COMMISSIONER OF INCOME TAX Vs. SAS PHARMACEUTICALS

JUDGEMENT

(1.) This appeal arises out of the order of the Income Tax Appellate Tribunal (the Tribunal for brevity) vide which it has affirmed the order of the CIT (A) deleting the penalty of 32,39,393/- imposed by the Assessing Officer under the provisions of Section 271(1)(c) of the Income Tax Act (hereinafter referred to as the Act). It so happened that a survey was carried out at the business premises and godown of the respondent-assessee on 06.01.2003. In that survey, discrepancies in cash, stock and renovation were found. When the assessee was confronted with the same, it surrendered the amount of 88,14,676/- during the survey. Since the survey was conducted on 06.01.2003, i.e., in the Financial Year 2002-03 corresponding to the Assessment Year 2003-04, for that assessment year, the assessee had not filed the income tax return and naturally the occasion to file the income tax return had not matured. When the income tax return was ultimately filed by the assessee on 02.12.2003, the assessee declared its income @ 87,71,580/- including the amount surrendered by the assessee itself. The assessment was framed including the surrendered amount. While passing the assessment order, the AO also decided to initiate penalty proceedings separately on the ground that the assessee had concealed the income. Show cause notice was given to which the assessee submitted the reply stating that the assessee had itself voluntarily surrendered the amount to avoid litigation and to buy peace of mind and had not concealed any income. This explanation was not digested by the AO, who had the view that the surrender was made only when discrepancies were brought to the notice of the assessee, which were found in cash, stock as well as renovation of the premises done by the assessee. He, thus, was of the opinion that had there been no survey, the assessee would have succeeded in concealing the income and evading tax. On this premise, penalty of 32,39,393/- was imposed.

(2.) The CIT (A) deleted the penalty on the ground that there was no concealment of income as in the return filed by the assessee, the said income was duly reflected.

(3.) The Tribunal has upheld the order of the CIT (A) and dismissed the appeal of the Revenue. It is in this factual context that the instant appeal is preferred by the Revenue, which was admitted on the following substantial questions of law: