INCOME TAX ACT, 1961

Section 271(1)(c) Section 133A

Penalty under section 271(1)(c) - Leviability - Concealment of income - Voluntary declaration of income during survey--Revenue not recognised on construction as 30% work not completed

Assessee company was engaged in the business of construction. A survey action under section 133A was carried out on the business premises of the assessee company on 30-10-2012. The assessee agreed to offer revenue on such construction contract by offering of income at the rate of 5% on the incremental construction work-in-progress on year on year basis subject to the condition that the revenue will not levy penalty on such voluntary declaration. Since assessee had not recognized the revenue in its original return as per revised accounting standard (AS-7) (percentage/progressive completion method) during the year relevant to the assessment year under consideration and since the assessee had agreed to offer 5% of the total amount of work-in-progress, the AO made addition to the income of the assessee. On the basis of the aforesaid addition, AO he levied penalty under section 271(1)(c). CIT(A) had confirmed the penalty.Held: In the present case since the assessee had explained the circumstances under which the addition in question had been made and further established that the explanation is bona fide and it had disclosed all the facts material to the computation of its total income, the CIT(A) had wrongly confirmed the addition made by the AO.This was not a case of concealment of particulars of income by the assessee. There was no active concealment of particulars of income by the assessee in the present case which was a pre condition for imposing penalty under the said section. Assessee had explained the circumstances under which the addition had been made, there was no reason to draw a conclusion that the explanation offered by the assessee was false. Further, the assessee had established that the explanation offered was bona fide, therefore, there was no justification of imposing penalty under section 271(1)(c). Hence, the ground of appeal raised by the assessee was allowed on merits and the impugned order passed by the CIT(A) was set aside.

Applied:CIT v. Reliance petroproducts (P.) Ltd. (2010) 322 ITR 158 (SC) : 2010 TaxPub(DT) 1683 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-2011 & 2011-12

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