ITAT Deletes Penalty on Survey Income Declared and Accepted in Return

The assessee, M/s Radhika Jewellers, a partnership firm engaged in the manufacturing and trading of jewellery, was subjected to survey proceedings under Section 133A. During the survey, the assessee admitted unaccounted income of Rs. 2.01 crore on account of excess stock and cash. This income was subsequently recorded in the books and declared in the return of income filed within the due date.

The assessment was completed under Section 143(3), wherein the returned income, including the surrendered amount, was accepted. Only minor disallowances were made. However, the Assessing Officer initiated penalty proceedings under Section 271(1)(c) and levied a penalty, alleging concealment of income. On appeal, the CIT(A) deleted the penalty, holding that the income disclosed during the survey was duly declared in the return and accepted; hence, no concealment existed. Aggrieved, the Revenue appealed before the Tribunal.

Main Issue: Whether a penalty under Section 271(1)(c) can be levied on income surrendered during the survey but duly declared in the return of income and accepted in assessment.

Tribunal Held: The Tribunal held that no penalty under Section 271(1)(c) is leviable where income surrendered during a survey is duly recorded in books and declared in the return of income, which is subsequently accepted by the Assessing Officer. It was observed that once the disclosed income is accepted as business income and no separate addition is made on that account, there is no question of concealment or furnishing inaccurate particulars.

The Tribunal emphasised that penalty provisions are penal in nature and must be strictly construed and cannot be invoked on mere presumptions. Relying on jurisdictional High Court precedent, the Tribunal upheld the deletion of the penalty and dismissed the Revenue’s appeal.

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