C/TAXAP/498/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 498 of 2019 PRINCIPAL COMMISSIOENR OF INCOME TAX (CENTRAL), SURAT Versus SHREE SAI DEVELOPERS Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 23/07/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260-A of Income Tax Act, 1961 (for short Act, 1961 ) is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Surat Bench, Surat, dated 25.01.2019 in ITA No.3175/Ahd/2016 for Assessment Year 2012-13. 2. Revenue has proposed following three substantial questions of law for consideration of this Court: [A] Whether on facts and circumstances of case and in law, Appellate Tribunal was right in Page 1 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER deleting penalty of Rs.55,15,650/- levied under Section 271(1)(c) of Act. [B] Whether on facts and circumstances of case and in law, Appellate Tribunal erred in not appreciating that penalty u/s 271(1)(c) is attracted for concealment detected in course of any proceeding under Act, which cannot be limited to assessment proceeding and should have been held to include survey proceeding u/s 133A(1)? [C] Whether on facts and circumstances of case and in law, Appellate Tribunal erred in not appreciating that even clause (a) of explanation 4 to section 271(1)(c) does not refer to returned income so as to limit penalty u/s 271(1)(c) with reference to difference between tax on Assessed Income and Returned Income? 3. It appears form materials on record that survey under Section 133A of Act was carried out on 17.07.2012. In course of survey proceedings, assessee firm declared unaccounted income of Rs.1,78,50,000/- received during A.Y. 2012-13. Later, assessee filed its return of income on 28.09.2012 declaring its total income of Rs.2,59,11,800/- including unaccounted income of Rs.1,78,50,000/- disclosed during course of survey proceedings. case of assessee firm was selected for scrutiny under CASS and notice under Section 143(2) of Page 2 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER Act was issued on 23.09.2013. assessment order under Section 143(3) of Act came to be passed on 30.03.2015 and income was assessed at Rs.2,59,11,800/-, meaning thereby, returned income was accepted as assessed income. 3.1 Assessing Officer vide his order dated 22.09.2015 levied penalty of Rs.55,15,650/- under Section 271(1)(c) of Act on premise that assessee had furnished inaccurate particulars of his income which led to concealment of his income. 3.2 assessee being dissatisfied with assessment order passed by AO preferred appeal before CIT(A). CIT(A) deleted penalty levied by AO. 3.3 Revenue being dissatisfied with order of CIT(A) preferred appeal before Appellate Tribunal. Appellate Tribunal dismissed appeal preferred by revenue and thereby affirmed order passed by CIT(A). 3.4 Being dissatisfied with order passed by Tribunal, Revenue is here before this Court with present appeal. Page 3 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER 4. Mrs. Mauna Bhatt, learned senior standing counsel appearing for Department submitted following : (a) In this case, it is found that assessee disclosed income of Rs.1,78,50,000/- only on account of Survey proceeding conducted by Income-tax department. Had there been no Survey action, undisclosed income of Rs.1,78,50,000/- would have remained undetected and entire amount would have escaped from gaze of tax. (b) Further, assessee s intention to avoid payment of taxes is clear from fact that entries in diary found during survey proceeding were not entered in books of account. (c) Penalty u/s 271(1)(c) of Act is attracted for concealment found in course of any proceeding under this Act, which includes also proceeding u/s 133A(1). Moreover, during penalty proceeding, assessee had failed to give any justification or acceptable explanation for furnishing inaccurate particulars of income. (d) imposition of penalty u/s 271(1)(c) as per clause (a) of explanation 4 to section 271(1)(c) does not refer to returned income, but merely to amount in respect of which particulars have been concealed. 5. Tribunal while dismissing appeal preferred by Department, held as under : Page 4 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER 13. Thus basis for levy of penalty is return of income. If any amount has been shown in return of income, then it cannot be said that assessee has concealed any particular about that income or furnished inaccurate particulars in relation thereto. There cannot be any concealment prior to filing of return. Question of consideration whether assessee is liable for action under section 271(1)(c) would arise only when return of income is scrutinized by AO and he finds some more items of income or additional income over above what is declared in return. If it is so, assessee would be liable for action under section 271(1)(c) in respect of such items only which are discovered by AO on scrutiny of return of income or after carrying out investigation and discovering some more items of income not found declared or mentioned in return of income. Prior to filing of return of income there is no concept of concealment or furnishing of inaccurate particulars. 14. initial phrase used in section 271(1)(c) suggests that AO has to find in course of any proceedings under this Act that assessee has concealed particulars of his income or furnished inaccurate particulars of such income. In fact, proceedings against assessee would start only after return of income is filed by assessee or after issuance of statutory notice against him such as under section 142(1) or u/s 143(2). Carrying out survey under section 133A is not at all any proceedings. Proceedings as used in section 271(1)(c) are statutory proceedings initiated against assessee either by issuance of statutory notice or after filing of return of income. Survey u/s. Page 5 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER 133A or search under section 132 or issuance of notice u/s. 133(6) for example, are only means of collecting evidence against assessee and are not equivalent to statutory proceedings. Another criteria of finding out ks to be seen whether it can be brought to legal conclusion against assessee by determining his right or liability. Merely carrying out survey under section 133A does not create any liability against assessee which in created only through assessment proceedings or penalty proceedings. Therefore, Ld.DR. is incorrect in his submission that survey being proceedings and AO has discovered concealment during survey, therefore, assessee is liable for penalty under section 271(1)(c). 18. ld.DR has relied on judgment of Mak Data Pvt. Ltd. vs. CIT [2013] 358 ITR 593 (SC), however, same is not applicable in present case as in that case survey was conducted more than 10 months before filing of returns and disclosure was made by assessee later during course of assessment proceedings, whereas in present case amount disclosed during survey was duly included in original return of income filed after date of survey. Therefore, facts of said case are distinguishable. Further, there is no difference in return of income and income. 19. In light of above facts and circumstances and case laws we are of considered opinion that it is not case of furnishing inaccurate particulars of income, as in Income Tax Return, particulars of income have been duly furnished and surrendered amount Page 6 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER of income was duly reflected in Income Tax Return nor there is tax sought to be evaded on basis of return of income as assessee has not evaded any tax on return income. Hon ble Delhi high Court in case of SAS Pharmaceuticals [2011] 335 ITR 259 (Del) has considered expression in course of any proceedings under this Act appearing in section 271 of Act and held that said expression cannot have reference to survey proceedings. It has also held that penalty proceedings would depend upon return of income filed by assessee. 6. Having regard to materials on record, question would be as to whether penalty can be imposed under Section 271(1)(c) of Act when assessee has shown his income in Income Tax Return filed by it and contends that he had voluntarily declared same in regular return filed for relevant year. 6.1 Section 271 clause 1(c) reads as under : (1) If Assessing Officer or Commissioner (Appeals) or Principal Commissioner or Commissioner in course of any proceedings under this Act, is satisfied that any person - (c) has concealed particulars of his income or furnished inaccurate particulars of such income; 6.2 principle argument of Mrs. Bhatt is that Page 7 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER assessee disclosed income of Rs.1,78,50,000/- only on account of survey proceedings conducted by Income Tax Department. According to Mrs. Bhatt, if there would have been no survey action, undisclosed income of said amount would have remained undetected and entire amount would have escaped. 6.3 In CIT vs. SAS Pharmaceuticals [2011] 335 ITR 259 (Delhi), Supreme Court had occasion to consider very same issue. A.K. Sikri, J. (as his Lordship then was) after considering language of Section 271(1)(c) of Act, held as under : 12. After considering respective submissions of learned counsel for parties, we are of view that argument of learned counsel for assessee has to prevail as it carried substantial weight. It is to be kept in mind that Section 271(1)(c) of Act is penal provision and such provision has to be strictly construed. Unless case falls within four-corners of said provision, penalty cannot be imposed. Sub- section (1) of Section 271 stipulates certain contingencies on happening whereof AO or Commissioner (Appeals) may direct payment of penalty by assessee. We are concerned herewith fundamentality provided in Clause (c) of Section 271 (1) of Act, which authorizes imposition of penalty when AO is satisfied that assessee has either; Page 8 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER (a) Concealed particulars of his income; or (b) Furnished inaccurate particulars of such income. 13. It is not case of furnishing inaccurate particulars of income, as in income-tax return, particulars of income have been duly furnished and surrendered amount of income was duly reflected in income tax return. question is whether particulars of income were concealed by assessee or not. It would depend upon issue as to whether this concealment has reference to income tax return filed by assessee, viz., whether concealment is to be found in income tax return. 14. We may, first of all, reject contention of learned counsel for Revenue relying upon expression in course of any proceedings under this Act occurring in Sub-section (1) of Section 271 of Act and contending that even during survey when it was found that assessee had concealed particular of his income, it would amount to concealment in course of any proceedings . words in course of any proceedings under this Act are prefaced by satisfaction of Assessing Officer or Commissioner of Income Tax (Appeals). When survey is conducted by survey team, question of satisfaction of Assessing Officer or Commissioner (Appeals) or Commissioner does not arise. We have to keep in mind that it is Assessing Officer who initiated penalty proceedings and directed payment of penalty. He had not recorded any satisfaction during course of survey. Decision to initiate penalty proceedings was taken while making assessment order. It is, thus, obvious that Page 9 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER expression in course of any proceedings under this Act cannot have reference to survey proceedings, in this case. 15. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particular of income by assessee has to be in income tax return filed by it. There is sufficient indication of this in judgment of this Court in case of CIT v. Mohan Das Hassa Nand [1983] 141 ITR 203 (Delhi) and in Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) Supreme Court has clinched this aspect, viz., assessee can furnish particulars of income in his return and everything would depend upon income tax return filed by assessee. This view gets supported by Explanation 4 as well as Explanation 5 and Explanation 5A of Section 271 of Act as contended by learned counsel for Respondent. 16. No doubt, discrepancies were found during survey. This has yielded income from assessee in form of amount surrendered by assessee. Presently, we are not concerned with assessment of income, but moot question is to whether this would attract penalty upon assessee under provisions of Section 271(1)(c) of Act. Obviously, no penalty can be imposed unless conditions stipulated in said provisions are duly and unambiguously satisfied. Since assessee was exposed during survey, may be, it would have not disclosed income but for said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. Section 271(1) (c) of Act has to be construed strictly. Unless it is Page 10 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER found that there is actually concealment or non- disclosure of particulars of income, penalty cannot be imposed. There is no such concealment or non- disclosure as assessee had made complete disclosure in income tax return and offered surrendered amount for purposes of tax. 6.4 Supreme Court in case of Mak Data Pvt. Ltd. vs. Commissioner of Income Tax reported in [2013] 358 ITR 593 (SC) considered Section 271(1)(c) of Act. Supreme Court took view that voluntary disclosure would not release assessee from mischief of penal proceedings. According to Supreme Court, law does not provide that when assessee makes voluntary disclosure of his concealed income he is to be absolved from penalty. moot question which should be considered according to Supreme Court is whether assessee had offered any explanation for concealment of particulars of income or furnished any inaccurate particulars of income? Tribunal in its impugned order has considered both decisions i.e. Delhi High Court decision in case of SAS Pharmaceuticals (supra) as well as Supreme Court decision in case of Mak Data Pvt. Ltd. (supra). Tribunal distinguished Mak Data Pvt. Ltd. on ground that in Mak Data Pvt. Ltd., survey was conducted more than Page 11 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER ten months before filing of return and disclosure was made by assessee later during course of assessment proceedings. Tribunal took notice of fact that in case on hand, amount disclosed during survey was duly included in original return of income filed after date of survey. It took view that there is no difference as such in return of income and income. 6.5 In peculiar facts of present case, Tribunal arrived at conclusion that case is not one of furnishing inaccurate particulars of income. At this stage, we deem it appropriate to reproduce relevant findings recorded by CIT(A), which ultimately, came to be affirmed by Tribunal in its impugned order : survey action was carried out at business premises of appellant form. income declared in return of income filed by appellant included amount surrendered by appellant during course of survey operations conducted by department at business premises. During course of survey operations, certain incriminating documents were found and one of partners of assessee firm Shri Jayantibhai Virjibhai Babariya declared addition income of Rs.1,78,50,000/- for A.Y. 2012-13. survey team did not make further enquiries nor was it established that these represented any other Page 12 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER income. It is not case where it was found / established that income disclosed was not full and true. department has not built case where explanation of appellant has been proved to be false or not bona fide. Even conditions or Explanation 1 of section 271(1)(c) are not applicable in such case. 6.6 We may also refer to one decision of this High Court in case of Principal Commissioner of Income Tax vs. Valibhai Khanbhai Mankad, Tax Appeal No.445 of 2015 decided on 7th September, 2015. In said decision, Assessing Officer had made various disallowances and additions under Sub-section (3) of Section 143 of Act. Assessing Officer also initiated penalty proceedings under Section 271(1)(c) of Act. very same argument was canvassed before coordinate Bench that penalty had been levied by Assessing Officer as assessee had shown additional income after same was detected during course of survey action under Section 133A of Act. It was argued before coordinate Bench that Tribunal had failed to appreciate fact that assessee had filed his return beyond period prescribed under Sub-section (1) of Section 139 of Act. It was also Page 13 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER pointed out that assessee had filed return of income consequent to survey under Section 133A of Act and thereby could be said to have furnished inaccurate particulars of income. This Court negatived contention referred to above and ultimately held as under : 5. From findings recorded by Tribunal, it is evident that factum of deletion of addition in respect of non-deduction of tax by assessee was not controverted by revenue. Tribunal has further found that penalty had been levied on amount which was reflected in original return as income. That it was undisputed fact that assessee had declared this income in his original return of income, although it was belated return. Tribunal was of view that as per provisions of section 271(1)(c) of Act, penalty can be imposed if assessee had concealed particulars of income or has furnished inaccurate particulars of such income. That in present case, there was no dispute with regard to fact that particulars of income were reflected in return of income. Moreover, it was not case of revenue that returns of income filed were invalid and in fact, Assessing Officer had proceeded on basis of return filed by assessee and particulars furnished therein. From findings recorded by Tribunal, it is evident that Tribunal has found as matter of fact that there was no concealment of particulars of income on part of respondent assessee and in fact, Assessing Officer had proceeded on basis of return filed by Page 14 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 C/TAXAP/498/2019 ORDER assessee and particulars furnished therein. Under circumstances, in absence of any concealment of particulars of income or furnishing of inaccurate particulars of income on part of assessee, no infirmity can be found in impugned order passed by Tribunal in confirming order passed by Commissioner (Appeals) in deleting penalty under section 271(1)(c) of Act. In absence of any infirmity in impugned order passed by Tribunal, it is not possible to state that impugned order gives rise to any question of law much less, any substantial question of law so as to warrant interference. appeal is accordingly dismissed. 7. In overall view of matter, we have reached to conclusion that no error not to speak of any error of law could be said to have been committed by Tribunal in passing Impugned order. No interference is warranted in this appeal under Section 260-A of Act. In result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) Dolly Page 15 of 15 Downloaded on : Thu Nov 07 10:53:28 IST 2019 Principal Commissioner of Income-tax (Central), Surat v. Shree Sai Developer