Income Tax Addition can’t be made solely on the basis of Statement of Survey without any Corroborative Material: ITAT deletes Penalty [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), while deleting a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 has held that the statement of survey without any corroborative material cannot be the sole reason for addition to income.

The assessee approached the Tribunal against the first appellate order in relation to the Assessment Year 2009-10. The issue raised is that Ld.CIT(A) erred in sustaining penalty levied u/s. 271(1)(c) of the Act amounting to Rs. 97,923/-.

During the course of survey, assessee has agreed for declaration of Rs. 6 lacs as additional income. In the profit and loss account, it has duly declared, the said credit of Rs. 6 lacs. However, after adjustment of the expenses profit was Rs. 2,34,576/-. In these facts, AO is of the opinion that assessee has not declared what he has agreed under survey and he added Rs. 6 lacs.

Quashing the order imposing penalty, the Tribunal held that “Firstly, we note that this is not a case of concealment or furnishing of inaccurate particulars of income. Rs. 6 lacs declared during survey has been credited in the profit and loss account by the assessee. But, the AO was of the opinion that this should have been declared, over and above profit shown for the year. In our considered opinion, these facts do not lead to a conclusion that assessee is guilty of concealment or furnishing inaccurate particulars of income. Moreover, though we are not sitting in the merits of the case, it is settled law as declared by Hon’ble Supreme Court in the case of S. Kader Khan (25 taxmann.com 413), that statement of survey without any corroborative material cannot be the sole reason for addition to income. In this view of the matter, when the addition itself is on such a weak footing, penalty u/s. 271(1)(c) for such an addition is not at all sustainable. In this view of the matter, we set-aside orders of the authorities below and delete the levy of penalty in this case.”

To Read the full text of the Order CLICK HERE

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