UNDER S. 271(1)(C). FAILURE TO RECORD S UCH SATISFACTION AMOUNTS TO A JURISDICTIONAL DEFECT WHI CH CANNOT BE CURED. IT IS ALSO RELEVANT TO NOTE THAT W HETHER THE ASSESSEE HAS CONCEALED HIS INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS THERE OF IS ESSENTIALLY A FINDING OF FACT WHICH HAS TO BE SPELT OUT BY WAY OF RECORDING THE SATISFACTION OF THE AO AS REQU IRED UNDER S. 271(1). THEREFORE, IN THE ABSENCE OF SUCH A FINDING IN THE ASSESSMENT ORDER NO PENALTY PROCEEDI NGS CAN BE INITIATED. THE DECLARATION OF INCOME MADE BY THE ASSESSEE COMPANY IN REVISED RETURN AND THE EXPLANAT ION THAT IT HAD DONE SO TO BUY PEACE WITH THE DEPARTMEN T AND TO AVOID PROTRACTED LITIGATION WAS ACCEPTED BY THE AO IN HIS ORDER DT. 16TH MARCH, 2001 WITHOUT RAISING A NY OBJECTION. ADMITTEDLY THE AO ACCEPTED THE RETURNS F ILED BY THE ASSESSEE AFTER VERIFICATION OF THE INFORMATION FILED AND BOOKS OF ACCOUNTS PRODUCED. THUS, THE ASSESSMENT WA S COMPLETED ACCEPTING THE RETURNED NET INCOME AS PER THE REVISED RETURN OF INCOME. NOT ONLY THE ASSESSMENT O RDER DID NOT REFLECT ANY SATISFACTION AS REQUIRED UNDER S. 271(1) BUT EVEN THE SHOW-CAUSE NOTICE WAS SILENT WI TH REFERENCE TO THE SATISFACTION ARRIVED AT BY THE AO WITH REFERENCE TO THE CONCEALMENT OF INCOME BY THE ASSES SEE I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 10 - : COMPANY. NOTHING HAS BEEN PLACED BEFORE THIS COURT BY THE REVENUE TO SHOW THAT ANY OTHER MATERIAL WAS AVAILABLE WITH THE AO TO THE EFFECT THAT THE ASSESS EE CONCEALED THE INCOME. IN THE CIRCUMSTANCES, IT IS N OT OPEN TO THE AO TO INVOKE THE POWER UNDER S. 271(1)(C) LE VYING PENALTY. THE IMPUGNED PENALTY PROCEEDINGS ARE WITHO UT JURISDICTION APART FROM BEING ARBITRARY AND ILLEGAL . 16.3. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, SINCE THE FACTS OF THE C ASE EQUALLY FITS INTO THE PRINCIPLES LAID DOWN BY THE HONBLE A.P. HIGH C OURT, WE HAVE NO HESITATION IN HOLDING THAT PENALTY UNDER SECTION 27 1(1)(C) IS NOT IMPOSABLE ON THE FACTS OF THE CASE. EVEN OTHERWISE, ASSESSEE HAVING GIVEN BONAFIDE EXPLANATION THAT HE HAS OFFERED HIGH ER INCOME EVEN THOUGH THAT MUCH INCOME IS NOT TAXABLE, THIS CONTEN TION OF THE ASSESSEE WAS NOT REBUTTED. AS BRIEFLY STATED ABOVE IN THE FACTS, A.O. HAS NEITHER BROUGHT ANY CALCULATIONS ON RECORD NOR MENTIONED HOW THE AMOUNT WAS QUANTIFIED. IN THESE SET OF CIRCUMST ANCES, ASSESSEES CONTENTION THAT IT HAD UNEXPLAINED EXPEN DITURE IN EARNING THAT GROSS RECEIPTS CANNOT BE REJECTED. THE REFORE, EVEN THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C) CO ME INTO OPERATION AS THE ASSESSEES EXPLANATION HAS NOT BEEN DISPROVE D. THEREFORE, THE CONDITIONS FOR IMPOSING PENALTY DOES NOT SATISF Y. IN VIEW OF THE VARIOUS FACTORS DISCUSSED ABOVE, WE HAVE NO HESITAT ION IN CANCELLING THE PENALTY. 16.4. THERE IS ONE MORE ASPECT TO THE ISSUE. UNLIKE IN A SEARCH CASE THERE IS NO PRESUMPTION THAT THE AMOUNT UNEARTHED DURING THE COURSE OF SURVEY WILL AUTOMATI CALLY BE CONSIDERED AS CONCEALED INCOME. NO PROVISION/EXPL ANATION SIMILAR TO EXPLANATION-5 WAS PROVIDED IN THE SECTIO N TO COVER SURVEY CASES. SINCE, THE INCOME DETECTED/OFFERED IN SURVEY CANNOT BE DEEMED TO BE CONCEALED INCOME, TREATING THE SAME AS CONCEALED INCOME AS WAS DONE BY A.O. DOES NOT ARISE. A.O. HAS TO ESTABLISH THE NATURE OF INCOME AS CONC EALED INCOME BEFORE LEVY OF PENALTY. AS DISCUSSED EARLI ER, NOTHING WAS DONE BY A.O. EXCEPT ACCEPTING THE REVISED INCOM E RETURNED IN THE ASSESSMENT PROCEEDINGS UNDER SECTIO N 143(3) OF THE ACT. (EMPHASIS SUPPLIED) 17. THE LEARNED CIT(A) IN HIS DETAILED ORDER HAS EL ABORATELY DISCUSSED PRINCIPLES OF LAW WITH WHICH WE HAVE NO O BJECTION. HOWEVER, WHAT THE LEARNED CIT(A) HAS MISSED IS, APP LICATION OF VARIOUS PRINCIPLES ON THE GIVEN SET OF FACTS. AS DI SCUSSED BY US IN DETAIL, ON THE FACTS AS STATED ABOVE IN ASSESSEES CASE, PENALTY IS I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 11 - : NOT IMPOSABLE. THEREFORE, WHILE APPRECIATING THE EF FORTS OF LEARNED CIT(A) IN IMPROVING THE ORDER OF THE A.O., WE HAVE NO HESITATION IN SETTING SET ASIDE THE ORDER OF LD.CIT(A) AND DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C). 8. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAS PHARMACEUTICALS [335 ITR 259] HAS CONSIDERED THE IS SUE ELABORATELY ON SIMILAR FACTS. THE HON'BLE DELHI HIGH COURT HELD AS UNDER: 'HELD, DISMISSING THE APPEAL, THAT CLAUSE (C) OF SECTION 271(1) OF THE ACT AUTHORIZES IMPOSITION OF PENALTY WHEN T HE ASSESSING OFFICER IS SATISFIED THAT THE ASSESSEE HAD EITHER CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT WAS NOT A CASE OF FURNISHING INACCURAT E PARTICULARS OF INCOME, AS IN THE INCOME-TAX RETURN, PARTICULARS O F INCOME HAD BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT WAS DULY REFLECTED IN THE RETURN. THE QUESTION IS WHETHER THE PARTICULAR S OF INCOME WERE CONCEALED BY THE ASSESSEE OR NOT WOULD DEPEND UPON WHETHER THIS CONCEALMENT HAD REFERENCE TO THE RETURN FILED BY T HE ASSESSEE. THE WORDS IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT ARE PREFACED BY THE SATISFACTION OF THE ASSESSING OFFICER OR TH E COMMISSIONER (APPEALS). WHEN THE SURVEY WAS CONDUCTED THE QUEST ION OF SATISFACTION OF ASSESSING OFFICER OR THE COMMISSIO NER (APPEALS) OR THE COMMISSIONER DID NOT ARISE. IT WAS THE ASSESS ING OFFICER WHO INITIATED THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURI NG THE COURSE OF SURVEY. THE DECISION TO INITIATE PENALTY PROCEEDIN GS WAS TAKEN WHILE MAKING ASSESSMENT ORDER. THUS, THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT COULD NOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS, IN THIS CASE. THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE HAD TO BE IN THE RETURN FILED BY IT. NO P ENALTY COULD BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE PR OVISIONS WERE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE W AS EXPOSED DURING THE SURVEY, MAY BE, IT WOULD HAVE NOT DISCL OSED THE INCOME BUT FOR THE SURVEY. HOWEVER, THERE COULD NOT BE A NY PENALTY ONLY ON SURMISES, CONJECTURES AND POSSIBILITIES. SECTION 271(1)(C) OF THE ACT HAD TO BE CONSTRUED STRICTLY. UNLESS IT WAS FOUND THAT THERE WAS ACTUALLY CONCEALMENT OR NON-DISCLOSURE OF THE PART ICULARS OF INCOME, PENALTY COULD NOT BE IMPOSED. THERE WAS NO SUCH C ONCEALMENT OR NON-DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN I.T.A. NO. 1789/HYD/2013 SHRI G.S. ARORA :- 12 - : THE RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX'. 9. IN VIEW OF THE ABOVE PRINCIPLES OF LAW AND ON TH E FACTS OF CASE, I DO NOT SEE ANY MERIT IN THE REVENUE'S APPEAL. ACCORDI NGLY, THE ORDER OF CIT(A) IS CONFIRMED AND REVENUE'S APPEAL IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMB ER HYDERABAD, DATED 21 ST AUGUST, 2015 TNMM COPY TO : 1. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5(1 ), HYDERABAD. 2. SHRI G.S. ARORA, 4-1-285, 1 ST FLOOR, BANK STREET, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD. 4. CIT-IV, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.