G.M. Property Developers Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 287/BANG/2012

• Counselvise Citation: 28721114 RSA 2012
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Income from undisclosed sources; Reasonable cause; Retraction
• Section: 143(3); 133A; 27; 148; 6; 132; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 287 /BANG/20 1 2 (ASSESSMENT YEAR : 2007-08) G.M. PROPERTY DEVELOPERS PVT. LTD., 4/5.1, IST FLOOR, 2 ND CROSS, CRESCENT ROAD, HIGH GROUND, BANGALORE-1. PAN AAACG 6044M VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI S. RAMASUBRAMANIAN. RESPONDENT BY : SHRI A. SUNDAR RAJAN. DATE OF HEARING :30.10.2012. DATE OF PRONOUNCEMENT : 10.12.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DATED 02.01.2012 CONFIRMING THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)( C ) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') IN HIS ORDER DT.30.6.201 0 FOR ASSESSMENT YEAR 2007-08. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CO NSTRUCTION OF FLATS AND BUILDINGS AND SALE OF THE SAME. IN THE RELEVANT PERIOD, PERTAINI NG TO ASSESSMENT YEAR 2007-08, A SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CON DUCTED AT THE BUSINESS PREMISES OF 2 ITA NO. 287/BANG/2012 THE ASSESSEE ON 23.3.2007. IN THE COURSE OF SURVE Y, CERTAIN DISCREPANCIES WERE REPORTEDLY FOUND / NOTICED AND IN RESPECT OF WHICH THE ASSESSEE VOLUNTARILY DISCLOSED INCOME OF RS.1 CRORE AS ITS INCOME FOR ASSESSMENT Y EAR 2007-08. SINCE THE SURVEY WAS CONDUCTED ON 23.3.2007, I.E., IN THE FINANCIAL YEAR 2006-07 CORRESPONDING TO ASSESSMENT YEAR 2007-08, THE ASSESSEE HAD NOT FILED THE RETURN OF INCOME AT THE TIME OF SURVEY, AND THE DUE DATE FOR FILING THE RETURN OF INCOME HAD NO T YET ELAPSED. THE ASSESSEE SUBSEQUENTLY FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2007-08 ON 15.11.2007 DECLARING INCOME OF RS.98,35,100. THE CASE WAS TAK EN UP FOR SCRUTINY AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT FOR ASSESSMENT YEA R 2007-08 BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 29.12.2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS.1 CRORE IN ORDER TO MAKE THE ASSESSED INCOME EQUAL TO RS.1 CRORE AS ADMITTED BY THE ASSESSEE IN THE COURSE OF SURVEY ACTION. NO OTHER REASON HAS BEEN ADDUCED FOR THIS ADDITION OF RS.1,64,900 IN THE ORDER OF ASSESSMENT. 2.2 IN THE ORDER OF ASSESSMENT, THE ASSESSING OFFIC ER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C ) OF THE ACT SE PARATELY ON THE GROUND THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND FURNISHED INA CCURATE PARTICULARS OF INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASS ESSING OFFICER FOR IMPOSITION OF PENALTY UNDER SECTION 271(1) ( C ) OF THE ACT, THE ASSESSEE SUBMITTED ITS REPLY STATING THAT THE DISCLOSURE MADE IN THE COURSE OF SURVEY WAS VOL UNTARY AND IT HAD NOT CONCEALED ANY INCOME AND REQUESTED FOR DROPPING OF THE PENALTY PR OCEEDINGS. THE EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE ASSESSING OFF ICER WHO WAS OF THE VIEW THAT THE 3 ITA NO. 287/BANG/2012 DISCLOSURE MADE BY THE ASSESSEE IN THE COURSE OF SU RVEY WAS ONLY BECAUSE DISCREPANCIES DETECTED WAS BROUGHT TO THE NOTICE OF ASSESSEE. HE , THUS, CONCLUDED THAT HAD THERE BEEN NO SURVEY, THE ASSESSEE WOULD HAVE CONCEALED INCOME AND EVADED PAYMENT OF TAXES ON THE SAME AND THEREFORE LEVIED PENALTY UNDER SECTION 271 (1) ( C ) OF THE ACT. WHILE LEVYING THE PENALTY, THE ASSESSING OFFICER WORKED OUT THE QUANT UM OF PENALTY, TAKING THE AVERAGE OF THE INCOME RETURNED IN THE IMMEDIATELY EARLIER YEAR (I.E. ASSESSMENT YEAR 2006-07) AND THE IMMEDIATELY SUCCEEDING YEAR (I.E. ASSESSMENT YE AR 2008-09) AS THE INCOME THAT WOULD HAVE BEEN RETURNED BY THE ASSESSEE BUT FOR THE SURV EY ACTION. THE DIFFERENCE BETWEEN THE NOTIONAL INCOME SO WORKED OUT AND THE INCOME DI SCLOSED IN THE SURVEY I.E. RS.1 CRORE HAS BEEN TREATED AS THE INCOME SOUGHT TO BE EVADED AND PENALTY @ 100% OF THE TAX THEREON WAS LEVIED. 2.3 AGGRIEVED BY THE LEVY OF PENALTY UNDER SECTION 271(1)( C ) OF THE ACT BY ORDER DT.30.6.2010, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT (APPEALS). THE LEARNED CIT (APPEALS) BY ORDER DT.2.1.2002 DISPOSED THE ASSESSE E'S APPEAL, UPHOLDING THE FINDING OF THE ASSESSING OFFICER THAT PENALTY UNDER SECTION 27 1(1)( C ) OF THE ACT WAS LEVIABLE ON THE FACTS OF THE CASE AND AGREED WITH THE CONCEPT OF A VERAGE OF THE INCOME OF THE EARLIER YEAR AND THE SUCCEEDING YEAR TO RECKON THE INCOME THAT WOULD NOT HAVE BEEN DISCLOSED BY THE ASSESSEE, BUT FOR THE SURVEY. THE LEARNED CIT (APPEALS), HOWEVER, MODIFIED THE WORKING OF INCOME SOUGHT TO BE EVADED. HE TREATE D THE INCOME OF RS.1 CRORE DISCLOSED DURING SURVEY AS ADDITIONAL INCOME AND THEREFORE HE LD THE INCOME ASSESSED TO BE RS.140.79 LAKHS (VIZ. RS.40.79 LAKHS WHICH THE ASSESSEE WOULD HAVE NORMALLY DISCLOSED PLUS RS.1 CRORE 4 ITA NO. 287/BANG/2012 AS ADDITIONAL INCOME). FROM THIS DESIRABLE RETURN ED INCOME AS THE LEARNED CIT (APPEALS) PUTS IT, THE RETURNED INCOME OF RS.98,35,100 HAS BE EN REDUCED THEREBY QUANTIFYING THE INCOME SOUGHT TO BE EVADED AT RS.42,43,900 AS AGAI NST RS. 59.21 LAKHS CONSIDERED BY THE ASSESSING OFFICER. 3.0 AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPE ALS) DT.2.1.2012 CONFIRMING THE LEVY OF THE LEVY OF PENALTY UNDER SECTION 271(1)( C ) OF THE ACT FOR ASSESSMENT YEAR 2007- 08, THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBU NAL. IN THE GROUNDS OF APPEAL RAISED THE ASSESSEE HAS CONTENDED AS UNDER : 1.THAT THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPEL LANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN UPHOLDING THE PENALTY U/S 271(1)(C) THOUGH THE APPELLANT HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE P ARTICULARS OF INCOME IN THE RETURN FILED BY IT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN UPHOLDING THE PENALTY JUST BECAUSE THE APP ELLANT AGREED TO OFFER INCOME OF RS. 1 CRORE DURING SURVEY U/S 133A OF THE ACT. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN UPHOLDING THE PENALTY ON A MERE SURMISE AN D CONJECTURE. 5. THAT THE FINDINGS OF THE LOWER AUTHORITIES IN PA GE 2 OF THE PENALTY ORDER IS PERVERSE AS NOT BEING BASED ON ANY MATERIALS ON REC ORD AND BEING CONTRARY TO THE MATERIALS ON RECORD. 6. WITHOUT PREJUDICE TO THE GENERALITY OF THE ABOVE GROUNDS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE PENALTY SHOULD HAVE BEEN QUANTIFIED ON THE BASIS OF THE DIF FERENCE BETWEEN THE ASSESSED AND RETURNED INCOME AND HE OUGHT TO HAVE H ELD THAT THE TAX SOUGHT TO BE EVADED IS ONLY RS. 55,505/- . 4.1 THE LEARNED COUNSEL FOR THE ASSESSEE WAS HEARD. IN WRITTEN SUBMISSION FILED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED AS U NDER : 5 ITA NO. 287/BANG/2012 1.0 IT IS SUBMITTED THAT THE PENALTY U/S 271(1)( C) OF INCOME TAX ACT, 1961 (ACT) THE PENALTY CAN BE LEVIED IF THERE IS CONCEAL MENT OF INCOME OR THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HI S INCOME. IT IS SUBMITTED THAT THE CONCEALMENT SHOULD BE IN THE RETURN. THE APPELLANT RELIES ON THE FOLLOWING DECISIONS: A. CIT V. SAS PHARMACEUTICALS [2011] 335 ITR 259 KINDLY REFER PARA 15 & 16 OF THE ORDER AT PAGE 26 5. B. CIT V. CAREERS EDUCATION AND INFOTECH PVT. LTD. [2011] 336 ITR 257 KINDLY REFER PARA 5 OF THE ORDER AT PAGE 260. SINCE THE APPELLANT HAD RETURNED AN INCOME OF RS. 9 8,35,100 AND ADDITION HAS BEEN SIMPLY MADE TO MAKE THE ASSESSED INCOME AT RS. 1,00,00,000/- THERE IS NO CONCEALMENT AT ALL AS THE RETURN HAS BEEN ACCEPTED SUBSTANTIALLY. THE APPELLANT SUBMITS THAT UNDER SUCH CIRCUMSTANCES NO PENALTY CA N BE LEVIED. 2.0 THE APPELLANT ALSO SUBMITS THAT THE SATISFACTIO N HAS TO BE REACHED BY THE ASSESSING OFFICER DURING THE COURSE OF ANY PROC EEDING BEFORE HIM. THE CONCEALMENT SHOULD BE DETECTED BY THE ASSESSING OFF ICER DURING SUCH PROCEEDINGS ONLY. SINCE THE ASSESSING OFFICER ASSU MES JURISDICTION ONLY ON ISSUE OF NOTICE U/S 143(2) OF THE ACT, ANY PROCEEDI NGS PRIOR TO THAT CANNOT BE AN ASSESSMENT PROCEEDING. THE LEARNED ASSESSING OF FICER HAS NOT RECORDED HIS SATISFACTION THAT IN THE RETURN FILED BY THE ASSESS EE THERE IS CONCEALMENT. IN THE ABSENCE OF SUCH SATISFACTION, THE PENALTY CANNO T BE LEVIED. THE APPELLANT RELIES ON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT V. SAS PHARMACEUTICALS [2011] 335 ITR 259 HENCE, THE PENAL TY IS NOT SUSTAINABLE ON THIS GROUND ALSO. 3.0 SECTION 271 (1) (III) READ WITH SECTION 271 (1) (C) OF THE ACT STATES THAT THE PENALTY IS TO BE LEVIED WITH REFERENCE TO THE A MOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS. EXPLANATION 4 DEFINES THE AMOUNT OF TAX SOUGHT TO BE EVADED AS UNDER: EXPLANATION 4. - FOR THE PURPOSE OF CLAUSE (III) OF THIS SUB - SECTION, THE EXPRESSION :THE AMOUNT OF TAX SOUGHT TO BE EVADED, - (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPECT O F WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTI CULARS HAVE BEEN FURNISHED HAS THE EFFECT OF REDUCING THE LOSS DECLA RED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME, MEANS THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH P ARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME; (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEANS T HE TAX ON THE TOTAL INCOME 3 [ASSESSED AS REDUCED BY THE AMOUNT OF ADVANCE TAX, TAX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SEL F-ASSESSMENT TAX PAID BEFORE THE ISSUE OF NOTICE UNDER SECTION 148] ; 6 ITA NO. 287/BANG/2012 (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CH ARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. A READING OF THE ABOVE SECTION SHOWS THAT THE TAX S OUGHT TO BE EVADED IS THE DIFFERENCE BETWEEN THE TAX ON TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGED HAD SUCH TOTAL INCOME BEEN REDUCE D BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. IT IS SUBMITTED THAT THE PENALTY CAN BE LEVIED ONLY ON THE DIFFEREN CE BETWEEN ASSESSED TAX AND THE TAX ON RETURNED INCOME. THE CONCEALMENT HAS TO BE IN THE RETURN. IN THIS CASE, THERE IS NO CONCEALMENT OR FURNISHING OF INAC CURATE PARTICULARS IN THE RETURN. THE LEARNED ASSESSING OFFICER HAS DETERMINED THE TA X SOUGHT TO BE EVADED NOT AS PER EXPLANATION 4, BUT ON A SPECIOUS REASONING. IT IS SUBMITTED THAT, THE DETERMINATION OF CONCEALED INCOME OF RS. 59.21 LAKH AND TAX AT RS. 19.93 LAKHS IS PERVERSE. 4.0 IT IS ALSO SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS MERELY ESTIMATED THE INCOME AND LEVIED PENALTY. IT IS WELL SETTLED THAT PENALTY CANNOT BE LEVIED WHEN THE INCOME IS ESTIMATED. WE RELY ON THE FOLLOWING DECISIONS: A. CIT V. VIJAYKUMAR JAIN 325 ITR 378 B. NAVJIVAN OILS MILLS V. CIT 252 ITR 417 C. CIT V. RAVAL SINGH & CO 254 ITR 191 5.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IN PARAGRAPH 7.1 STATES THAT THE APPELLANT GOT BENEFITTED BY ACCEPTI NG TO DISCLOSE RS. 1,00,00,000/-AND THE ASSESSEETHWARTED FURTHER INVES TIGATION WHICH WOULD HAVE PROBABLY RESULTED IN DETECTION OF CONCEALMENT OF MO RE UNACCOUNTED INCOME. HE FURTHER GOES ON TO SAY THAT THE APPELLANT HAD NOT D ISCLOSED TRUE INCOME IN THE RETURN. IT IS RESPECTFULLY SUBMITTED THAT THE ABOV E OBSERVATIONS OF THE LEARNED CIT(A) IS PERVERSE AS IT IS A MERE CONJECTU RE AND SURMISE. 6.0 THE LEARNED CIT(A) HAS RELIED ON THE DECISION O F THE HONBLE SUPREME COURT IN K.P. MADHUSUDHANAN V. CIT [2001] 251 ITR 9 9. IT IS SUBMITTED THAT THIS CASE IS OF NO RELEVANCE TO THE FACTS OF THE PR ESENT CASE. THE HONBLE SUPREME COURT HELD THAT THE ASSESSING OFFICER NEED NOT SPECIFY THE EXPLANATION BELOW SECTION 271(1)(C) WHICH HE PROPOS ES TO INVOKE. THAT IS NOT AN ISSUE IN THE PRESENT CASE. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS PRAYED THAT THE APPEAL MAY KINDLY BE ALLOWED. 7 ITA NO. 287/BANG/2012 4.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED AND PLACED RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW. 5.1 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSE D AND CONSIDERED THE SUBMISSIONS MADE, THE ORDER OF ASSESSMENT, THE ORDER LEVYING P ENALTY UNDER SECTION 271(1)( C ), THE ORDER OF THE LEARNED CIT (APPEALS) AND THE MATERIAL ON RECORD. IN THE PRESENT APPEAL BEFORE US, THE ASSESSEE HAS RAISED THE FOLLOWING IS SUES FOR CONSIDERATION : (I) WHETHER PENALTY FOR CONCEALMENT OF INCOME UNDER SECTION 271(1)( C ) OF THE ACT IS LEVIABLE ON THE FACTS OF THE CASE, AND IF SO (II) THE QUANTUM OF PENALTY TO BE LEVIED, PARTICULA RLY, THE MANNER OF WORKING OUT THE QUANTUM OF INCOME SOUGHT TO BE EVADED. IT IS THE CONTENTION OF THE ASSESSEE THAT IT OFFERE D / DISCLOSED INCOME OF RS.1 CRORE IN THE RETURN OF INCOME FILED WITHIN THE DUE DATE UNDER SE CTION 139(1) OF THE ACT AND HENCE THIS IS VOLUNTARY. IT IS SUBMITTED THAT, THEREFORE THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08. IT IS FURTHER CONTEND ED, THAT WITHOUT PREJUDICE TO ITS CONTENTIONS THAT NO PENALTY IS LEVIABLE IN THIS CAS E, IF AT ALL PENALTY HAS TO BE LEVIED, IT HAS TO BE QUANTIFIED ON THE BASIS OF THE DIFFERENCE BET WEEN THE RETURNED INCOME AND THE ASSESSED INCOME AND THEREFORE PENALTY OUGHT TO HAVE BEEN LEVIED BY COMPUTING TAX ON INCOME SOUGHT TO BE EVADED I.E. RS.55,505 ONLY ON R S.1,64,900 AND NOT ON THE NOTIONAL / IMAGINARY FIGURES COMPUTED BY BOTH THE ASSESSING OF FICER OR THE LEARNED CIT (APPEALS). 8 ITA NO. 287/BANG/2012 5.2 IT IS IN THIS FACTUAL CONTEXT THAT THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE. IT IS NOT DISPUTED THAT WHEN THE SURVEY WAS CONDUCT ED AT THE FAG END OF THE FINANCIAL YEAR I.E. ON 23.3.2007, DISCREPANCIES WERE DETECTED IN THE ASSESSEE'S BUSINESS AFFAIRS. THE ASSESSEE ACCEPTED THESE DISCREPANCIES AND DISCLOSED AN AMOUNT OF RS.1 CRORE. THERE WAS NO RETRACTION OF THIS DISCLOSURE OF RS.1 CRORE BY T HE ASSESSEE NOR WAS THERE ANY ATTEMPT BY THE ASSESSEE TO EXPLAIN AWAY THESE DISCREPANCIES AND THIS POSITION WAS VIRTUALLY MAINTAINED BY INCLUDING THIS AMOUNT IN THE INCOME T AX RETURN FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08. THERE IS NO DOUBT THAT TH E ASSESSEE SURRENDERED CERTAIN INCOME IN THE COURSE OF SURVEY AND DISCREPANCIES DE TECTED BY THE SURVEY TEAM WOULD SUGGEST THAT THE ASSESSEE WAS NOT MAINTAINING PROPE R AND RELIABLE ACCOUNTS. THEREFORE, THERE COULD BE A POSSIBILITY THAT, BUT FOR THE SURV EY, THE DISCREPANCIES BROUGHT TO THE NOTICE OF THE ASSESSEE WOULD HAVE GONE UNNOTICED AN D THE ASSESSEE MIGHT HAVE SUPPRESSED THIS IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 20 07-08 AS WELL. THE FACT, HOWEVER, REMAINS THAT THE ASSESSEE DISCLOSED THIS INCOME IN THE RETURN OF INCOME FILED BY IT FOR ASSESSMENT YEAR 2007-08. 5.3 IN THESE CIRCUMSTANCES, THE ISSUE FOR CONSIDERA TION IS WHETHER PENALTY UNDER SECTION 271(1)( C ) OF THE ACT CAN BE IMPOSED ON TH E ASSESSEE WHEN IT HAS DISCLOSED THIS INCOME IN THE RETURN OF INCOME FILED BY IT AND CONT ENDS THAT IT HAS VOLUNTARILY DISCLOSED THE SAME IN THE REGULAR RETURN OF INCOME FILED WITH IN THE DUE DATE FOR ASSESSMENT YEAR 2007-08. THE PROVISION OF SECTION 271(1)( C ) OF T HE ACT READ AS UNDER : 9 ITA NO. 287/BANG/2012 SECTION 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT A NY PERSON - (A) OMITTED (B) HAS FAILED TO COMPLY WITH A NOTICE UNDER SUB-S ECTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 OR FAILS TO COMPLY W ITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF SECTION 142; OR (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, - (I) OMITTED (II) IN THE CASES REFERRED TO IN CLAUSE (B), IN ADD ITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN ONE THOUSAND RUP EES BUT WHICH MAY EXTEND TO TWENTY-FIVE THOUSAND RUPEES FOR EACH SUCH FAILURE; (III) IN THE CASES REFERRED TO IN CLAUSE (C), IN AD DITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INACCURATE PARTI CULARS OF SUCH INCOME : 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) TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE A ND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLO WED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FO R THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCO ME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. EXPLANATION 2 : WHERE THE SOURCE OF ANY RECEIPT, DE POSIT, OUTGOING OR INVESTMENT IN ANY ASSESSMENT YEAR IS CLAIMED BY ANY PERSON TO BE AN AMOUNT WHICH HAD BEEN ADDED IN COMPUTING THE INCOME OR DED UCTED IN COMPUTING THE LOSS IN THE ASSESSMENT OF SUCH PERSON FOR ANY EARLI ER ASSESSMENT YEAR OR YEARS BUT IN RESPECT OF WHICH NO PENALTY UNDER CLAUSE (II I) OF THIS SUB-SECTION HAD 10 ITA NO. 287/BANG/2012 BEEN LEVIED, THAT PART OF THE AMOUNT SO ADDED OR DE DUCTED IN SUCH EARLIER ASSESSMENT YEAR IMMEDIATELY PRECEDING THE YEAR IN W HICH THE RECEIPT, DEPOSIT, OUTGOING OR INVESTMENT APPEARS (SUCH EARLIER ASSESS MENT YEAR HEREAFTER IN THIS EXPLANATION REFERRED TO AS THE FIRST PRECEDING YEAR ) WHICH IS SUFFICIENT TO COVER THE AMOUNT REPRESENTED BY SUCH RECEIPT, DEPOS IT OR OUTGOING OR VALUE OF SUCH INVESTMENT (SUCH AMOUNT OR VALUE HEREAFTER IN THIS EXPLANATION REFERRED TO AS THE UTILISED AMOUNT) SHALL BE TREATED AS THE INCOME OF THE ASSESSEE, PARTICULARS OF WHICH HAD BEEN CONCEALED OR INACCURA TE PARTICULARS OF WHICH HAD BEEN FURNISHED FOR THE FIRST PRECEDING YEAR; AND WH ERE THE AMOUNT SO ADDED OR DEDUCTED IN THE FIRST PRECEDING YEAR IS NOT SUFFICI ENT TO COVER THE UTILISED AMOUNT, THAT PART OF THE AMOUNT SO ADDED OR DEDUCTE D IN THE YEAR IMMEDIATELY PRECEDING THE FIRST PRECEDING YEAR WHICH IS SUFFICI ENT TO COVER SUCH PART OF THE UTILISED AMOUNT AS IS NOT SO COVERED SHALL BE TREAT ED TO BE THE INCOME OF THE ASSESSEE, PARTICULARS OF WHICH HAD BEEN CONCEALED O R INACCURATE PARTICULARS OF WHICH HAD BEEN FURNISHED FOR THE YEAR IMMEDIATELY P RECEDING THE FIRST PRECEDING YEAR AND SO ON, UNTIL THE ENTIRE UTILISED AMOUNT IS COVERED BY THE AMOUNTS SO ADDED OR DEDUCTED IN SUCH EARLIER ASSESS MENT YEARS. EXPLANATION 3 : WHERE ANY PERSON WHO HAS NOT PREVIO USLY BEEN ASSESSED UNDER THIS ACT, FAILS, WITHOUT REASONABLE CAUSE, TO FURNI SH WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) OF SECTION 153 A RETURN OF HIS I NCOME WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSM ENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1989, AND, UNTIL THE EX PIRY OF THE PERIOD AFORESAID, NO NOTICE HAS BEEN ISSUED TO HIM UNDER CLAUSE (I) O F 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 S UCH 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 PARTICULAR S 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 P ERIOD AFORESAID IN PURSUANCE OF A NOTICE UNDER SECTION 148. EXPLANATION 4 : FOR THE PURPOSE OF CLAUSE (III) OF THIS SUB-SECTION, THE EXPRESSION 'THE AMOUNT OF TAX SOUGHT TO BE EVADED', - (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED EXCEEDS THE TOTAL INCOME ASSESSED, MEANS THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON TH E INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME; (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEA NS THE TAX ON THE TOTAL INCOME ASSESSED; 11 ITA NO. 287/BANG/2012 (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CH ARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESP ECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. EXPLANATION 5 : WHERE IN THE COURSE OF A SEARCH UND ER SECTION 132, THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BUL LION, JEWELLERY 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) HIS INCOME, - (A) FOR ANY PREVI OUS YEAR WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH, BUT THE RETURN OF IN COME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE, OR, WHERE SUCH RETURN HAS BEEN FURNISHED BEFORE THE SAID DATE, SUCH INCOME HAS NOT BEEN DECL ARED THEREIN; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFTER 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 SH ALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SEC TION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INC OME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, UNLESS, - (1) SUCH INCOME IS, OR THE TRANSACTIONS R ESULTING IN 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 O F INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE CHIEF COMMISSIONER OR CO MMISSIONER 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 O THER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTROL, HAS B EEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN O F INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SECTION 139, AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. EXPLANATION 6 : WHERE ANY ADJUSTMENT IS MADE IN THE INCOME OR LOSS DECLARED IN THE RETURN UNDER THE PROVISO TO CLAUSE (A) OF SUB-S ECTION (1) OF SECTION 143 AND ADDITIONAL TAX CHARGED UNDER THAT SECTION, THE PROV ISIONS OF THIS SUB-SECTION SHALL NOT APPLY IN RELATION TO THE ADJUSTMENT SO MA DE. 12 ITA NO. 287/BANG/2012 (1A) WHERE ANY PENALTY IS IMPOSABLE BY VIRTUE OF EX PLANATION 2 TO SUB-SECTION (1), PROCEEDINGS FOR THE IMPOSITION OF SUCH PENALTY MAY BE INITIATED NOTWITHSTANDING THAT ANY PROCEEDINGS UNDER THIS ACT IN THE COURSE OF WHICH SUCH PENALTY PROCEEDINGS COULD HAVE BEEN INITIATED UNDER SUB-SECTION (1) HAVE BEEN COMPLETED. (2) WHEN THE PERSON LIABLE TO PENALTY IS A REGISTER ED FIRM OR AN UNREGISTERED FIRM WHICH HAS BEEN ASSESSED UNDER CLAUSE (B) OF SE CTION 183, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN THE OTHER PRO VISIONS OF THIS ACT, THE PENALTY IMPOSABLE UNDER SUB-SECTION (1) SHALL BE TH E SAME AMOUNT AS WOULD BE IMPOSABLE ON THAT FIRM IF THAT FIRM WERE AN UNREGIS TERED FIRM. (4) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT TH E PROFITS OF A REGISTERED FIRM HAVE BEEN DISTRIBUTED OTHERWISE THAN IN ACCORD ANCE WITH THE SHARES OF THE PARTNERS AS SHOWN IN THE INSTRUMENT OF PARTNERS HIP ON THE BASIS ON WHICH THE FIRM HAS BEEN REGISTERED UNDER THIS ACT, AND TH AT ANY PARTNER HAS THEREBY RETURNED HIS INCOME BELOW ITS REAL AMOUNT, HE MAY D IRECT THAT SUCH PARTNER SHALL, IN ADDITION TO THE TAX, IF ANY, PAYABLE BY H IM, PAY BY WAY OF PENALTY A SUM NOT EXCEEDING ONE AND A HALF TIMES THE AMOUNT OF TA X WHICH HAS BEEN AVOIDED, OR WOULD HAVE BEEN AVOIDED IF THE INCOME RETURNED B Y SUCH PARTNER HAD BEEN ACCEPTED AS HIS CORRECT INCOME; AND NO REFUND OR OT HER ADJUSTMENT SHALL BE CLAIMABLE BY ANY OTHER PARTNER BY REASON OF SUCH DI RECTION. (5) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1 989 SHALL APPLY TO AND IN RELATION TO ANY ASSESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECTION TO THE OTHER PROVISIONS OF THIS ACT SHALL BE CONSTRUED AS REFERENCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR. 5.4 AS MENTIONED ABOVE, THE CONTENTION OF REVENUE I S THAT THE INTENTION OF THE ASSESSEE IN MAINTAINING INACCURATE DETAILS / RECORD S WAS MANIFEST, VIZ., TO CONCEAL THE PARTICULARS OF INCOME AND FURNISH INACCURATE PARTIC ULARS OF SUCH INCOME. IT IS THE ARGUMENT PUT FORTH BY REVENUE THAT BUT FOR THE SUR VEY UNDER SECTION 133A OF THE ACT, IN WHICH THE DISCREPANCIES IN THE ASSESSEE'S ACCOUNTS WERE EXPOSED, THE ASSESSEE WOULD HAVE 13 ITA NO. 287/BANG/2012 FILED THE RETURN OF INCOME FOR THE RELEVANT PERIOD CONCEALING THE SAID INCOME AND THEREFORE THE PROVISIONS OF SECTION 271(1)( C )OF T HE ACT ARE ATTRACTED IN THE PRESENT CASE. 5.5 ON THE OTHER HAND, THE ASSESSEE CONTENDS THAT C LAUSE ( C ) OF SECTION 271(1) OF THE ACT MAKES IT CLEAR THAT THE ACT OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IS RELATABLE ONLY TO A RETURN OF INCOME FILED. THEREF ORE, IT IS SUBMITTED, IN A CASE WHERE THE DATE FOR FILING THE RETURN OF INCOME HAD NOT BECOME DUE, THERE IS NO CASE FOR INVOKING THE PROVISIONS OF SECTION 271 AND IMPOSING PENALTY UNDE R SECTION 271(1)( C ) OF THE ACT, AS IS THE POSITION IN THE PRESENT CASE OF THE ASSESSEE. IN THE PRESENT CASE, THE RETURN OF INCOME WAS FILED WITHIN THE PRESCRIBED TIME SPECIFI ED IN THE ACT AND IN THE SAID RETURN OF INCOME, THE INCOME DISCLOSED IN THE COURSE OF SURVE Y ACTION HAS DULY BEEN DISCLOSED THEREIN. THEREFORE, INVOKING OF THE PENAL PROVISIO N OF SECTION 271(1)( C ) OF THE ACT ONLY ON THE ASSUMPTION THAT THE ASSESSEE WOULD NOT HAVE INCLUDED THE SAID INCOME WHILE FILING ITS RETURN OF INCOME, IS IN OUR OPINION, UNSUSTAINA BLE. IT IS A WELL SETTLED POSITION OF LAW, AS ENUNCIATED IN VARIOUS JUDICIAL PRONOUNCEMENTS THAT PENALTY CANNOT BE BASED ON PRESUMPTIONS AND SURMISES. 5.6 LEGISLATIVE INTENT IN CONNECTION WITH THE PROV ISIONS OF SECTION 271 OF THE ACT IS FURTHER FORTIFIED BY THE VARIOUS EXPLANATIONS PROVI DED THEREIN. IN THIS REGARD, EXPLANATION 4 THERETO IS RELEVANT WHEREIN IT IS SPE CIFICALLY PROVIDED AS TO WHAT WOULD BE INCLUDED IN THE EXPRESSION THE AMOUNT OF TAX SOUGH T TO BE EVADED, WHICH IS THE BASIS FOR IMPOSITION OF THE PENALTY CONTEMPLATED UNDER SECTIO N 271(1)( C ) OF THE ACT. A PERUSAL OF 14 ITA NO. 287/BANG/2012 THIS EXPLANATION 4 ALSO ESTABLISHES THE DIRECT NEXU S BETWEEN THE CONCEALMENT OF INCOME AND INACCURATE PARTICULARS FURNISHED WITH THE RETUR N OF INCOME. EXPLANATION 5 TO SECTION 271 OF THE ACT PROVIDES THAT IN CASES OF SEARCH, BY WAY OF DEEMING FICTION, THE LIABILITY TOWARDS PENALTY HAVE BEEN PRESCRIBED EVEN IN CASES WHERE THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE DATE OF SEAR CH. THEREFORE, IT IS CLEAR THAT, WHENEVER THE LEGISLATURE INTENDS TO IMPOSE A PENAL LIABILITY COVERING A CASE WHERE THE RETURN WAS YET TO BE FILED, A DEEMING FICTION HAS B EEN CONSCIOUSLY PROVIDED. IN THE ABSENCE OF ANY SUCH DEEMING FICTION IMPOSING PENALT Y IN A CASE OF SURVEY WHEN RETURN IS NOT YET DUE TO BE FILED, THE PENAL PROVISIONS OF SECTIO N 271 OF THE ACT CANNOT BE INVOKED AS THE MANDATORY INGREDIENTS THEREOF ARE NOT MET AT ALL. 5.7 IN THE CASE OF CIT V RELIANCE PETRO PRODUCTS PV T LTD (2010) 3 SCR 510 RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE HON'BL E APEX COURT HELD THAT UNLESS THE CONDITIONS UNDER SECTION 271(1)(C) OF THE ACT EXIS T IN A PARTICULAR CASE, PENALTY CANNOT BE IMPOSED. IT WAS ALSO HELD THAT SECTION 271 OF THE ACT BEING A PENAL PROVISION, IT IS REQUIRED TO BE CONSTRUED STRICTLY. IT WAS ALSO HELD BY THE HON'BLE APEX COURT THAT THE ASSESSEE CAN FURNISH PARTICULARS OF INCOME IN HIS RETURN OF INCOME AND EVERYTHING WOULD DEPEND ON THE RETURN OF INCOME FILED BY THE ASSESSEE. THIS V IEW DRAWS SUPPORT FROM EXPLANATIONS 4, 5 AND 5A TO SECTION 271 OF THE ACT. THERE IS NO DI SPUTING THE FACT THAT DISCREPANCIES IN THE ASSESSEE'S ACCOUNTS WERE DETECTED IN THE COURSE OF SURVEY AND PURSUANT TO WHICH THE ASSESSEE ADMITTED INCOME OF RS.1 CRORE. THE QUESTI ON FOR CONSIDERATION HERE IS WHETHER THIS WOULD ATTRACT THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE 15 ITA NO. 287/BANG/2012 ASSESSEE. OBVIOUSLY, NO PENALTY CAN BE IMPOSED UNL ESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED TO SURVEY UNDER SECTION 133A OF THE ACT, IT IS POSSIBL E THAT IT WOULD NOT HAVE ADMITTED THE INCOME OF RS.1 CRORE BUT FOR THE SURVEY. HOWEVER, THE CONCLUSION OF THE AUTHORITIES BELOW AS TO WHAT THE ASSESSEE WOULD HAVE DONE ON A FUTURE DATE IS ONLY A SURMISE AND THERE CANNOT BE IMPOSITION OF PENALTY UNDER SECTION 271(1 )(C) OF THE ACT ONLY ON THE BASIS OF SURMISES AND CONJECTURES. SECTION 271(1)( C ) OF T HE ACT IS TO BE CONSTRUED STRICTLY AND UNLESS IT IS ESTABLISHED THAT THERE IS A CONCEALMEN T OR NON-DISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. IN THE INSTANT CASE, WE FIND THAT, THERE IS NO SUCH CONCEALMENT OR NON-DISCLOSURE OF INCOME AS THE ASSE SSEE HAD DISCLOSED THE SAME IN ITS RETURN OF INCOME AND OFFERED THE SURRENDERED AMOUNT FOR TAXATION. 5.8 ON SIMILAR FACTS OF THE HON'BLE DELHI HIGH COUR T IN THE CASE OF SAS PHARMACEUTICALS REPORTED IN (2011) 335 ITR 259 (DEL HI) WHICH IS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE HAS HELD THE SAME VIEW AS ELUCIDATED ABOVE. IN PARAS 12 TO 17 THEREOF THEIR LORDSHIPS HAVE HELD AS UNDER : 12. AFTER CONSIDERING THE RESPECTIVE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE ARGUMENT O F THE LEARNED COUNSEL FOR THE ASSESSEE HAS TO PREVAIL AS IT CARRIED SUBSTANTI AL WEIGHT. IT IS TO BE KEPT IN MIND THAT SECTION 271(1)(C) OF THE ACT IS A PENAL P ROVISION 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 STIPULATES CERTAIN CONTINGENCIES ON THE HAPPENING W HEREOF THE AO OR THE COMMISSIONER (APPEALS) MAY DIRECT PAYMENT OF PENALT Y BY THE ASSESSEE. WE ARE CONCERNED HEREWITH THE FUNDAMENTALITY PROVIDED IN C LAUSE (C) OF SECTION 271 (1) OF THE ACT, WHICH AUTHORIZES IMPOSITION OF PENALTY WHEN THE AO IS SATISFIED THAT THE ASSESSEE HAS EITHER; 16 ITA NO. 287/BANG/2012 (A) CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF SUCH INCOME . 13. IT IS NOT THE CASE OF FURNISHING INACCURATE PAR TICULAR OF INCOME, AS IN THE INCOME TAX RETURN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT OF INCOME WAS DULY REFLECTED IN THE INCOME TAX RETURN. THE QUESTION IS WHETHER THE PARTICULARS OF INCOME WERE CONCEALED BY THE ASSESSEE OR NOT. IT WOULD DEPEND UPON THE ISSUE AS TO WHETHE R THIS CONCEALMENT HAS REFERENCE TO THE INCOME TAX RETURN FILED BY THE ASS ESSEE, VIZ., WHETHER CONCEALMENT IS TO BE FOUND IN THE INCOME TAX RETURN . 14. WE MAY, FIRST OF ALL, REJECT THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE RELYING UPON THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT OCCURRING IN SUB-SECTION (1) OF SECTION 271 OF THE ACT AND CONTENDING THAT EVEN DURING SURVEY WHEN IT WAS FOUND THAT THE ASSESSEE HAD CONCEALED THE PARTICULAR OF HIS INCOME, IT WOULD AMOUNT CONCEALME NT IN THE COURSE OF ANY PROCEEDINGS . THE WORDS IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE COMMI SSIONER OF INCOME TAX (APPEALS). WHEN THE SURVEY IS CONDUCTED BY A SURVEY TEAM, THE QUESTION OF SATISFACTION OF AO OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER DOES NOT ARISE. WE HAVE TO KEEP IN MIND THAT IT IS THE AO WH O INITIATED THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURING THE COURSE OF SURVEY. DECISION TO INITIATE PENALTY PROCEEDINGS WAS TAKEN WHILE MAKING ASSESSMENT ORDER . IT IS, THUS, OBVIOUS THAT THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UN DER THIS ACT CANNOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS, IN THIS CASE. 15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PART ICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY TH E ASSESSEE HAS TO BE IN THE INCOME TAX RETURN FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI-I VS. MOHAN DAS HASSA NAND 141 ITR 203 AND IN RELIANCE PE TROPRODUCTS PVT. LTD. (SUPRA), THE SUPREME COURT HAS CLINCHED THIS ASPECT , VIZ., THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE INCOME TAX RETURN FILED BY THE ASSESSEE. T HIS VIEW GETS SUPPORTED BY EXPLANATION 4 AS WELL AS 5 AND 5A OF SECTION 271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT. 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING T HE SURVEY. THIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FORM OF AMOUNT SURR ENDERED BY THE ASSESSEE. PRESENTLY, WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS TO WHETHER THIS WOULD ATTRACT PENALTY U PON THE ASSESSEE UNDER THE 17 ITA NO. 287/BANG/2012 PROVISIONS OF SECTION 271(1) (C) OF THE ACT. OBVIOU SLY, NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAI D PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXP OSED 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. SECTION 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 INCO ME TAX RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 17. WE, THUS, ANSWER THE QUESTIONS AS FORMULATED A BOVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE FINDING NO FAULT W ITH THE DECISIONS OF THE CIT(A) AS WELL AS THE TRIBUNAL. AS A RESULT, THIS APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SAS PHARMACEUTICALS (SUPRA), WE HOLD THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT LEVIABLE ON THE FACTS ON THE PRESENT CASE. 6.1 THERE IS ALSO THE QUESTION OF THE DIFFERENCE BE TWEEN THE RETURNED INCOME OF RS.98,35,100 AS DISCLOSED IN THE RETURN OF INCOME F ILED FOR ASSESSMENT YEAR 2007-08 AND THE ASSESSED INCOME DETERMINED AT RS.1 CRORE. THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT FOR THE RELEVANT PERIOD BY ADDING AN AMO UNT OF RS.1,64,900 TO BRING THE ASSESSED INCOME TO RS.1 CRORE AS DISCLOSED IN THE S URVEY PROCEEDINGS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAD DISCLOSED AN AMOUNT OF RS.1 CRORE IN ITS RETURN OF INCOME. IN FACT, IT IS SEEN THAT THE NET PROFIT IS DECLARED AT RS.1,11,95,469 WHICH IS MORE THAN THE INCOME DECLARED IN THE COURSE OF SURVEY. THE TOTAL TAXABLE INCOME WAS COMPUTED AT RS.98,35,100 AFTER CLAIMING CERTAIN DEDUCTIONS. ON CAREFUL APPRAISAL AND CONSIDERATION OF THE FACTS ON RECORD, WE AGREE WITH THE CONTENTION O F THE ASSESSEE THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS.1,64,900 NOT BECAUS E OF ANY DISCREPANCY OR CONCEALMENT 18 ITA NO. 287/BANG/2012 DETECTED IN THE COURSE OF ASSESSMENT PROCEEDINGS BU T ONLY TO PEG THE TAXABLE INCOME AT RS.1 CRORE, AS DISCLOSED DURING THE COURSE OF SURVE Y. TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN THESE CIRCUMSTANCES WILL NO T STAND UP TO THE PRINCIPLE THAT PENAL PROVISIONS SHOULD BE CONSTRUED STRICTLY SINCE THE A DDITION OF RS.1,64,900 IS ONLY IN THE NATURE OF AN ADHOC ADDITION. WE, THEREFORE, HOLD T HAT THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IN THE ASSESSEE'S CASE FOR ASS ESSMENT YEAR 2007-08 IS UNSUSTAINABLE AND THEREFORE DELETE THE SAME. 7. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DECEMBER, 2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - C BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE