No Concealment penalty u/s 271(1)(c) for income surrendered during survey

No Concealment penalty u/s 271(1)(c) for income surrendered during survey if income was disclosed in return which was filed within due date-Allahabad High Court

ABCAUS Case Law Citation:
ABCAUS 2077 (2017) (09) HC

The Substantial Question of Law framed/urged for determination:

“(I) Whether the ITAT was justified in law and on facts in deleting the penalty under Section 271(1)(c) even when there was clear curt case of concealment? 

(II) Whether the ITAT was correct in deleting the penalty under Section 271(1)(c) completely ignoring the language of 271(1) clause C of explanation 4 where no immunity is provided to the Assessee on the basis of surrender under survey proceedings? 

(III) Whether the ITAT erred in law and on facts in deleting the penalty on grounds that there was no addition to the income returned ignoring the fact that the income shown in the returned income is the outcome of unexplained income detected during the survey proceedings? 

(IV) Whether the ITAT was justified in deleting the penalty when there was a clear cut case of concealment amounting to Rs. 97,98,465/- which was incurred in repair and renovation and which was also accepted by the Chairman who had stated that this was incurred out of cash donations received from various persons?” 

Assessment Year :  2007-08

Brief Facts of the Case:

During the course of a survey conducted, the assessee had surrendered a sum of Rs.1,00,00,000/- for alleged cash received by way of donations which was utilized for the renovation and repair of the buildings.

The assessee submitted its return within due date prescribes u/s 139(1) incorporating the amount surrendered as income.

The Assessing Authority in view of the said surrender, passed an assessment order and directed for initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 (Act).  Subsequently, penalty was imposed under Section 271(1)(c) of the Act holding that the disclosure of Rs.1,00,00,000/- received in donation was under compulsion and as such the assessee was guilty of not only furnishing inaccurate particulars but of non-disclosure of full and complete particulars for the purposes of assessment. 

The penalty order was set aside by the Commissioner of Income Tax and the same has been confirmed by the Income Tax Appellate Tribunal by the order impugned in the present appeal filed by the Revenue.

Observations made by the High Court:
The High Court observed that section 271(1)(c) of the Act proposes to impose penalty only on two conditions, first if the assessee has failed to disclose true and complete particulars relevant for the assessment and second if he has furnished inaccurate particulars. 

It was noted that the survey was conducted before the return of income was filed under Section 139 of the Act within time. In the return, the assessee had declared the income of Rs.1,00,00,000/- which it had received by way of donation and had paid tax on it. 
Since the aforesaid income was disclosed it could not be a case of non-disclosure of any income. At the same time, no incorrect or inaccurate particulars were furnished in respect of the said disclosure or any other part of the income shown in the return. 

The High Court observed that the Tribunal followed the decision of the Supreme Court in the case of Reliance Petroproducts (P) Ltd wherein it had been held that if no information given in the return was found to be incorrect or inaccurate and the full particulars are disclosed, the assessee cannot be held guilty for the purposes of most punishment under Section 271(1)(c) of the Act. 

The High Court observed that in view of the above ratio as laid down by the Supreme Court the assessee was not guilty of furnishing inaccurate particulars or non-disclosure of the relevant particulars for the purposes of assesment. 

Accordingly the High Court answered all the questions framed in favour of the assessee and against the Revenue.

Held:
The Court held that the Tribunal was justified in law on the facts and circumstances of the case in deleting the penalty made under Section 271(1)(c) of the Act even though the disclosure of Rs.1,00,00,000/- was made by the assessee subsequent to the survey but fully and correctly in the return filed under Section 139 of the Act. 

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