ITAT says Penalty Can't Be Imposed If There Is No Concealment in IT Return
The Income Tax Appellate Tribunal (ITAT), Mumbai bench, in its order dated 23 February 2021, directed to delete the imposed penalty under Section 271(1)( c) of the Income Tax Act (IT Act) in the case titled M/s Balee Plastics Pvt. Ltd. (Appellant/Assessee) v. The Income Tax Officer (Respondent/ Revenue), held that the penalty cannot be levied if there is no concealment in the return of income.
The ITAT President, Justice P.P. Bhatt held that since there was no concealment in the return of income filed by the assessee which was ultimately accepted by the Revenue, there cannot be any levy of penalty under section 271(1)(c) of the Act.
The assessee company which has been engaged in the business of manufacturing and marketing plastic products had filed the income tax return declaring a total income of Rs. 2,99,94,911.
The assessee company had purchased land along with a house at Hyderabad for Rs 10.50 crore. The survey was conducted on the assessee's premises. During survey proceedings, a statement on oath of authorized signatory on behalf of the assessee company for the purchase of land was recorded.
Later in the post-survey proceedings, a statement of Jadavji Lalji Shah (Director of the assessee company) was recorded and it was admitted that they have additional income of Rs 4.50 crore as a cash component towards the purchase of property at Hyderabad.
The assessee in the income tax return offered only Rs 3 crore as on money payment made for the purchase of property at Hyderabad as its additional income by duly crediting the same in its profit and loss account under the head 'other income' by clearly mentioning that this sum of Rs 3 crore was the additional income offered during the survey.
The Assessing Officer (AO) completed the assessment without considering the income of Rs 3 crore offered by the assessee in the return of income and made a total addition of Rs 4.50 crore based on the statement recorded as an unexplained investment under Section 69B of the IT Act.
In the quantum appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] made deletion of additional Rs 1.50 crore. It also held that the sum of Rs 3 crore had already been disclosed by the assessee in the return of income which was accepted by the AO while completing the assessment.
The AO levied the penalty on the assessee under Section 271(1)(c) of the IT Act over Rs 3 crore which the assessee offered after the survey was done.
The CIT(A) upheld the decision of levy of penalty on the assessee on the basis that the assessee had not recorded the cash of Rs 3 crore in its regular books of accounts. It further noted that the assessee did not record the said amount at the time of the survey and he did not come forward to offer the same to the Income Tax department.
An appeal was filed before the ITAT against the said order. It noted that "We find that the assessee comprising of the profit and loss account for the year ended 31/03/2009 and the schedule for the other income thereon, the sum of Rs 3 crore has been disclosed by the assessee exclusively as income declared under survey under the head 'other income'."
The ITAT relied on the judgment of the Delhi High Court (HC) in the case titled CIT v. SAS Pharmaceuticals, wherein the HC held that to impose penalty u/s.271(1)(c) of the IT Act, concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be in the income tax return filed by the assessee.
It also put reliance on the case of PCIT v. Shree Sai Developers reported in 418 ITR 306, wherein the Gujarat HC held that since there was no concealment in the return of income filed by the assessee which was ultimately accepted by the Revenue, there cannot be any levy of penalty u/s.271(1)(c) of the IT Act.
While allowing the appeal the ITAT directed the AO to delete the imposed penalty.