A survey u/s.133A was carried out at the premises of the
assessee who was a practising doctor. During the course of the search he
declared unaccounted income of Rs.32.84 lakh. Thereafter, he filed a return of
income declaring income of Rs.37.57 lakh wherein, apparently, the assessee
disclosed unaccounted income of Rs.32.84 lakh which was declared by him during
the course of survey. The assessment was finally completed on an income of
Rs.38.12 lakh after making minor additions. The Assessing Officer also levied
penalty u/s.271(1)(c) in respect of the sum of Rs.32.84 lakh declared during the
course of survey. On appeal, the CIT(A) set aside the penalty order.
The Tribunal, following the decision of the Allahabad High
Court in the case of Smt. Govinda Devi v. CIT, (2008) 304 ITR 340/173
Taxman 370, upheld the CIT(A)’s order deleting the penalty. The Tribunal noted
as under:
(1) As per clause (c) of the Explanation 4 to section 271(1)(c), tax sought to be evaded means the difference between tax on the total income assessed and tax that would have been chargeable on such total income reduced by the amount added.
(2) Since, in the instant case, the Assessing Officer had not made any addition to the returned income, the question of working out any tax sought to be evaded would not arise.
(3) In general, where a case does not fall within clause (a) or clause (b) of Explanation 4 to section 271(1)(c) there cannot be any ‘tax sought to be evaded’ if there is no addition to the returned income.
(4) The assessee would be liable for an action u/s.271(1)(c) in respect of such items only which are discovered by the Assessing Officer on the scrutiny of return of income or after carrying out an investigation and discovering some more items of income not found declared or mentioned in the return of income. Prior to the filing of return of income there is no concept of concealment or furnishing inaccurate particulars of income.
(5) ‘Proceedings’ as used in section 271(1)(c) are statutory proceedings initiated against the assessee either by the issuance of a statutory notice or after filing of return of income. Survey u/s.133A or a search u/s.132 or issuance of a notice u/s.133(6), for example, are only means of collecting evidence against the assessee and are not equivalent to statutory proceedings. Another criterion for finding out whether a particular action is a statutory proceeding or not is to see whether it can be brought to a legal conclusion against the assessee by determining his right to liability.
(6) Merely carrying out a survey u/s.133A does not create any liability against the assessee which is created only through assessment proceedings or through penalty proceedings. Therefore, the Revenue was not correct in its submission that the survey was a ‘proceeding’ and the Assessing Officer having discovered concealment during survey, the assessee would be liable for penalty u/s.271(1)(c).
(7) The act of concealment or furnishing of inaccurate particulars should be viewed by the Assessing Officer as done with respect to return of income. The omission or commission or contumacious conduct has to be viewed from the return of income and if certain thing has not been disclosed or has not been furnished therein, only then it can be said that the assessee has concealed the particulars of his income or furnished inaccurate particulars of his income. Prior to this the assessee cannot be said to have done any contumacious conduct on which penalty could be levied.
(8) Merely because certain receipts were not recorded in the books of account or receipts were not issued to the patients, but income therefrom was finally declared in the return of income, there would be no contumacious conduct. For not maintaining books of account or not issuing receipts to the patients for the amount received by the assessee, at best, the books can be rejected by invoking provisions of section 145(3) and income can be estimated in accordance with section 144. Where, however, the Assessing Officer had accepted the income declared in the return of income, then the assessee could not be charged for any contumacious conduct.
