Surrender of income due to recovery of documents during survey can not be said to be voluntarily. ITAT upheld penalty u/s 271(1)(c)
ABCAUS Case Law Citation
ABCAUS 3472 (2021) (03) ITAT
Important case law relied referred:
MAK Data (P) Ltd. v. CIT (2013) 358 ITR 593(SC)
Samson Maritime Ltd.  88 taxmann.com 671 (Bombay)
Gangotri Textiles Ltd.  121 taxmann.com 171 (Madras)
CIT vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar)
Sudhir Kumar Singh and others vs. State of UP
SSA Emrald Meadows, 73 Taxman 248 (SC)
Sundaram Finance Lt. vs. ACIT, 93 tamann.com 250 (Madras)
Sandeep Chandak, 93 taxman.com 405
In the instant case, the Revenue had challenged the order passed by the CIT(A) in deleting the penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).
A survey action u/s 133A was carried out at the business premises of the assessee. During the course of survey, loose papers and other documents were found which were impounded and inventorized.
The assessee, when confronted with the documents so found and impounded, in his statement recorded surrendered income stating that he was doing so to avoid litigation, to buy peace of mind and have a cooperation with the department
Based on this statement, during the assessment proceedings, the assessee was asked to explain the source of income not declared in the return for the relevant assessment year.
The assessee against stated during the course of survey, he had offered income for taxation just to avoid litigation, to buy peace and have a cooperation with the department with the condition that no penal action may kindly be taken.
However, in the assessment order, the Assessing Officer (AO) initiated penalty u/s. 271(1)(c) of the Act.
The CIT(A) deleted the said penalty.
Before the Tribunal, the assessee submitted that penalty order was required to be set aside not only on the ground mentioned by the CIT(A), but also on account of fact that in all the notices sent there were no specific charge of penalty i.e. without striking of the not applicable limb of the penalty.
The Department submitted that the finding recorded by the CIT(A) that no document, no cash no stock or incriminating material was found during the survey, was incorrect and was contrary to the categorical finding recorded in the assessment order.
It was also stated that no prejudice was caused to the assessee as the assessee had not only participated in the penalty proceedings, but was aware of the fact as was clear from the reply submitted by the assessee.
With respect to the non-specific charge in the penalty notice u/s 274 the Tribunal stated that the assessee was well aware of the charge against it and was required to plead not only the plea of non-specific notice but was also required to raise the defense of prejudice caused to him on account of non-specific notice.
The Tribunal opined that the assessee had not raised the plea of non-specific notice before the lower authorities and had further not raised the plea of prejudice caused to him on account of non-specific notice.
The Tribunal pointed out that though the judgement relied upon by the assessee provides that in case of non-specific notice, the penalty proceedings are required to be dropped. However, Hon’ble Supreme Court in a subsequent judgement had laid down that it is not only necessary for the assessee to raise the plea of violation of principle of natural justice but it is also necessary to prove and plead the prejudice caused to him on account of non-compliance of principle of natural justice as in the present case of non-specific notice. Nothing has been pleaded before us or before the lower authorities to prove the prejudice caused to the assessee on account of non-specific notice.
The Tribunal held that there was no merit in the contention of the assessee and therefore the cross objections filed by the assessee was dismissed as no prejudice had been caused to the assessee.
The Tribunal further noted that it was clear that the assessee had surrendered the income during the course of survey but not disclosed the said income in the return of income. In the assessment proceeding the assessee, by the written submission the assessee agreed for the surrender and submitted that it was done only to avoid litigation and to buy peace.
The Tribunal opined that initial surrender made by the assessee was on account of recovery of loose papers, hard disk and other documents showing the undisclosed income and investment by the assessee, his daughter and son. It was not voluntary but it was on account of the recovery of the said documents made during survey.
The Tribunal opined that from the conduct of the assessee it was clear that the surrender was lacking voluntariness. The assessee was forced to disclose the income on account of survey and subsequent show cause notice issued by the assessing officer.
Accordingly, the Tribunal set aside the order passed by the CIT (appeals) and the order of the assessing officer imposing the penalty was confirmed.
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