INCOME TAX ACT, 1961

Penalty under section 271(1)(c)- Concealment-Assessee offered additional income during survey proceedings

Assessee was engaged in conducting coaching class for various examinations. It filed return of income declaring income of certain sum. Certain discrepancies were found under survey proceedings under section 133A. The assessee had offered an additional income to cover up discepriencies under survey. The return was revised and the assessee offered another additional income that was investment in fixed deposits with banks. AO completed the assessment by accepting the revised return. Penalty proceedings under section 271(1)(c) were initiated for concealing particulars of the income and furnishing inaccurate particulars thereof. AO had held that the discrepancies noted during course of survey under section 133A and consequent disclosures of additional income attracted penalty. Notice under section 274 read with section 271(1)(c) was issued to the assessee. The assessee submitted that non-discovery of incriminating discoveries in the survey action, voluntary and suo motu disclosure of additional incomes, valid revising of the returns, oral promises of AO for non-levy of penalties etc.

AO did not allow the submission of assessee and was held that the assessee had concealed the particulars of income and failed to offer satisfactory explanation. SO, AO levied the penalty. CIT (A) had upheld the order of penalty. Held:No incriminating material was noticed which was said to have been gathered either during the survey or during the post survey enquiries with the bank. They had mere reference to the bank enquiries and scanty material against the assessee, which was quantitatively disproportionate to the extent of disclosure offered by the assessee. Neither AO had described the said material nor CIT (A) highlighted the incriminating nature of the same in their respective orders while levying/confirming the penalty. Impugned orders were silent on the said material as to how the income was concealed for the assessment years under consideration and nothing was made out about the incriminating nature of the same. None of the said documents, were produced to demonstrate that the impugned additional income was declared by the assessee only due to said incriminating material discovered during the survey operation or post survey operation. It was further found that the assessee had not only offered the additional income but also filed the revised return by enhancing the income. [Para 12]

The assessee had furnished the valid revised return, which was accepted by AO without pointing out a single inaccuracy and without making any further additions in the assessment. In such situations, it was not possible to levy penalty. [Para 13]

For levy of the penalty under section 271(1)( c), it is established legal proposition, that there has to be positive material to indicate that the assessee has concealed income or had furnished inaccurate particulars of income.AO must have gathered such material, which was undisputedly unreliable and incredible to establish the concealed income of the assessee. Penalty for concealment can not be levied merely when the assessee offered some income not backed by the material as the assessee can offer such income for various reasons. AO had to crystallize the ownership of such income and year it relates to. Further, there had to be some material to compare and to prove that what was stated by the assessee was false or inaccurate. Assessment proceedings are distinct and different from that of the penalty proceedings. Sustaining of the additions in quantum appeal or assessee decision to not to file further appeal for some reasons, does not automatically invite the levying the penalty. Penalty cannot be sustained in such cases where there is some possibility for the acceptance of the assessee`s explanation. Further, when two views are possible, real ownership of the FDs/income and correct assessment years, a bona fide belief for claim or allowance cannot be subjected to concealment merely because such belief is erroneous under the law. In the light of the above, it was to be held that instant was not a fit case for levy of penalty. [Para 15]