Penalty — Concealment of income — Search proceedings and income-tax survey — Subsequent addition to income returned — Returns accepted — No concealment of income — Penalty could not be levied

Penalty — Concealment of income — Search proceedings and income-tax survey — Subsequent addition to income returned — Returns accepted — No concealment of income — Penalty could not be levied

The assessee, a partnership firm was involved in the business of real estate development and construction, where it had come out with a scheme “Shreedhar Residency” in the first year 2012-13. The survey u/s 133A of the Income-tax Act, 1961 was conducted on 9th January, 2013 as a part of search operations in Rashmikant Bhatt Group along with other assessees belonging to the very group. The total disclosure was made of Rs. 20 crores, of which Rs. 3.80 crores was of the assessee firm. This was offered as an additional income of a year under survey and the return which was filed by the assessee for the A.Y. 2013-14 on 29th September, 2013. The total income disclosed and declared was Rs. 4,26,92,360 which was inclusive of the said sum of Rs. 3.80 crores. The assessment order was passed u/s 143(3) on 28th December, 2015 without any addition, whereby the return filed by the assessee was accepted. However, the Assessing Officer had initiated the penalty proceedings u/s 271(1)(c) on the ground of concealment. The stand of the assessee is that the amount of Rs. 3.80 crores cannot be treated as concealed income since the same had been declared in the return filed by the assessee. This was not accepted by the Assessing Officer and a penalty was imposed u/s 271(1)(c) at the rate of 100 per cent tax on the income to the tune of Rs. 3.80 crores.

The Commissioner (Appeals) cancelled the penalty. The Tribunal concurred with the Commissioner (Appeals).

On appeal by the Revenue, the following question was raised.

“Whether in the facts and circumstances of the case, the learned Income-tax Appellate Tribunal has erred in law and on fact in deleting the penalty levied u/s. 271(1)(c) of the Income-tax Act, 1961, amounting to Rs. 1,18,00,000 despite the fact that penalty was levied on admitted net undisclosed income of Rs. 3.80 crores received as ‘on money’, which was unearthed based on diary found and impounded by Investigation Wing during survey proceedings and also admitted by one of the partners in the statement recorded u/s. 131(1A) of the Act and the said ‘on money’ income was not accounted for in the regular books of account of the assessee on the date of survey?”

The Gujarat High Court upheld the decision of the Tribunal and held as under:

“i) The Income-tax survey had taken place on 9th January, 2013 as a part of search operation of the entire group and out of additional Rs. 20 crores disclosed, Rs. 3.80 crores was attributed to the assessee-firm. The return was filed u/s. 139 of the Income-tax Act, 1961 by the assessee for the A.Y. 2013-14 on 29th September, 2013, which was about eight months after the survey which was conducted. The books of account were not closed and it was not a case of any revised return being filed by the assessee. In such circumstances, the Assessing Officer also had not added any other income as the amount of Rs. 3.80 crores had already been declared in the return itself.

ii) There was no concealment of income and hence penalty could not be imposed.”